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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

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

For
the twelve months ended December 28, 2001

Commission
file number: 1-11997

SPHERION CORPORATION(Exact name of registrant as specified in its charter)

|Delaware(State or other jurisdiction of incorporation or organization) | 36-3536544(I.R.S. Employer Identification Number)
|---------------------------------------------------------------------- | -------------------------------------------------

2050 Spectrum Boulevard, Fort Lauderdale, Florida 33309(Address of principal executive offices)        (Zip code)

(954) 938-7600(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

|Title of each class         |  | Name of each exchange
on which registered
|--------------------------- |  | -----------------------------------------
|COMMON STOCK$.01 PAR VALUE |  | New York Stock Exchange                  

Securities registered pursuant to Section 12(g) of the Act:

None(Title of class)

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.  Yes X  No

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

The aggregate market value of the voting stock held by non-affiliates of the Registrant, computed by reference to the closing price of the
Registrant's Common Stock as of February 22, 2002 on the New York Stock Exchange, was $509,630,136.

Number
of shares of Registrant's Common Stock, par value $.01 per share ("Common Stock"), outstanding on February 22, 2002 was 58,530,438.

Documents
Incorporated by Reference:

Certain
specified portions of the registrant's definitive proxy statement to be filed within 120 days after December 28, 2001, are incorporated herein by reference in
response to Part III, Items 10 through 13, inclusive.

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PART I

Item 1.    BUSINESS

Company Overview

Spherion Corporation ("Spherion") delivers performance enhancing solutions in Recruitment, Technology and Outsourcing services. Founded in 1946, Spherion is
headquartered in Ft. Lauderdale, Florida and operates a network of approximately 940 locations primarily in North America, and includes operations in Europe and Australia/Asia.

Since
its January 1994 initial public offering ("IPO"), Spherion's network of locations has grown from 373 in North America to approximately 940 locations in eight countries as of
December 28, 2001 through a combination of acquisitions and internal growth. Spherion acquired approximately 35 companies from 1994 through 2000, including Norrell Corporation ("Norrell") in
1999, Computer Power Group Limited in 1998 ("Computer Power") and Michael Page Group PLC ("Michael Page") in 1997. During 2001, Spherion did not make any acquisitions other than repurchases of
licensee and franchise operations to eliminate market overlap and contingent payments related to prior year acquisitions.

For
the year ended December 28, 2001, Spherion had revenues of $2.7 billion, of which $2,228.9 million, $344.9 million and $139.3 million were related
to operations in North America, Europe and Australia/Asia, respectively. Of the European revenue, $179.6 related to Michael Page, which was sold on April 2, 2001 as discussed below.

During
2001, Spherion completed the sale of several businesses, the most significant of which was Michael Page. Spherion completed the initial public offering of shares of Michael Page,
disposing of 100% of Spherion's interest on April 2, 2001. Spherion's proceeds were approximately $710 million, net of taxes and expenses. Spherion recorded a gain on the transaction of
$305.7 million ($186.3 million after-tax) of which an $11.4 million ($7.2 million after-tax) gain related to foreign currency gains on forward
contracts.

Spherion
also assessed its portfolio of businesses and determined that three businesses did not provide the returns required by Spherion or were non-strategic. Consequently,
Spherion sold the StratfordGroup (retained executive search), Tutor Recursos Humanos (commercial staffing in Spain) and JobOptions (internet job board) during the fourth quarter of 2001. These sales
resulted in a loss of $37.1 million.

The
following table summarizes the operating results for the four business units that were sold, as described above, for the periods they were owned by Spherion (in thousands):

Fiscal Years EndedDec. 28, 2001

Dec. 29, 2000

Dec. 31, 1999Revenues

$
203,177

$
685,043

$
556,931Earnings before interest and taxes

$
19,541

$
95,207

$
75,079


The
results of the sold businesses have been included in the Statements of Earnings and Cash Flows through the dates of their disposition.

Industry Overview

Spherion operates three business segments: Recruitment, Technology and Outsourcing. The market, size and growth rates for each of Spherion's three business
segments vary. Although the market for each of the service offerings was negatively impacted by U.S. and global economic slowing during 2001, the
market for each of Spherion's three major lines of business are all expected to increase on a long-term basis.

Spherion's
Recruitment business includes staffing and permanent placement of personnel in the following skill categories: office, clerical and administrative, light industrial,
accounting/finance,

2

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engineering, sales/marketing, human resources and law. Spherion's Recruitment business operates primarily within North America, with operations also in Europe and Australia/Asia.

According
to the Staffing Industry Report, the U.S. recruitment market including staffing and permanent placement services was estimated to be in excess of $100 billion in 2000.
Growth rates averaged approximately 13% from 1997 to 2000. During 2001, the slowdown in the U.S. economy significantly impacted the recruitment market. Industry analysts estimated a decline in
staffing of approximately 10% to 14% in 2001 compared with 2000. However, due to an aging workforce and smaller labor supplies, analysts believe that the recruitment market will return to growth when
the U.S. economy improves. The European and Australia/Asia recruitment markets are estimated at approximately $25 billion and $14 billion, respectively.

Spherion's
Technology segment delivers IT staffing and managed services focused on both the technology applications and infrastructure areas. The staffing and placement of information
technology professionals is included in the staffing market noted above. However, Spherion believes that it also participates, to a lesser extent, in the information systems consulting and
applications development and maintenance market. International Data Corporation (IDC) estimates that this was approximately $37.7 billion in 2000. The information technology services market,
while generating significant growth during the later half of the 1990s, has declined since the year 2000 due to lower demand following Y2K and a U.S. economic slowdown.

The
worldwide business process outsourcing market ("BPO") was estimated at approximately $128 billion in 2001 by Gartner, Inc. Spherion derives the majority of its
outsourcing revenues in the areas of call center and administrative outsourcing services, which are part of the $14 billion sales, marketing and customer care and $87 billion business
administration segments of the BPO market, respectively. Spherion believes that as client companies continue to recognize the value of outsourcing solutions, this industry will exhibit strong growth
rates and be relatively insulated from economic cycles due to the long-term nature of outsourcing engagements.

Business Strategy

During 2001, Spherion announced its Business Transformation Strategy, which is focused on three primary lines of business: Recruitment, Technology and
Outsourcing. This strategy is focused on
increasing the predictability of revenues and earnings, continuous productivity improvements and enhancing profitability.

Within
the Recruitment business, Spherion is focused on growing higher margin administrative and professional services. Business in this segment is primarily focused on selling to local
decision makers within client organizations of varied size and industry, where emphasis is on quality of service and candidate and the competition based on price alone is less severe. These efforts
are supported by local market focused advertising and sales programs.

Spherion's
Technology business delivers staffing and outsourcing (managed services) in the areas of quality assurance, project management, help desk, data center and network operations.

As
part of the Business Transformation Strategy, Spherion is placing significant effort and resources on further refining and dramatically expanding its Outsourcing business. Since
multi-year agreements are typical within the outsourcing arena, increasing the proportion of outsourcing services as a percentage of our total business is important to improving the
predictability of Spherion's performance. To be successful, Spherion will leverage current recruitment, call center and administrative service competencies, add talent to broaden its outsourcing
knowledge base and pursue partnership opportunities to complete service offerings, expand delivery channels and increase sales.

3

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Acquisitions

Spherion's acquisition strategy has changed substantially over the past two years as it announced that it does not expect to undertake any significant
acquisitions at this time. However, Spherion may consider small acquisitions within Recruitment to fill geographic needs, small acquisitions in Outsourcing to complete a service offering or
acquisitions of client assets associated with a new Outsourcing contract. Spherion did not complete any significant acquisitions during 2001 and may not be active in the acquisition market in the
coming year. Spherion's acquisitions in 2001 were $38.5 million in comparison with $127.5 million in 2000 and $706.6 million in 1999, including cash, stock and notes. The 2001
acquisitions included $28.7 million in contingent payments for acquisitions consummated in prior years and $9.8 million other acquisitions, primarily for repurchases of licensee and
franchise operations. Expenditures for acquisitions in 2000 were primarily related to contingent payments for prior year acquisitions and purchases of franchisee and licensee operations to eliminate
local market overlap created by the acquisition of Norrell in 1999.

Spherion
is generally the purchaser of choice when a Spherion franchisee or licensee decides to sell its business. Spherion has a first right of refusal on any franchise sale at the same
terms and conditions as may be agreed with another purchaser and has a standard purchase option on licenses.

Operations Overview

Spherion operates through three operating segments: Recruitment, Technology and Outsourcing. Within these operating segments, Spherion provides one to three
primary servicesstaffing, outsourcing, and permanent placement. Staffing services are generally billed by the hour for the number of hours worked. Bill rates are often determined as a
mark-up over pay or pay plus burden. Permanent placement fees are generally determined as a percentage of first year compensation for the candidate placed. Billing is contingent on filling
the assigned position. Outsourcing services are generally long-term customer contracts. Fees are determined based on a combination of headcount, managed service level agreements provided
and/or fixed fee per transaction/unit processed. The following presents the 2001 revenues derived from each of these services (excluding Michael Page, in thousands):

Recruitment

Technology

Outsourcing$

% Total

$

% Total

$

% TotalStaffing

$
1,592,719

94.8
%
$
395,074

81.9
%
$


Outsourcing







86,591

17.9
%

371,570

100.0
%Permanent placement


86,646

5.2
%

895

0.2
%



Total

$
1,679,365

100.0
%
$
482,560

100.0
%
$
371,570

100.0
%


The
activities of the three segments are as follows:

RecruitmentRecruitment services include staffing and permanent placement of personnel in the following skill categories:
office, clerical and administrative, light industrial, accounting/finance, engineering, sales/marketing, human resources and law. Recruitment services are provided primarily in North America, with
operations also in Europe and Australia/Asia.

TechnologyTechnology includes staffing and outsourcing (managed services) for a client's technology applications and
infrastructure. Areas of expertise include quality assurance, project management, help desk, data center and network operations. Services are provided primarily in North America, with operations also
in Europe and Australia/Asia.

OutsourcingOutsourcing assumes responsibility for client functions in call center and administrative services. Spherion
offers outsourcing services primarily in the U.S. whereby its clients delegate to Spherion all responsibility for staffing and performance. In addition, Spherion provides human resource consulting

4

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services primarily in the U.S. to help clients in the planning, acquisition and optimization of its workforce. Spherion's human resource consulting offerings include outplacement, assessment,
benchmarking and workforce consulting.

Location Structure

Spherion locations are company-owned, licensed and franchised. Spherion believes that it can better leverage profitability and serve its customer base through a
combination of company-owned, licensed and franchise locations. For 2001 86% of revenues were derived from company-owned locations, with the remaining derived from franchised and licensed locations.

The
following table details the number of locations, which are company-owned, licensed and franchised as of the end of the periods listed.

Fiscal Year Ended DecemberNumber of Locations2001

2000

1999Company-owned locations

604

883

815Licensed locations

225

261

308Franchised locations

112

113

121Total

941

1,257

1,244




Spherion operates both company-owned branch locations and On-Premise locations. A branch location is designed to serve multiple clients in a
geographic market, while the On-Premise location is established at the client's location to serve only that client. As of December 28, 2001, Spherion operated 604 company-owned
locations, which decreased from the prior year due to business dispositions and the closure of locations in smaller, non-strategic markets as a result of Spherion's Business Transformation
Strategy.



Spherion grants licenses, which give the licensee the right to establish a recruitment business utilizing Spherion's trade names, service marks, advertising
materials, sales programs, operating procedures, manuals and forms within a designated territory. Licensees are required to observe Spherion's operating procedures and standards and act as a
representative of Spherion in recruiting, employing and placing candidates in response to client orders. The licensee is required to use Spherion's billing,
payroll and other data processing services. As of December 28, 2001, Spherion's 84 licensees operated 225 licensed locations. All licensees operated within the recruitment segment.

From
time to time, Spherion will finance a portion of the purchase price of the license at market rates of interest. The outstanding principal balance of such notes receivable was
$2.1 million as of December 28, 2001.

Sales
by the licensed locations are included in Spherion's revenues, and the direct costs of services are included in Spherion's cost of services. Spherion is responsible for paying the
wages of the flexible staff and all related payroll taxes and insurance. As a result, Spherion provides a substantial portion of the working capital needed for the licensed businesses.

The
licensee receives a commission from Spherion, which averaged approximately 65% of the licensed locations' gross profit for the year ended December 28, 2001. The licensee is
responsible for establishing the location and paying related administrative and operating expenses, such as rent, utilities and salaries of full-time employees.

5

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As
a continuation of its Business Transformation Strategy, Spherion may continue to identify licensees whose operating practices are not in alignment with Spherion's higher margin
operating strategy and convert these operations to franchises or independent operations.



Spherion has been granting franchises for approximately 40 years. The average tenure of franchise ownership is approximately 10 years, and a number
of franchisees are second-generation owners. Most franchisees operate more than one franchise. As of December 28, 2001, Spherion's 16 franchisees operated 112 locations.

From
time to time, Spherion will finance a portion of the purchase price of the franchise at market rates of interest. The outstanding principal balance of such notes receivable was
$4.4 million as of December 28, 2001.

Spherion
grants franchisees the right to market and furnish staffing services within a designated geographic area using Spherion's trade names, service marks, advertising materials,
sales programs, operating procedures, manuals and forms. Spherion provides franchises with its national, regional and local advertising. Franchisees operate their businesses autonomously within the
framework of Spherion's policies and standards and recruit, employ and pay their own full-time and flexible staff. Spherion receives royalty fees from each franchise based upon its sales,
and in return, supplies a variety of support and marketing services.

Competition

Spherion operates in a highly competitive, fragmented market in each of its three business segments. In addition, especially within the Recruitment and Technology
segments, there are low barriers to entry within the local market. Spherion faces significant competition in the markets it serves and will continue to face competition in any geographic market or
industry sector that it may enter. Spherion competes for both clients and qualified personnel with other firms in the Recruitment, Technology and Outsourcing segments. The majority of competitors are
significantly smaller than Spherion. However, certain of Spherion's competitors are larger and have greater marketing and financial resources than Spherion.

Spherion
believes that a primary competitive factor in obtaining and retaining clients is the depth of its expertise in delivering quality services in each of the business segments.
Critical competitive factors include an understanding of clients' specific job requirements through consultative assessments, the ability to provide the right candidate for the right job, the ability
to measure the quality of job performance and pricing. Factors in obtaining qualified candidates for employment assignments with clients are the quality of available opportunities, wages,
responsiveness to work schedules and the number of available work hours.

Within
the Recruitment and Technology segments, Spherion's largest competitors are Adecco S.A., Manpower, Inc., Kelly Services, Inc., Robert Half
International, Inc., MPS Group, Inc. and Keane, Inc. Within Outsourcing, Spherion believes it competes with companies like Affiliated Computer Services, Inc. and Convergys
Corporation among others.

Trademarks

In 2000, Spherion changed its name and primary identifying trademark from "INTERIM" to "SPHERION" and related "SPHERION" marks. Spherion, through its
subsidiaries, maintains a number of trademarks, trade names and service marks in the United States and certain other countries. Spherion believes that many of these marks and trade names, including
SPHERION®, INTERIM®, NORRELL®, and SARATOGASM are important to its business. In addition, Spherion maintains other intangible property rights.

6

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Spherion, through its subsidiaries, currently uses and has applications for registration pending on various marks, including the following: ENTHUSIANSM,
SARATOGASM, TECHNOLOGY ARCHITECTSSM and WORKFORCE ARCHITECTSSM.

Spherion's
U.S. trademark registration for SPHERION® expires October 9, 2011, but is renewable indefinitely for successive ten-year terms. Spherion's U.S.
trademark registration for INTERIM® expires April 6, 2003, but is renewable indefinitely for successive ten-year terms. Spherion's U.S. trademark registration for
NORRELL® expires on March 8, 2003, but is renewable indefinitely for successive ten-year terms.

Governmental Regulation

Staffing firms are generally subject to one or more of the following types of government regulations: (i) regulation of the employer/employee relationship
between a firm and its flexible staff, (ii) registration, licensing, record keeping and reporting requirements and (iii) substantive limitations on its operations. Staffing firms are the
legal employers of their flexible workers. Therefore, the firm is governed by laws regulating the employer/employee relationship such as tax withholding or reporting, social security or retirement,
anti-discrimination and workers' compensation.

Spherion
has operations in a number of foreign countries. In some of these countries, particularly those in Europe, there is significant national and local regulation of staffing
services. These laws generally require that part-time, temporary and contract workers receive benefits similar to full-time workers, such as vacation, welfare plan
contributions and severance pay. In some cases, hours of work and the duration of assignments are limited and workers may not be assigned to certain industries. Industry-wide union
membership is also a requirement in some countries. Spherion does not anticipate that these legal structures and requirements will have a material effect on its growth or prospects. However, any
material change in national or local regulation of staffing services could have a material adverse effect on Spherion.

Spherion's
sale of franchises and licenses is regulated by the Federal Trade Commission and by authorities in approximately 15 states and two Canadian provinces. Spherion must deliver a
franchise offering circular (similar to a prospectus) to prospective franchisees or licensees. Spherion has filed either the appropriate registration or obtained an exemption from registration in
states that require
franchisers to register in order to sell franchises. Spherion does not anticipate that these requirements will have a material effect on its ability to sell franchises or licenses.

Employees

Spherion estimates that it employed approximately 370,000 people in 2001. Approximately 5,000 individuals were employed full-time in both its national
and international operations and the remaining 365,000 individuals were billable personnel assigned with its clients, of whom approximately 66,000 were assigned, on average, at any given time.

Seasonality and Cyclical Nature of Business

Spherion's businesses are only moderately seasonal in nature. However, the staffing industry has historically been considered to be cyclical, often acting as a
coincidental indicator of both economic downswings and upswings. Spherion believes that the balance between its service lines reduces the cyclical nature of the Recruiting and Technology businesses.
Longer-term, more predictable contracts are characteristic of Outsourcing. Spherion's goal to grow its Outsourcing business as a percentage of total revenues is intended to help balance
the cyclical nature of Recruitment and Technology.

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Executive Officers of the Registrant

The executive officers of Spherion, each of whom has been elected to serve at the discretion of the Board of Directors of Spherion, are:

|Name and Age           |  | Position                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|---------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Cinda A. Hallman, 57   |  | President and Chief Executive Officer since April 2001; Director since February 1995; Director, Bowater Incorporated since November 2000. Senior Vice President of E.I. DuPont de Nemours & Co. ("DuPont") from March
1998 to April 2001. Global Vice President Integrated Processes and Systems of DuPont from August 1997 to March 1998. Vice President, Information Systems and Chief Information Officer of DuPont from November 1992 to August 1997.                                                                      
|Robert E. Livonius, 53 |  | Chief Operating Officer since February 1997, Executive Vice President since August 1993. Vice President, Interim HealthCare from August 1991 to August 1993.                                                                                                                                                                                                                                                                                                                                                                   
|Roy G. Krause, 55      |  | Executive Vice President and Chief Financial Officer since October 1995.                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Peter T. Bourke, 42    |  | President, Outsourcing Group since October 2001. President, Professional Services Group from April 2000 until October 2001. Prior to joining Spherion, he was a Principal at The Complex Sale, a sales and marketing consulting and training organization,
specializing in Professional Services from November 1998 until April 2000. Prior to that, he was responsible for Global Business Development at Accenture (formerly Andersen Consulting) from October 1994 until November 1998.                                     
|Lisa G. Iglesias, 36   |  | General Counsel, Vice President and Secretary since July 1999. Associate Counsel from August 1998 to July 1999. Prior to joining Spherion, she was an attorney with the law firm of Greenberg Traurig from September 1994 to August 1998.                                                                                                                                                                                                                                                                                      
|Wayne D. L'Heureux, 44 |  | Vice President, Human Resources since February 2000. Vice PresidentHuman Resources of Volvo Cars of North America from September 1996 to February 2000.                                                                                                                                                                                                                                                                                                                                                                       
|Wayne M. Mincey, 44    |  | President, Technology Group since November 2001. President, Enthusian, from June 2000 until February 2002. President, Global Alliances from July 1999 until June 2000. From June 1998 until June 1999, he was PresidentIT Consulting Division of
Norrell Corporation. From September 1997 until May 1998, he was Vice President, Strategic Planning of Norrell Corporation. Prior to joining Norrell, he served as a Vice President of Operations Ryder TRS, Inc., a transportation company, from July 1995
until August 1997.
|Gary Peck, 48          |  | President, Staffing Group since August 1997. Vice President, Commercial Branch Operations from January 1995 to August 1997. Vice President, Special Services from August 1991 until January 1995.                                                                                                                                                                                                                                                                                                                              
|Mark W. Smith, 40      |  | Vice President, Business Services since August 2001. Vice President, Finance and Administration from June 2000 until August 2001. Vice President, Finance from June 1997 until June 2000. Prior to joining Spherion, he served as Group
DirectorFinancial Planning, Ryder Integrated Logistics, Inc., from October 1996 to June 1997.                                                                                                                                                                                         

8

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Item 2.    PROPERTIES

The corporate headquarters of Spherion are located at 2050 Spectrum Boulevard, Fort Lauderdale, Florida 33309, in a 120,000 square-foot building owned
by Spherion and approximately 32,500 square feet in buildings within one mile of its Florida corporate headquarters leased by Spherion. In addition, Spherion leases approximately 70,000 square feet in
Alpharetta, Georgia for division operating functions. All other locations of Spherion and its subsidiaries are operated in premises held primarily under three to five year leases providing fixed
monthly rentals, usually with renewal options. Spherion believes that its facilities are adequate for its needs.

Item 3.    LEGAL PROCEEDINGS

Spherion, in the ordinary course of its business, is threatened with or named as a defendant in various lawsuits. Spherion's management does not expect that the
outcome of any of these lawsuits, individually or collectively, will have a material adverse effect on Spherion's financial condition, results of operations or cash flows. Spherion maintains insurance
in such amounts and with such coverages and deductibles as management believes are reasonable and prudent. The principal risks that Spherion insures against are workers' compensation, personal injury,
bodily injury, property damage, professional malpractice, errors and omissions, employment practices and fidelity losses.

On
April 2, 2001, Cincinnati Financial Corporation ("CFC") filed a lawsuit against Spherion in the U.S. District Court, Southern District of Ohio seeking $50 million in
compensatory damages and $300 million in punitive damages. The lawsuit arises out of a dispute between the parties in connection with Spherion's contract to develop a software application for
use with CFC's insurance business. The plaintiff's complaint alleges the following causes of action: breach of contract, fraud, negligence and misrepresentation. Spherion denies the allegations of
CFC's complaint and intends to vigorously defend against the claims. On April 2, 2001, Spherion filed a lawsuit against CFC in U.S. District Court, Northern District of Illinois seeking
collection from CFC of $2,212,000 in unpaid fees in connection with the contract. Management believes there is no basis for the amount of damages sought in the plaintiff's case. Management further
believes that Spherion's insurance will provide adequate coverage of this claim and therefore it is not expected to have a material impact on Spherion's consolidated financial position, liquidity or
results of operations.

Interim
HealthCare Inc., Catamaran Acquisition Corp. and Cornerstone Equity Investors IV, L.P. (collectively, the "Interim HealthCare Plaintiffs") have an action pending against
Spherion in the Delaware Court of Chancery. Their complaint, filed on June 26, 2001 and amended on July 24, 2001, relates to Spherion's divestiture of Interim HealthCare (the "Healthcare
Divestiture") and seeks damages of approximately $10 million for breach of contract, reformation of the purchase agreement to reduce the purchase price by approximately $24 million, or
rescission of the contract. The same parties are also seeking damages against Spherion in an action pending in Delaware Superior Court alleging multiple breach of contract claims arising out of the
Healthcare Divestiture allowing the same judge to preside over both actions. Management believes the resolution of this matter will not have a material impact on Spherion's consolidated financial
position, liquidity or results of operations.

Item 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth quarter of the twelve months ended December 28, 2001.

9

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PART II

Item 5.    MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The Common Stock is traded on The New York Stock Exchange under the symbol "SFN." The following table sets forth, for the periods indicated, the high and low
prices per share of the common stock as reported on The New York Stock Exchange:

2001

High

LowFirst Quarter

$
12.52

$
6.75Second Quarter


9.10


6.35Third Quarter


9.85


5.83Fourth Quarter


10.81


6.102000

High

LowFirst Quarter

$
28.38

$
16.50Second Quarter


22.75


15.50Third Quarter


20.19


10.88Fourth Quarter


13.25


9.69


On
February 22, 2002, there were approximately 2,424 holders of record of Spherion's Common Stock.

Spherion
has not paid cash dividends and does not intend to pay cash dividends in the foreseeable future.

10

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Item 6.    SELECTED FINANCIAL DATA

|                                                                                                        |                                                                                                          | Fiscal Years Ended
(in thousands, except per share data) |          
|------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------- | -------------------------------------------------------- | ---------
|
|Income Statement Data:                                                                                  |                                                                                                          |                                                          |          
|Revenues:                                                                                               |                                                                                                          |                                                          |          
|Revenues excluding Interim HealthCare and Michael Page                                                  |                                                                                                          | $                                                        | 2,533,495
|Interim HealthCare (2)                                                                                  |                                                                                                          |                                                          |         
|Michael Page (3)                                                                                        |                                                                                                          |                                                          | 179,642  
|                                                                                                        |                                                                                                          |                                                          |          
|                                                                                                        | Total revenues                                                                                           |                                                          |          
|Expenses:                                                                                               |                                                                                                          |                                                          |          
|Cost of services                                                                                        |                                                                                                          |                                                          | 1,938,747
|                                                                                                        |                                                                                                          |                                                          |          
|                                                                                                        | Gross profit                                                                                             |                                                          |          
|Selling, general and administrative expenses                                                            |                                                                                                          |                                                          | 644,876  
|Licensee commissions                                                                                    |                                                                                                          |                                                          | 52,428   
|                                                                                                        |                                                                                                          |                                                          |          
|                                                                                                        | Results of operations                                                                                    |                                                          |          
|Amortization of intangibles                                                                             |                                                                                                          |                                                          | 35,207   
|Interest expense                                                                                        |                                                                                                          |                                                          | 24,399   
|Interest income                                                                                         |                                                                                                          |                                                          | (9,595   
|Restructuring, asset impairments and other charges (4)                                                  |                                                                                                          |                                                          | 140,141  
|Gain on sale of Michael Page (5)                                                                        |                                                                                                          |                                                          | (305,704 
|Gain on sale of marketable securities (6)                                                               |                                                                                                          |                                                          | (2,435   
|Write-down of investment (7)                                                                            |                                                                                                          |                                                          |         
|Year 2000 costs (8)                                                                                     |                                                                                                          |                                                          |         
|Gain on sale of Interim HealthCare business (9)                                                         |                                                                                                          |                                                          |         
|                                                                                                        |                                                                                                          |                                                          |          
|                                                                                                        | Earnings before income taxes, extraordinary item and cumulative effect of change in accounting principle |                                                          |          
|Income taxes                                                                                            |                                                                                                          |                                                          | 86,998   
|                                                                                                        |                                                                                                          |                                                          |          
|                                                                                                        | Earnings before extraordinary item and cumulative effect of change in accounting principle               |                                                          |          
|Extraordinary item-early extinguishment of debt, net of income taxes                                    |                                                                                                          |                                                          |         
|Cumulative effect of change in accounting principleadoption of SFAS No. 133, net of income tax benefit |                                                                                                          |                                                          | 1,114    
|                                                                                                        |                                                                                                          |                                                          |          
|                                                                                                        | Net earnings                                                                                             |                                                          | $        
|                                                                                                        |                                                                                                          |                                                          |          
|Basic earnings per share:                                                                               |                                                                                                          |                                                          |          
|Earnings before extraordinary item and cumulative effect of change in accounting principle              |                                                                                                          | $                                                        | 1.82     
|Extraordinary item                                                                                      |                                                                                                          |                                                          |         
|Cumulative effect of change in accounting principle                                                     |                                                                                                          |                                                          | (0.02    
|                                                                                                        |                                                                                                          |                                                          |          
|Net earnings                                                                                            |                                                                                                          | $                                                        | 1.80     
|                                                                                                        |                                                                                                          |                                                          |          
|Diluted earnings per share:                                                                             |                                                                                                          |                                                          |          
|Earnings before extraordinary item and cumulative effect of change in accounting principle              |                                                                                                          | $                                                        | 1.73     
|Extraordinary item                                                                                      |                                                                                                          |                                                          |         
|Cumulative effect of change in accounting principle                                                     |                                                                                                          |                                                          | (0.02    
|                                                                                                        |                                                                                                          |                                                          |          
|Net earnings                                                                                            |                                                                                                          | $                                                        | 1.72     
|                                                                                                        |                                                                                                          |                                                          |          

11

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|Weighted average shares:               |         |   |           |        |   |           |        |   |           |        |   |           |        |   |           |       
|-------------------------------------- | ------- | - | --------- | ------ | - | --------- | ------ | - | --------- | ------ | - | --------- | ------ | - | --------- | ------
|                                       | Basic   |   |           | 59,502 |   |           | 63,728 |   |           | 54,949 |   |           | 44,237 |   |           | 39,305
|                                       | Diluted |   |           | 65,934 |   |           | 69,757 |   |           | 60,837 |   |           | 48,244 |   |           | 40,407
|Balance Sheet Data: (10)               |         |   |           |        |   |           |        |   |           |        |   |           |        |   |           |       
|Total assets                           |         | $ | 1,868,345 |        | $ | 2,483,220 |        | $ | 2,438,901 |        | $ | 1,606,808 |        | $ | 1,091,734 |       
|Long-term debt, net of current portion |         |   | 215,751   |        |   | 489,911   |        |   | 513,611   |        |   | 426,856   |        |   | 379,197   |       
|Working capital                        |         |   | 410,131   |        |   | 12,013    |        |   | 50,488    |        |   | 152,388   |        |   | 97,990    |       
|Operating Information (10):            |         |   |           |        |   |           |        |   |           |        |   |           |        |   |           |       
|Operating locations                    |         |   | 941       |        |   | 1,257     |        |   | 1,244     |        |   | 877       |        |   | 706       |       

---

12

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

Introduction

As part of its Business Transformation Strategy, which is focused on increasing the predictability of revenues and earnings, continuous productivity improvements
and enhancing profitability, Spherion changed its basis of segmentation and is now organized into the following three operating segments: Recruitment, Technology, and Outsourcing. Through these
operating segments, Spherion provides the following three services: (1) Staffinggenerally billed by the hour for the number of hours worked. Bill rates are often determined as a
mark-up over pay or pay plus burden; (2) Outsourcinggenerally long-term customer contracts. Fees are determined based on a combination of headcount, managed
service level agreements provided and/or fixed fee per transaction/unit processed; and (3) Permanent Placementfees are generally determined as a percentage of first year
compensation for the candidate placed. Billing is contingent on filling the assigned position.

On
April 2, 2001, Spherion sold 100% of Michael Page's common stock through an initial public offering. The transaction resulted in a gain of $305.7 million
($186.3 million after tax). A portion of the proceeds from the sale were used to retire debt, with the remainder currently invested and available for general corporate purposes. Spherion also
assessed its portfolio of businesses and determined that three businesses did not provide the returns required by Spherion, or were not in geographic locations that would provide long-term
growth. Consequently, Spherion sold the StratfordGroup (retained executive search), Tutor Recursos Humanos (recruitment in Spain) and JobOptions (internet job board) during the fourth quarter of 2001.
The results of operations in the following Management's Discussion and Analysis include the results of operations of these business units for the periods they were owned by Spherion, unless otherwise
stated.

During
2000 and to a lesser extent in 2001, Spherion repurchased licensed and franchised locations to reduce market overlap, which resulted primarily from the Norrell acquisition. On
July 2, 1999, Spherion completed its acquisition of Norrell. Norrell provided services similar to those of Spherion, primarily in the areas of recruitment, technology and outsourcing.
Operations of Norrell were combined with Spherion's existing operating segments effective with the completion of the acquisition. As such, all the
discussion in the following Management's Discussion and Analysis includes Norrell's operations in Spherion's operating segments and services from July 2, 1999, unless otherwise stated.

Operating Segments

Effective in the fourth quarter of 2001, Spherion changed its basis of segmentation to the following: Recruitment, Technology and Outsourcing. Management believes
that the new reportable segments better reflect the management and financial responsibilities within Spherion. Spherion evaluates the performance of its operating segments and allocates resources
based on revenues, gross profit and segment operating profit. Segment operating profit is defined as income before unallocated central costs, amortization expense, net interest expense, income taxes
and special charges (restructuring, asset impairments and other charges, gain on sale of Michael Page, gain on sale of marketable securities, write-down of investment, and Year 2000
costs). All material intercompany revenues and expenses have been eliminated. All previous year amounts have been reclassified for comparative purposes. Operating results from StratfordGroup, Tutor
Recursos Humanos and JobOptions which were sold during the fourth quarter of 2001 are included in the Recruitment segment. See notes to the consolidated financial statements for further discussion and
financial information regarding these operating segments.

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Information
on operating segments and a reconciliation to earnings before income taxes and cumulative effect of change in accounting principle for the periods indicated are as follows
(in thousands):

|          |                                    | Fiscal Years Ended |  
|--------- | ---------------------------------- | ------------------ | -
|
|
|Revenues: |                                    |                    |  
|          | RecruitmentExcluding Michael Page |                    | $
|          | Technology                         |                    |  
|          | Outsourcing                        |                    |  
|          |                                    |                    |  
|          | Total, Excluding Michael Page      |                    |  
|          | RecruitmentMichael Page           |                    |  
|          |                                    |                    |  
|          | Total                              |                    | $
|          |                                    |                    |  

|                          |                                                                                      |  |   | % of Revenues |   |      |   | % of Revenues |           |   |      | % of Revenues |  
|------------------------- | ------------------------------------------------------------------------------------ |  | - | ------------- | - | ---- | - | ------------- | --------- | - | ---- | ------------- | -
|Gross Profit:             |                                                                                      |  |   |               |   |      |   |               |           |   |      |               |  
|                          | RecruitmentExcluding Michael Page                                                   |  | $ | 422,089       |   | 25.1 | % | $             | 561,869   |   | 26.6 | %             | $
|                          | Technology                                                                           |  |   | 145,789       |   | 30.2 | % |               | 198,555   |   | 32.5 | %             |  
|                          | Outsourcing                                                                          |  |   | 99,260        |   | 26.7 | % |               | 88,425    |   | 24.0 | %             |  
|                          |                                                                                      |  |   |               |   |      |   |               |           |   |      |               |  
|                          | Total, Excluding Michael Page                                                        |  |   | 667,138       |   | 26.3 | % |               | 848,849   |   | 27.4 | %             |  
|                          | RecruitmentMichael Page                                                             |  |   | 107,252       |   | 59.7 | % |               | 392,824   |   | 60.8 | %             |  
|                          |                                                                                      |  |   |               |   |      |   |               |           |   |      |               |  
|                          | Total                                                                                |  | $ | 774,390       |   | 28.5 | % | $             | 1,241,673 |   | 33.2 | %             | $
|                          |                                                                                      |  |   |               |   |      |   |               |           |   |      |               |  
|Segment Operating Profit: |                                                                                      |  |   |               |   |      |   |               |           |   |      |               |  
|                          | RecruitmentExcluding Michael Page                                                   |  | $ | 25,479        |   | 1.5  | % | $             | 86,282    |   | 4.1  | %             | $
|                          | Technology                                                                           |  |   | 19,230        |   | 4.0  | % |               | 42,637    |   | 7.0  | %             |  
|                          | Outsourcing                                                                          |  |   | 27,231        |   | 7.3  | % |               | 25,675    |   | 7.0  | %             |  
|                          |                                                                                      |  |   |               |   |      |   |               |           |   |      |               |  
|                          | Total, Excluding Michael Page                                                        |  |   | 71,940        |   | 2.8  | % |               | 154,594   |   | 5.0  | %             |  
|                          | RecruitmentMichael Page                                                             |  |   | 31,733        |   | 17.7 | % |               | 110,873   |   | 17.2 | %             |  
|                          |                                                                                      |  |   |               |   |      |   |               |           |   |      |               |  
|                          | Total                                                                                |  |   | 103,673       |   | 3.8  | % |               | 265,467   |   | 7.1  | %             |  
|                          |                                                                                      |  |   |               |   |      |   |               |           |   |      |               |  
|                          | Unallocated central costs                                                            |  |   | (26,587       | ) |      |   |               | (20,333   | ) |      |               |  
|                          | Amortization expense                                                                 |  |   | (35,207       | ) |      |   |               | (43,374   | ) |      |               |  
|                          | Interest expense, net                                                                |  |   | (14,804       | ) |      |   |               | (50,424   | ) |      |               |  
|                          | Restructuring, asset impairments and other charges                                   |  |   | (140,141      | ) |      |   |               | (259      | ) |      |               |  
|                          | Gain on the sale of Michael Page                                                     |  |   | 305,704       |   |      |   |               |          |   |      |               |  
|                          | Gain on sale of marketable securities                                                |  |   | 2,435         |   |      |   |               |          |   |      |               |  
|                          | Write-down of investment                                                             |  |   |              |   |      |   |               | (24,766   | ) |      |               |  
|                          | Year 2000 costs                                                                      |  |   |              |   |      |   |               |          |   |      |               |  
|                          |                                                                                      |  |   |               |   |      |   |               |           |   |      |               |  
|                          | Earnings before income taxes and cumulative effect of change in accounting principle |  | $ | 195,073       |   |      |   | $             | 126,311   |   |      |               | $
|                          |                                                                                      |  |   |               |   |      |   |               |           |   |      |               |  

Fiscal 2001 Compared with 2000

RecruitmentExcluding Michael Page.Revenues decreased 20.6% to $1,679.4 million in 2001 from
$2,116.1 million in the prior year due primarily to lower worldwide demand for staffing services. Revenues decreased domestically and in all international locations. Within the U.S. revenues
were down 21.3% as the economy slowed and Spherion's customers downsized their temporary workforce and experienced pricing pressures with many of its customers. Additionally, toward the end of the
year as part of Spherion's

14

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Business Transformation Strategy, Spherion began to exit lower margin customers mostly in the light industrial sector. International revenues declined 17.5% primarily in Australia and the U.K. due to
lower demand for staffing. Revenues by service line for 2001 within the segment were comprised of 94.8% staffing and 5.2% permanent placement. As a percentage of total recruitment revenues, permanent
placement decreased from 6.3% in the prior year as permanent hiring slowed significantly faster at most customers than staffing services.

Gross
profit decreased 24.9% to $422.1 million in 2001 from $561.9 million in the prior year, and the overall gross profit percentage decreased to 25.1% in 2001 from 26.6%
in the prior year. The decrease in gross profit percentage is due to pricing pressures, higher workers' compensation and unemployment costs and lower permanent placement revenues as a percentage of
total revenues.

Segment
operating profit decreased 70.5% to $25.5 million in 2001 from $86.3 million in the prior year. The decrease was due to the decrease in gross profit of
$139.8 million, partially offset by lower operating expenses of $79.0 million. Operating expenses as a percentage of revenues increased to 23.6% in 2001 from 22.5% in 2000 as the impact
of lower revenues more than offset the cost-cutting initiatives undertaken in 2001 in the U.S. and Australia. Also contributing to the higher operating expense percentage were higher costs
associated with JobOptions, which was sold in the fourth quarter of 2001.

Technology.Revenues decreased 20.9% to $482.6 million in 2001 from $610.4 million in the prior year due to
lower demand for IT related services, primarily within the U.S. Revenues by service line for 2001 within the segment were comprised of 81.9% staffing, 17.9% outsourcing and 0.2% permanent placement.
As a percentage of total technology revenues, staffing decreased from the 2000 level of 89.5% as the demand for staffing services decreased while outsourcing services, which are supported by
longer-term contracts, were up from 10.1% and permanent placement decreased from 0.4%.

Gross
profit decreased 26.6% to $145.8 million in 2001 from $198.6 million in the prior year, and the overall gross profit percentage decreased to 30.2% in 2001 from 32.5%
in the prior year. The decrease in gross profit percentage is primarily due to lower utilization of consultants, a decrease in the higher margin variable staffing business and to a lesser extent lower
permanent placement revenues in the current year.

Segment
operating profit decreased 54.9% to $19.2 million in 2001 from $42.6 million in the prior year. The decrease was due to the decrease in gross profit of
$52.8 million, partially offset by lower operating expenses of $29.4 million. Operating expenses as a percentage of revenues increased to 26.2% in 2001 from 25.5% in 2000. Operating
expenses were reduced through active cost-cutting initiatives throughout the year but did not keep pace with the decreases in revenues.

Outsourcing.Revenues increased 0.9% to $371.6 million in 2001 from $368.3 million in the prior year as revenue
increases from human resource consulting services more than offset revenue decreases in the variable time and material portions in certain outsourcing contracts. While traditional outsourcing
activities are governed by multi-year contracts, which lead to predictable revenue streams, revenue levels were impacted by reduced activity in some outsourcing contracts.

Gross
profit increased 12.3% to $99.3 million in 2001 from $88.4 million in the prior year, and the overall gross profit percentage increased to 26.7% in 2001 from 24.0% in
the prior year. The increase in the gross profit percentage is primarily due to the growth in the higher margin human resource consulting services as a percentage of total revenues.

Segment
operating profit increased 6.1% to $27.2 million in 2001 from $25.7 million in the prior year. The increase was due to the increase in gross profit of
$10.9 million, partially offset by higher operating expenses of $9.4 million. Operating expenses as a percentage of revenues increased to 19.4% in 2001 from 17.0% in 2000 due to the
higher proportion of human resource consulting services and increased administrative and marketing costs from the Enthusian product line, Spherion's automated recruitment process outsourcing system.

15

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Unallocated Central Costs.Unallocated central costs increased 30.8% to $26.6 million in 2001 from
$20.3 million in the prior year, due primarily to charges recorded in 2001 for a $2.5 million bad debt provision related to a loan made to Worldwide Xceed Group, an internet-focused
consulting group in which Spherion had an equity investment, and higher professional fees associated with our Business Transformation Strategy. As a percentage of consolidated revenues, these costs
increased to 1.0% in 2001 from 0.7% in the prior year (excluding Michael Page which did not significantly impact central cost levels).

Amortization Expense.Amortization expense decreased 18.8% to $35.2 million in 2001 from $43.4 million in 2000.
This decrease is primarily attributable to the decrease in intangible assets related to Michael Page which was sold on April 2, 2001.

Interest Expense.Interest expense decreased 53.9% to $24.4 million in 2001 from $52.9 million last year. This
decrease resulted from lower debt levels, due primarily to the repayment of debt with the proceeds from the sale of Michael Page. Average borrowings outstanding during 2001 of $312.4 million
carried an average rate of interest of 6.7%, compared with $813.4 million outstanding during 2000 at an average rate of interest, including the effects of interest rate swaps, of 6.8%.

Interest Income.Interest income increased from $2.5 million in 2000 to $9.6 million in 2001 due to interest
earned on the proceeds from the sale of Michael Page. During 2001, the proceeds were invested primarily in commercial paper and tax-free instruments, which are classified as cash
equivalents in the accompanying Consolidated Balance Sheets.

Restructuring, asset impairments and other charges.During 2001, Spherion recorded pre-tax restructuring, asset
impairments and other charges of $140.1 million ($93.9 million after-tax). See section "Restructuring, Asset Impairments and Other Charges" below for further discussion.

Gain on sale of Michael Page.During 2001, Spherion sold Michael Page and recognized a pre-tax gain on the sale
of Michael Page of $305.7 million ($186.3 million after-tax), which included pre-tax gains on forward contracts entered into to hedge foreign currency
fluctuations on the proceeds from the sale.

Gain on sale of marketable securities.A pre-tax gain was recognized on the sale of marketable securities of
$2.4 million ($1.5 million after tax).

Income Taxes.The effective income tax rate for 2001 was 44.6% compared with 41.0% in 2000. The higher effective tax rate was
due primarily to higher relative state income tax expense and the tax impact of non-deductible goodwill somewhat offset by the impact of employment tax credits.

Cumulative Effect of Change in Accounting Principle.At the beginning of the first quarter of 2001, Spherion recorded an
after-tax charge of $1.1 million (net of income tax benefit of $0.7 million) in conjunction with the adoption of Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities."

Net Earnings.Net earnings increased to $107.0 million ($1.72 per diluted share) in 2001 from $74.5 million
($1.16 per diluted share) in the prior year, due primarily to the gain on sale of Michael Page, offset by restructuring and other charges and lower profitability on the existing operations. The
weighted average number of shares (as adjusted for the dilutive impact of common stock equivalents) decreased to 65.9 million from 69.8 million in the prior year, due primarily to stock
repurchases completed in 2001.

Fiscal 2000 Compared with 1999

RecruitmentExcluding Michael Page.Revenues increased 15.9% to $2,116.1 million in 2000 from
$1,825.1 million in 1999 due to the Norrell acquisition and growth in the U.S. permanent placement business partially offset by a decrease in staffing revenues in Australia/Asia. On a pro forma
basis (including Norrell as if it had been acquired at the beginning of 1999), revenues decreased 7.7% from $2,293.1 million due primarily to the impact of Norrell acquisition-related
integration efforts, economic

16

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slowdown in the U.S. and Australia/Asia in the fourth quarter of 2000 and elimination of unprofitable and lower margin business. Revenues by service line for 2000 within the segment were comprised of
93.7% staffing and 6.3% permanent placement. As a percentage of total recruitment revenues, permanent placement increased from 5.0% in the prior year due to growth in the U.S.

Gross
profit increased 19.5% to $561.9 million in 2000 from $470.3 million in 1999 due primarily to the Norrell acquisition. The gross profit percentage increased to 26.6%
in 2000 from 25.8% in 1999 and 25.2% on a 1999 pro forma basis, due to an increase in U.S. permanent placement revenues.

Segment
operating profit increased 18.0% to $86.3 million in 2000 from $73.1 million in 1999. Higher operating margin in 2000 was due primarily to the increase in gross
profit of $91.6 million discussed above partially offset by higher operating expenses of $78.4 million due primarily to the Norrell acquisition and higher commissions on permanent
placement revenues. Operating expenses as a percentage of revenues increased from 21.8% for 1999 to 22.5% for 2000, as the impact of higher commissions more than offset the leveraging of fixed costs
by eliminating redundant personnel and locations from the Norrell acquisition.

Technology.Revenues increased 0.9% to $610.4 million in 2000 from $605.1 million in 1999 due primarily to the
Norrell acquisition, offset by industry-related decreases in customer demand and absence of longer duration Enterprise Resource Planning (ERP) and Y2K-related projects in the 2000 period. Technology
revenues in 2000 were also impacted by the trend toward smaller and shorter duration e-solutions projects and away from traditional IT services. On a pro forma basis (including Norrell as
if it were acquired at the beginning of 1999), revenues were down 14.5% from $713.6 million in 1999. The decline in revenues from 1999 pro forma levels was primarily due to the reasons outlined
above. Revenues by service line for 2000 within the segment were comprised of 89.5% staffing, 10.1% outsourcing and 0.4% permanent placement. As a percentage of total Technology revenues, outsourcing
increased from a 1999 level of 9.8% reflecting increases in help desk services, while staffing revenues decreased from 89.8%. The permanent placement percentage was about the same in 2000 compared
with 1999.

Gross
profit decreased 7.2% to $198.6 million in 2000 from $214.0 million in 1999 and the overall gross profit percentage decreased to 32.5% in 2000 from 35.4% in 1999 due
primarily to lower utilization of consultants. On a pro forma basis, gross profit percentage for 2000 was lower than the 1999 level of 36.9%. This decrease was also due to lower utilization of
consultants.

Segment
operating profit decreased 41.0% to $42.6 million in 2000 from $72.3 million in 1999. Lower operating margin in 2000 was due primarily to the decrease in gross
profit of $15.4 million discussed above and higher operating expenses of $14.2 million. Operating costs as a percentage of revenues increased from 23.4% in 1999 to 25.5% in 2000 due to
Norrell-related integration costs and the overall decline in revenues.

Outsourcing.Revenues increased 77.9% to $368.3 million in 2000 from $207.1 million in 1999, with most of the
increase due to the acquisition of Norrell's outsourcing business. On a pro forma basis, revenues increased 7.6% from $342.2 million in 1999 due primarily to growth in call centers.

Gross
profit increased 56.7% to $88.4 million in 2000 from $56.4 million in 1999 and the gross profit percentage decreased from 27.2% in 1999 to 24.0% in 2000. On a pro
forma basis, gross profit percentage for 2000 was higher than the 1999 level of 23.3% as several outsourcing contracts matured beyond the start-up phase.

Segment
operating profit increased 66.6% to $25.7 million in 2000 from $15.4 million in 1999. Higher operating margin compared with the prior year was due primarily to the
increase in gross profit of $32.0 million discussed above, which was partially offset by higher operating expenses of $21.7 million related primarily to a full year of activity for the
Norrell outsourcing business. As a percentage of revenues, operating expenses decreased from 19.8% in 1999 to 17.0% in 2000 due primarily to the inclusion of the outsourcing business in 2000 (which
classifies most of its expenses in gross profit).

17

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RecruitmentMichael Page.Revenues increased 21.7% to $646.0 million in 2000 from $530.6 million in
the prior year due to strong organic growth. Revenues by service line for 2000 were comprised of 51.1% staffing and 48.9% permanent placement. As a percentage of total revenues, staffing decreased
from 54.8% in the prior year as the permanent placement business grew more rapidly than staffing.

Gross
profit increased 31.8% to $392.8 million in 2000 from $298.1 million in the prior year, and the overall gross profit percentage increased to 60.8% in 2000 from 56.2%
in the prior year. The increase in gross profit is primarily due to the higher proportion of permanent placement business.

Segment
operating profit increased 25.2% to $110.9 million in 2000 from $88.6 million in the prior year. The increase was due to the increase in gross profit of
$94.7 million discussed above, partially offset by higher operating expenses of $72.4 million. Operating expenses as a percentage of revenues increased to 43.6% in 2000 from 39.5% in
1999 due to a higher proportion of permanent placement business.

Unallocated Central Costs.Unallocated central costs decreased 3.5% to $20.3 million in 2000 from $21.1 million
in 1999. As a percentage of consolidated revenues, these costs were about 0.7% in 2000 compared with 0.8% in 1999 (excluding Michael Page which did not impact central cost levels).

Amortization Expense.Amortization expense increased 27.0% to $43.4 million in 2000 from $34.2 million in 1999.
This increase is primarily attributable to the amortization of Norrell goodwill, which began in July of 1999.

Interest Expense.Interest expense increased 34.7% to $52.9 million in 2000 from $39.3 million in 1999. The
increase reflects higher average borrowings outstanding during 2000 related to the Norrell acquisition and increased borrowings to fund higher working capital needs due to an increase in days sales
outstanding, franchise buybacks and earnouts, as well as slightly higher overall average interest rates. Spherion had average borrowings outstanding during 2000 of $813.4 million at an average
interest rate including the effects of interest rate swaps of 6.8%. During 1999, Spherion had average borrowings outstanding of $635.4 million at an average interest rate including the effects
of interest rate swaps of 6.0%.

Interest Income.Interest income remained relatively unchanged at $2.5 million in 2000 compared with
$3.0 million in 1999.

Write-down of Investment.During the second quarter of 2000, Spherion made an equity investment in Worldwide
Xceed Group, Inc., an internet-focused consulting group. In the fourth quarter of 2000, Spherion determined that the decline in value of this investment was other than temporary and recorded a
pre-tax charge to earnings of $24.8 million ($15.4 million after-tax, or $0.22 per diluted share).

Income Taxes.The effective income tax rate for 2000 was 41.0% compared with 42.8% (or 42.0% before Year 2000 costs and
restructuring and integration costs) in 1999. The decrease in the effective rate resulted primarily from higher levels of Work Opportunity tax credits.

Net Earnings.Net earnings increased 5.2% to $74.5 million ($1.16 per diluted share) in 2000 from $70.8 million
($1.27 per diluted share) in the prior year period. The weighted average number of shares (as adjusted for the dilutive impact of common stock equivalents) increased from 60.8 million in 1999
to 69.8 million in 2000 due to the issuance of 20.8 million shares in July 1999 related to the Norrell acquisition, partially offset by stock repurchases. For 1999, Spherion's
fiscal year included 53 weeks, whereas 2000 included 52 weeks. The extra week in 1999 resulted in approximately $40.4 million in additional revenues, but net earnings benefited by less than
$500,000 as the 53rd week was a holiday week.

18

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Liquidity And Capital Resources



Historically, Spherion has financed its operations through cash generated by operating activities and bank lines of credit. Spherion's principal uses of cash are
capital expenditures, working capital needs, repayment of debt, stock repurchases and funding acquisitions. The nature of Spherion's business requires payment of wages to its flexible staff and
consultants on a weekly or bi-weekly basis, while payments from clients are generally received 30-60 days after billing. The sale of Michael Page during 2001 generated
cash of $192 million, net of taxes paid on the gain and repayments of debt. These funds are available for general corporate purposes and are included in total cash and cash equivalents of
$260.3 million at December 28, 2001.

Cash
used in operating activities in 2001 was $19.6 million compared with cash provided by operating activities of $150.0 million in 2000 and $150.6 million in 1999.
Lower operating cash flows during 2001 resulted from higher 2001 tax payments of approximately $72.5 million associated with the sale of Michael Page, net of the tax benefit from the
restructuring charge, lower operating earnings (before restructuring charges and the gain on the sale of Michael Page) and higher expenditures for restructuring related activities, partially offset by
lower working capital needs. Lower operating cash flows during 2000 compared with 1999, resulted from increased working capital needs, partially offset by higher earnings and the impact of higher
amortization, depreciation and other non-cash charges. Cash used by changes in working capital was $34.9 million for 2001, $55.5 million for 2000 and $29.1 million for
1999. Working capital for 2001 was used for the following items: (1) tax payments of $72.5 million related to the sale of Michael Page, net of the tax benefit from the restructuring
charge, (2) restructuring activities used $28.4 million, and (3) accounts payable and accrued liabilities decreased primarily due to first quarter payments associated with Michael
Page's activities. Working capital for 2001 was positively impacted by the collection of outstanding accounts receivable as the number of days sales outstanding decreased from the prior year. The
increase in cash used for working capital items in 2000 compared with 1999 resulted primarily from: (1) a decrease in accounts payable, accrued expenses and other liabilities due primarily to
the payout of acquisition and restructuring related costs; (2) an increase in receivables due to an increase in days sales outstanding offset by (3) a decrease in other assets resulting
primarily from the liquidation of certain insurance-related deposits of $12.0 million and the receipt of an $8.0 million tax refund related to the final Norrell tax return.

Investing
activities provided cash of $787.5 million in 2001 and used cash of $168.1 million and $320.5 million in 2000 and 1999, respectively. The 2001 sale of
Michael Page generated gross cash proceeds before tax payments and debt pay down of $852.7 million. In addition, in 2001 Spherion had acquisition expenditures of $34.1 million
(contingent payments for acquisitions consummated in prior years and the repurchases of licensee and franchise operations) and had $34.9 million of capital expenditures. Capital expenditures
for 2001 include the normal replacement of hardware and software as well as office furnishings and leasehold improvements. Cash used for investing activities in 2000 reflects the repurchase of license
operations to reduce market overlap created by the Norrell acquisition, earnout payments associated with prior acquisitions and strategic investments in eBusiness alliance partners. Investing
activities in 2000 also included $56.2 million of capital expenditures primarily for new computer hardware and software to continue to upgrade and expand Spherion's information technology
capabilities. Cash used for investing activities in 1999 reflects the acquisition of Norrell, which included cash payments of $87.8 million, the remaining payments of $111.0 million made
in the first quarter of 1999 on the December 1998 acquisition of Computer Power, various buybacks of Spherion's license operations, and
$55.8 million of capital expenditures primarily related to new computer hardware and software to upgrade and expand Spherion's information technology capabilities including the new front office
system within domestic staffing and expenditures associated with Spherion's outsourcing business.

19

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Cash
used by financing activities was $546.1 million for 2001, compared with cash provided by financing activities of $19.0 million and $54.1 million for 2000 and
1999, respectively. Cash used by financing activities for 2001 primarily reflects the repayment of debt with proceeds from the sale of Michael Page and the repurchase of treasury stock. During 2001,
Spherion purchased approximately 4.0 million shares of its common stock at an average price of $9.42 per share. At December 28, 2001, Spherion had approximately 7.0 million shares
held in treasury and had approval to repurchase 2.7 million shares under a repurchase program approved in June 2001, which expires in June 2002. There is a further authorization
to acquire shares for various compensation and benefits programs under which a maximum of 2.6 million shares may be acquired in any one year. Management may acquire shares pursuant to these
authorizations from time to time in open market or negotiated transactions depending upon market conditions. Cash provided by financing activities in 2000 primarily reflects net borrowings offset by
treasury share purchases of $33.8 million. During 2000, Spherion purchased approximately 2.6 million shares of its common stock at an average price of $13.04 per share. Cash provided by
financing activities in 1999 primarily reflects net borrowings for the Norrell and other acquisitions offset by $89.4 million of purchases of Spherion's common stock. As part of the acquisition
of Norrell, Spherion assumed $125.5 million in existing Norrell debt, which was repaid with the proceeds of borrowings under Spherion's credit facilities.



Spherion has a multi-currency syndicated credit agreement ("Revolving Loan Facility") with a total capacity of $400 million, of which $75 million
terminates in 2002 and $325 million terminates in 2004. At December 28, 2001, letters of credit totaling $71.4 million were issued and reduce the amount Spherion can borrow under
the Revolving Loan Agreement. Outstanding borrowings at December 29, 2000 subject to this Revolving Loan Facility were $242.0 million in revolving loans, $55.3 million in letters
of credit and $9.5 million in loan notes to prior shareholders of Michael Page with $221.5 million of the revolving loans and loan notes denominated in British pound sterling and
$30.0 million denominated in U.S. dollars. Borrowings under this Revolving Loan Facility are unsecured. The Revolving Loan Facility is available to supply working capital and to provide for
general corporate needs. Interest rates on amounts outstanding under the Revolving Loan Facility are based on LIBOR plus a variable margin. The Revolving Loan Facility contains customary covenants,
which include restrictions on the payment of cash dividends, as well as the maintenance of certain financial tests including minimum net worth and EBITDA (earnings before interest, income taxes,
depreciation and amortization adjusted to reflect operating earnings), debt and interest coverage, as well as restrictions on the incurrence of liens and additional indebtedness. Due to these
covenants, the amount that can be borrowed under the Revolving Loan Facility is limited and as of December 28, 2001, there was approximately $23 million available for future borrowings
under the lines of credit.

The
outstanding irrevocable letters of credit described above of approximately $71.4 million (same as fair value) and surety bonds outstanding of approximately
$23.9 million, substantially all of which mature in May 2002, primarily collateralize Spherion's recorded obligations under certain workers' compensation insurance programs. The level of
collateral required is determined by the insurance carrier based on claims experience of the programs and may vary from year to year. The agreement between Spherion and the carrier provides that
additional collateral may be required in the event that Spherion's senior debt rating falls below investment grade. This collateral may be in any form acceptable to the carriers and could include
additional letters of credit or cash. There can be no assurance that Spherion will retain its investment grade rating on its senior debt.

In
October 2000, Spherion issued $8.0 million of interest-bearing convertible promissory notes due October 1, 2005 in conjunction with the purchase of 80% of the
membership interests of JobOptions, LLC. In May 1998, Spherion issued $207.0 million of 41/2% Convertible Subordinated Notes due June 1, 2005.

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In July 1999, Spherion added a loan facility secured by Spherion's accounts receivable of $250.0 million ("Accounts Receivable Securitization") and issued
$53.0 million in Australian dollar term financing. All borrowings related to the Accounts Receivable Securitization and the Australian dollar term financing were repaid in April 2001
with the proceeds from the sale of Michael Page, and were subsequently terminated. Interest rates on the Accounts Receivable Securitization borrowings and the Australian dollar term financing were
based on commercial paper market rates and Australian bank bills plus a variable margin, respectively. In addition, Spherion had established short-term, unsecured lines of credit with
certain banks. Interest rates on these lines of credit were based on LIBOR and were available to fund Spherion's short-term capital requirements. Outstanding borrowings at
December 29, 2000 were $214.4 million under the Accounts Receivable Securitization and $37.4 million under the Australian dollar term financing.

Subsequent
to year end, Spherion has notified its syndicated bank group of its intention not to seek renewal of the $75 million, 364 day portion of the Revolving Loan
Facility which terminates in April 2002. In addition, Spherion has determined that in order to provide for its long-term capital needs it will seek to replace or modify the existing
Revolving Loan Facility which matures in 2004. Spherion cannot give assurance that it will be able to replace the existing Revolving Loan Facility with a facility that is more favorable.

Restructuring, Asset Impairments and Other Charges

Spherion has entered into various restructuring plans during 2001, 2000 and 1999. The 2000 and 1999 plans were related to rationalizing excess capacity resulting
from the Norrell acquisition. During 2001, Spherion was negatively impacted by the slowdown in the economy. Also during 2001, Spherion announced its Business Transformation Strategy which was focused
on increasing the predictability of revenues and earnings, continuous productivity improvements and enhancing profitability. All of these factors led to an assessment of the strategic direction and
product mix. Consequently, restructuring plans were adopted in 2001 to terminate redundant employees, reduce excess capacity and dispose of certain non-strategic assets (the "2001 Plans").

A
summary of the charges is as follows (in thousands):

Fiscal Years EndedDec. 28,
2001

Dec. 29,
2000

Dec. 31,
1999Restructuring

$
56,492

$
259

$
12,750Write-down of assets (including goodwill of $26,566)


42,729





Goodwill impairment


33,703





Integration costs and other charges


7,217





16,792$
140,141

$
259

$
29,542


2001 Plans

Restructuring costs in 2001 include employee severance costs of $24.7 million, facility closure costs and asset write-offs of
$31.9 million, professional fees related to the execution of the 2001 Plans of $2.8 million and reversal of over accruals of $3.0 million. The facility closure costs include
$20.7 million in lease termination costs and $11.2 million for the write-off of leasehold improvements on closed locations and write-down of office furniture and
equipment to their estimated fair value determined by comparable market information. These assets will be taken out of service at the time properties are abandoned and consequently will not be
depreciated further after abandonment. Depreciation expense related to these assets was approximately $3.0 million annually. These actions included the elimination of 1,311 positions, primarily
within the Recruiting and Outsourcing segments and the closure of 290 locations.

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The
write-down of assets of $42.7 million includes the write-down of businesses sold or held for sale of $37.1 million and the
write-down of abandoned software of $5.6 million. The write-down of the business held for sale and businesses sold as of December 28, 2001 was for the estimated
loss on disposition of the StratfordGroup, Spherion's retained executive search business, JobOptions, an internet recruiting business and the commercial staffing operations in Spain. These businesses
were written-down to their estimated net realizable values. These businesses generated $23.5 million of revenues and pretax losses of $9.4 million during 2001.

The
goodwill impairment of $33.7 million relates primarily to a write-down of goodwill associated with the impairment of the human resource consulting businesses,
which is included in the Outsourcing segment. Management reviewed the valuation of its human resource consulting business and determined that while current year revenues from this cyclical business
increased the long term future cash flows did not support the carrying value and recorded an impairment charge based on the estimated fair market value derived from valuations of publicly traded
competitors.

Other
charges include the severance cost for Spherion's former chief executive officer in the amount of $6.9 million.

2000 and 1999 Plans

Restructuring costs and charges of $12.8 million in 1999 included employee severance costs of approximately $3.7 million and facility closure costs
of $7.0 million primarily relating to the elimination of redundant branch locations. The facility closure costs included approximately $5.0 million in lease termination costs and
approximately $2.0 million in losses on the disposition of facility related fixed assets, primarily the write-off of leasehold improvements on closed branch locations and
write-down of furniture and fixtures to their estimated fair value, determined by comparable market information. In addition, as part of the 1999 Plan, Spherion recorded a charge of
approximately $2.1 million for the write-off of certain software programs that were no longer utilized as a result of the Norrell acquisition. These assets were taken out of service
at the time of the write-down and consequently were not depreciated further after the write-down. During 2000, remaining accruals of approximately $3.0 million were
identified relating to the 1999 Plan that were not needed, primarily the result of the buyout of existing lease obligations at better than expected rates and this $3.0 million was reversed to
income. Spherion then undertook additional restructuring actions in the amount of $3.2 million. These additional actions included the elimination of 71 positions, with most of these positions
being administrative personnel within the Technology segment, and the closure of an additional 14 locations.

Nonrecurring
integration costs of approximately $16.8 million in 1999 included approximately $7.6 million in costs relating to employees whose positions were eliminated and
were involved solely in exit functions and systems integrations, approximately $5.0 million in consulting costs primarily related to systems integrations, approximately $2.6 million for
a one-time acquisition completion incentive bonus, approximately $0.7 million in relocation of employees and approximately $0.9 million in other related integration costs.
Substantially all these costs were paid by December 31, 1999, and the remaining amounts were paid by December 29, 2000.

An
analysis of the restructuring plans, excluding the write-down of businesses that were held for sale and obsolete software, goodwill impairment and other charges including
severance cost of Spherion's

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former chief executive officer, along with amounts remaining to be distributed under restructuring plans initiated in 1999, 2000 and 2001 are as follows (dollar amounts in thousands):

|                            |  | Facility
Closures |        | Number of
locations |      | Severance |   | Number of
personnel |   | Asset
write-offs |   | Total |       
|--------------------------- |  | ----------------- | ------ | ------------------- | ---- | --------- | - | ------------------- | - | ---------------- | - | ----- | ------
|1999 Plan charges           |  | $                 | 6,992  |                     | 43   |           | $ | 3,650               |   | 160              |   | $     | 2,108 
|Utilized during fiscal 1999 |  |                   | (1,340 | )                   | (22  | )         |   | (1,465              | ) | (48              | ) |       | (2,108
|                            |  |                   |        |                     |      |           |   |                     |   |                  |   |       |       
|Balance at Dec. 31, 1999    |  |                   | 5,652  |                     | 21   |           |   | 2,185               |   | 112              |   |       |      
|                            |  |                   |        |                     |      |           |   |                     |   |                  |   |       |       
|2000 Plan charges           |  |                   | 845    |                     | 14   |           |   | 2,399               |   | 71               |   |       |      
|Utilized during fiscal 2000 |  |                   | (2,898 | )                   | (35  | )         |   | (2,540              | ) | (102             | ) |       |      
|Reversal of over accrual    |  |                   | (2,007 | )                   |     |           |   | (978                | ) | (74              | ) |       |      
|                            |  |                   |        |                     |      |           |   |                     |   |                  |   |       |       
|Balance at Dec. 29, 2000    |  |                   | 1,592  |                     |     |           |   | 1,066               |   | 7                |   |       |      
|                            |  |                   |        |                     |      |           |   |                     |   |                  |   |       |       
|2001 Plan charges           |  |                   | 23,541 |                     | 290  |           |   | 24,692              |   | 1,311            |   |       | 11,215
|Utilized during fiscal 2001 |  |                   | (6,508 | )                   | (222 | )         |   | (16,030             | ) | (1,096           | ) |       | (2,795
|Reversal of over accrual    |  |                   | (821   | )                   | (11  | )         |   | (1,864              | ) | (96              | ) |       | (271  
|                            |  |                   |        |                     |      |           |   |                     |   |                  |   |       |       
|Balance at Dec. 28, 2001    |  | $                 | 17,804 |                     | 57   |           | $ | 7,864               |   | 126              |   | $     | 8,149 
|                            |  |                   |        |                     |      |           |   |                     |   |                  |   |       |       

The
remaining accruals, which are included in accrued restructuring in the accompanying Consolidated Balance Sheets, relate to lease payments on closed locations that
will be paid out through 2006 and severance costs which will be paid out during 2002.

Inflation

The effects of inflation on Spherion's operations were not significant during the periods presented in the financial statements.

Impact of the Euro

The Euro became the legal tender for Spherion's operations in The Netherlands effective January 1, 2002. The costs of addressing the Euro conversion were
not material. Spherion has studied the implications of the overall Euro conversion and does not expect it to have a material impact on Spherion's financial condition or results of operations upon
adoption.

Seasonality And Cyclical Nature Of Business

Spherion's businesses are only moderately seasonal in nature. However, the staffing industry has historically been considered to be cyclical, often acting as a
coincidental indicator of both economic downswings and upswings. Spherion believes that the balance between its service lines reduces the cyclical nature of the Recruiting and Technology businesses.
Longer-term, more predictable contracts are characteristic of Outsourcing. Spherion's goal to grow its Outsourcing business as a percentage of total revenues is intended to help balance
the cyclical nature of Recruitment and Technology.

Other



In June 1998, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results
on the

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hedged item in the statement of earnings, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. Spherion adopted
the provisions of SFAS No. 133, as amended by SFAS No. 138, in the first quarter of 2001 and recorded a charge for the cumulative effect of a change in accounting principle of
$1.1 million, net of an income tax benefit of $0.7 million.

In
July 2001, the FASB issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." These standards establish accounting
and reporting for business combinations. SFAS No. 141 requires all business combinations entered into subsequent to June 30, 2001 to be accounted for using the purchase method of
accounting. SFAS No. 142 provides that goodwill and other intangible assets with indefinite lives will not be amortized, but will be tested for impairment on an annual basis. Spherion will
adopt the provisions of these statements in the first quarter of 2002. Spherion has completed its assessment of impairment of goodwill using the requirements of SFAS No. 142 and will record a
pre-tax transitional impairment charge to goodwill of $692 million in the first quarter of 2002.

In
August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which is effective for fiscal years beginning
after December 15, 2001. This Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supercedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the accounting and reporting provisions of Accounting Principles Board
Opinion No. 30, "Reporting the Results of OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," for the disposal of a segment of a business (as previously defined in that opinion). This statement also amends Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to eliminate the exception to consolidation for subsidiaries for which control is likely to be temporary. Spherion will adopt SFAS No. 144 in the first quarter of 2002. The impact
of such adoption is not anticipated to have a material effect on Spherion's financial statements.



Substantially all of Spherion's field operations are conducted in leased premises. Spherion also leases computer equipment. Total lease expense for the years
ended December 28, 2001, December 29, 2000 and December 31, 1999 was $40.1 million, $51.6 million and $37.6 million, respectively. Future minimum lease
payments under non-cancelable leases as of December 28, 2001 are $42.4 million, $34.4 million, $25.8 million, $16.9 million and $9.7 million in
2002, 2003, 2004, 2005 and 2006, respectively. Future minimum lease payments of $15.6 million and $1.6 million as of December 28, 2001 and December 29, 2000, respectively,
related to facility closures under Spherion's Business Transformation Strategy, have been accrued and are included as part of Accrued Restructuring in the balance sheets of the Consolidated Financial
Statements.



Spherion's critical accounting policies, including the assumptions and judgments underlying them, are disclosed in the Notes to the Consolidated Financial
Statements. These policies have been consistently applied in all material respects and address such matters as principles of consolidation, allowance for doubtful accounts, investments, impairment of
long-lived assets, accrued self-insurance, revenue recognition, derivative financial instruments and stock based compensation. While the estimates and
judgments associated with the application of these policies may be affected by different assumptions or conditions, Spherion believes the estimates and judgments associated with the reported amounts
are appropriate in the circumstances.

Forward Looking StatementsSafe Harbor

In evaluating Spherion's business, you should carefully consider the following factors in addition to the information contained elsewhere in this Annual Report on
Form 10-K or incorporated by reference

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herein. This Annual Report on Form 10-K includes "forward-looking statements" within the meaning of Section 21E of the Securities Act of 1934, as amended, including, in
particular, statements about our plans, strategies and prospects. Although we believe that our plans, strategies and prospects reflected in or suggested by our forward-looking statements, and the
assumptions on which they are based, are reasonable, we cannot assure you that our plans, strategies and prospects or our other expectations and intentions will be realized or achieved. Important
factors that could cause our actual results to differ materially from our forward-looking statements include those set forth in this Forward Looking StatementsSafe Harbor section. If any
of the following risks, or other risks not presently known to us or that we currently believe to not be significant, do materialize or develop into actual events, then our business, financial
condition, results of operations or prospects could be materially adversely affected. All forward-looking statements attributable to us or any persons acting on our behalf are expressly qualified in
their entirety by the cautionary statements set forth below.

We operate in highly competitive markets with low barriers to entry, and may be unable to compete successfully against existing or new
competitors.

We
operate in highly competitive and fragmented markets in each of our three business segments. Within the Recruitment and Technology segments, there are low barriers to entry by
potential competitors at the local level. We face significant competition in the markets we serve and will continue to face significant competition in any geographic markets or industry sectors that
we may enter. The majority of competitors are significantly smaller than us. However, certain of our competitors are larger and have greater marketing and financial resources than us.

There
has been a significant increase in the number of clients consolidating their staffing services purchases with a single provider or with a small number of providers. The trend to
consolidate staffing services purchases has in some cases made it more difficult for us to obtain or retain business. We also face the risk that certain of our current and prospective clients may
decide to provide similar services internally. We cannot assure you that we will not encounter increased competition in the future.

Any significant economic downturn could result in our clients using fewer temporary employees or the loss of a significant client, which would materially
adversely affect our business segments.

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. Also during such periods, companies may elect to defer installation of new information technology systems and platforms or upgrades to existing systems and platforms. As a result, any
significant economic downturn could have a material adverse effect on our business, financial condition or results of operations. During 2001, the slowdown in the U.S. economy significantly impacted
the recruitment and technology markets, which in turn reduced our revenues significantly.

A
loss of a significant client from one of our business segments, or reduced business from such a client, could have a significant adverse impact on our business and results of
operations in future periods. We cannot guarantee that we will be able to retain long-term relationships or secure renewals of short-term relationships with our more
substantial clients in the future.

We are dependent upon availability of qualified personnel, and may not be able to attract and retain sufficient numbers of qualified personnel necessary to
succeed.

We
depend upon our ability to attract qualified personnel who possess the skills and experience necessary to meet the staffing requirements of our clients. We must continually evaluate
and upgrade our base of available qualified personnel to keep pace with changing client needs and emerging technologies. Competition for individuals with proven professional or technical skills always
exists. We could have difficulty attracting, training and retaining sufficient numbers of qualified personnel necessary for our business to succeed.

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We may not achieve the intended effects of our Business Transformation Strategy, which could adversely impact our business, financial condition and results of
operations.

As
part of the Business Transformation Strategy announced in 2001, we are focused on growing higher margin administrative and professional services and are placing significant effort and
resources on further refining and dramatically expanding our Outsourcing business. To be successful in this endeavor, we intend to leverage current recruitment, call center and administrative service
competencies, add talent to broaden our outsourcing knowledge base and pursue partnership opportunities to complete service offerings, expand delivery channels and increase sales. We cannot assure you
that these efforts
will be successful and, if they are, that they will have the intended effects of increasing the predictability of revenues and earnings, improving productivity or enhancing profitability.

Our liquidity may be affected if we are not able to renegotiate our Revolving Loan Facility or if our credit rating changes.

Due
to various financial covenants, the amount we can borrow under our Revolving Loan Facility is currently limited. Because of the limited credit availability under this facility we may
have to use our cash and cash equivalents for corporate needs such as pledging collateral for the workers' compensation insurance program and business growth opportunities. We will attempt to
renegotiate the facility terms, but we cannot assure you that we will be able to do so on the same terms. A reduction of our credit rating may also require a use of our cash and cash equivalents with
respect to our workers' compensation insurance program.

We may be exposed to employment-related claims and costs as well as new regulations that could materially adversely affect our business, financial condition and
results of operations.

We
employ and place people in the workplaces of other businesses. Attendant risks of such activity that could increase our cost of doing business include:



Although
we maintain insurance coverage for general liability, errors and omissions and employee theft, such insurance coverage may not be adequate in scope or amount to cover any such
liability. A failure of any of our personnel to observe our policies and guidelines intended to reduce exposure to these risks could have a material adverse effect upon us. Although historically we
have not had any significant problems arising from the matters discussed above, we cannot assure that we will not experience such problems in the future.

We
retain a portion of the risk under our workers' compensation, general liability/professional liability, employment practices liability insurance programs and health insurance benefits
programs. Changes in the estimates of these accruals are charged or credited to earnings in the period determined, and therefore a large fluctuation in any given quarter could materially adversely
affect earnings in that period.

Government regulation may significantly increase our costs.

In
conducting our business, we are required to pay a number of payroll and related costs and expenses, including unemployment taxes, workers' compensation and insurance and medical
insurance for

26

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our personnel. Unemployment insurance premiums paid by employers typically increase during periods of increased levels of unemployment. Workers' compensation costs have increased over the past decade
and may increase in the future as states have raised benefit levels and liberalized allowable claims. Future earnings could be adversely affected if we are not able to increase the fees charged to
clients to absorb the increased costs related to unemployment insurance or workers' compensation benefits.

We are subject to business risks associated with international operations, which could make our international operations significantly more
costly.

Operations
in certain of our markets are subject to risks inherent in international business activities, including,



Our failure or inability to complete our outsourcing projects could result in damage to our reputation and give rise to legal claims against
us.

Our
Outsourcing business requires us to assume a greater level of responsibility for developing or maintaining processes on behalf of our clients than our other business segments. Many
of our outsourcing engagements are critical to the operation of our clients' businesses. Our failure or inability to complete these engagements satisfactorily could have a material adverse effect on
our clients' operations and consequently may give rise to claims against us for actual or consequential damages or otherwise damage our reputation. Any of these claims could have a material adverse
effect on our business, financial condition or results of operations.

We are defendant in a variety of litigation and other actions from time to time, which may have a material adverse effect on our business, financial condition and
results of operations.

We
and our subsidiaries are regularly involved in a variety of litigation arising out of our business. Occasionally, this litigation can be serious. We cannot assure you that our
insurance will cover all claims that may be asserted against us. Should the ultimate judgments or settlements exceed our insurance coverage, they could have a material effect on our results of
operations, financial position and cash flows. We also cannot assure you that we will be able to obtain appropriate types or levels of insurance in the future or that adequate replacement policies
will be available on acceptable terms, if at all.

Our contracts contain termination provisions and pricing risks that could decrease our revenues, profitability and cash flow.

Some
of our contracts with our outsourcing clients permit termination in the event our performance is not consistent with service levels specified in those contracts. Our clients'
ability to terminate contracts creates uncertain revenue streams. In addition, if clients are not satisfied with our level of performance, our reputation in the industry may suffer, which could
materially and adversely affect our business, financial condition, results of operations and cash flow. Some of our contracts contain pricing provisions that allow clients to pay a set fee for our
services regardless of whether our costs to perform
these services exceed the amount of the set fee. Many of our outsourcing contracts provide for credits to our clients if we fail to achieve specific contract standards. Some of our contracts contain
re-pricing provisions that can result in reductions of our fees for performing our services. In these situations, we could incur significant unforeseen costs or financial penalties in
performance under the contracts.

The
termination of a client contract or the deterioration of the financial condition or prospects of a client may result in an impairment of the net book value of the assets we use in
connection with that contract.

27

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Item 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of December 28, 2001, Spherion maintains the majority of its cash and cash equivalents in financial instruments with original maturities of one month or
less. These financial instruments are subject to interest rate risk and will decline in value if interest rates increase. Due to the short duration of these financial instruments, an immediate
increase of 1% in interest rates would not have a material effect on Spherion's financial condition.

Spherion's
outstanding variable-rate debt at December 28, 2001 and December 29, 2000 was $19.6 million and $569.1 million, respectively. Based on
the outstanding balance, a change of 1% in the interest rate would cause a change in interest expense of approximately $0.2 million and $5.7 million in 2001 and 2000, respectively, on an
annual basis not considering the offset of the interest rate swap discussed below.

Spherion
has utilized interest rate swap agreements to reduce the impact on interest expense of fluctuating interest rates on its variable-rate debt. Spherion had a
variable-to-variable interest rate swap agreement outstanding which effectively converted interest from a British LIBOR basis to a broader index and capped Spherion's exposure
to upward movement in rates at 8.5%. This agreement was terminated during the first quarter of 2001 at a cost of $1.3 million in anticipation of repaying substantially all
variable-rate debt during the second quarter of 2001 with the proceeds from the sale of Michael Page. There were no such agreements outstanding as of December 28, 2001. Spherion
received an average variable rate of 5.9% and paid an average variable rate of 6.7% during the period the swap was outstanding during the year ended December 28, 2001. The notional amount
outstanding at December 29, 2000 was $112.0 million. Spherion received an average variable rate of 6.2% and paid an average variable rate of 6.7% during the twelve months ended
December 29, 2000.

At
December 28, 2001, Spherion had no outstanding foreign currency contracts. At December 29, 2000, Spherion had outstanding foreign currency forward contracts to sell
Australian dollars in the notional amount of $82.6 million for the purpose of hedging intercompany amounts outstanding with its Australian operations.

When
interest rate and foreign currency financial instruments are outstanding, exposure to market risk on interest rate and foreign currency financial instruments results from
fluctuations in interest and currency rates, respectively, during the periods in which the contracts are outstanding. The
counterparties to Spherion's interest rate swap agreements and currency exchange contracts consist of a diversified group of major financial institutions, each of which is rated investment grade.
Spherion is exposed to credit risk to the extent of potential nonperformance by counterparties on financial instruments. Any potential credit exposure does not exceed the fair value as stated below.
Spherion believes the risk of incurring losses due to credit risk is remote.

The
carrying amount of cash and cash equivalents approximates fair value due to the short-term maturities of these instruments. The cost to terminate the outstanding interest
rate swap and the book value as of December 29, 2000 were approximately $1.8 million and a $0.2 million interest payable, respectively. Termination of the foreign currency forward
contracts as of December 29, 2000 would have resulted in a gain of $11.4 million. In estimating the fair value of its derivative positions, Spherion utilizes quoted market prices, if
available, or quotes obtained from outside sources. The cost to terminate Spherion's fixed-rate convertible subordinated notes as of December 28, 2001 and December 29, 2000
was $162.5 million and $140.6 million, respectively, with a $207.0 million carrying value. The fair value of Spherion's fixed-rate notes is estimated based on quoted
market prices for the same issue. The fair values of all other financial instruments, including debt other than the Notes, approximate their book values as the instruments are short-term
in nature or contain market rates of interest.

The
purpose of Spherion's foreign exchange hedging activities is to mitigate the impact of changes in foreign currency exchange rates. Spherion attempts to hedge transaction exposures
through natural

28

---

economic offsets. To the extent this is not practicable, exposure areas that are considered for hedging include foreign currency denominated receivables and payables, intercompany loans, firm
committed transactions and dividends related to foreign subsidiaries. Spherion uses financial instruments, principally forward exchange contracts, in its management of foreign currency exposures.
Spherion does not enter into forward contracts for trading purposes.

Item 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

|                                                |  | Page
|----------------------------------------------- |  | ----
|Independent Auditors' Report                    |  | 30  
|Consolidated Statements of Earnings             |  | 31  
|Consolidated Balance Sheets                     |  | 32  
|Consolidated Statements of Stockholders' Equity |  | 33  
|Consolidated Statements of Cash Flows           |  | 34  
|Notes to Consolidated Financial Statements      |  | 35  

29

---



INDEPENDENT AUDITORS' REPORT

To
the Board of Directors
    of Spherion Corporation
Fort Lauderdale, Florida

We
have audited the accompanying consolidated balance sheets of Spherion Corporation and subsidiaries ("Spherion") as of December 28, 2001 and December 29, 2000, and the related
consolidated statements of earnings, stockholders' equity and cash flows for each of the three years in the period ended December 28, 2001. Our audits also included the financial statement
schedule listed in the Index at Item 14. These financial statements and financial statement schedule are the responsibility of Spherion's management. Our responsibility is to express an opinion on
these financial statements and financial statement schedule 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, such consolidated financial statements present fairly, in all material respects, the financial position of Spherion Corporation and subsidiaries as of December 28, 2001 and
December 29, 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 28, 2001 in conformity with accounting principles
generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth therein.

As
discussed in Note 1 to the consolidated financial statements, in 2001 Spherion changed its method of accounting for derivative instruments to conform to Statement of Financial Accounting
Standard No. 133.

DELOITTE &
TOUCHE LLP
Certified Public Accountants

Fort
Lauderdale, Florida
February 6, 2002

30

---



SPHERION CORPORATION AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF EARNINGS  (amounts in thousands, except per share amounts)

|                                                                                      |  | Fiscal Years Ended |          
|------------------------------------------------------------------------------------- |  | ------------------ | ---------
|
|Revenues                                                                              |  | $                  | 2,713,137
|Cost of services                                                                      |  |                    | 1,938,747
|                                                                                      |  |                    |          
|Gross profit                                                                          |  |                    | 774,390  
|                                                                                      |  |                    |          
|Selling, general and administrative expenses                                          |  |                    | 644,876  
|Licensee commissions                                                                  |  |                    | 52,428   
|Amortization of intangibles                                                           |  |                    | 35,207   
|Interest expense                                                                      |  |                    | 24,399   
|Interest income                                                                       |  |                    | (9,595   
|Restructuring, asset impairments and other charges                                    |  |                    | 140,141  
|Gain on sale of Michael Page                                                          |  |                    | (305,704 
|Gain on sale of marketable securities                                                 |  |                    | (2,435   
|Write-down of investment                                                              |  |                    |         
|Year 2000 costs                                                                       |  |                    |         
|                                                                                      |  |                    |          
|                                                                                      |  |                    | 579,317  
|                                                                                      |  |                    |          
|Earnings before income taxes and cumulative effect of change in accounting principle  |  |                    | 195,073  
|Income taxes                                                                          |  |                    | 86,998   
|                                                                                      |  |                    |          
|Earnings before cumulative effect of change in accounting principle                   |  |                    | 108,075  
|Cumulative effect of change in accounting principle net of income tax benefit of $681 |  |                    | (1,114   
|                                                                                      |  |                    |          
|Net earnings                                                                          |  | $                  | 106,961  
|                                                                                      |  |                    |          
|Basic earnings per share:                                                             |  |                    |          
|Earnings before cumulative effect of change in accounting principle                   |  | $                  | 1.82     
|Cumulative effect of change in accounting principle                                   |  |                    | (0.02    
|                                                                                      |  |                    |          
|Net earnings                                                                          |  | $                  | 1.80     
|                                                                                      |  |                    |          
|Diluted earnings per share:                                                           |  |                    |          
|Earnings before cumulative effect of change in accounting principle                   |  | $                  | 1.73     
|Cumulative effect of change in accounting principle                                   |  |                    | (0.02    
|                                                                                      |  |                    |          
|Net earnings                                                                          |  | $                  | 1.72     
|                                                                                      |  |                    |          
|Basic weighted average shares outstanding                                             |  |                    | 59,502   
|Diluted weighted average shares outstanding                                           |  |                    | 65,934   

See
notes to Consolidated Financial Statements.

31

---

SPHERION CORPORATION AND SUBSIDIARIES  CONSOLIDATED BALANCE SHEETS  (amounts in thousands, except share data)

|                                              |                                                                                                                              | Dec. 28, 2001              |           | Dec. 29, 2000 |          
|--------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------- | -------------------------- | --------- | ------------- | ---------
|Assets                                        |                                                                                                                             
|Current Assets:                               |                                                                                                                              |                            |           |               |          
|                                              | Cash and cash equivalents                                                                                                    |                            | $         | 260,259       |          
|                                              | Receivables, less allowance for doubtful accounts of $10,261 and $21,643                                                     |                            |           | 347,034       |          
|                                              | Deferred tax asset                                                                                                           |                            |           | 38,590        |          
|                                              | Other current assets                                                                                                         |                            |           | 23,297        |          
|                                              |                                                                                                                              |                            |           |               |          
|                                              |                                                                                                                              | Total current assets       |           |               | 669,180  
|Goodwill, net                                 |                                                                                                                              |                            | 1,013,291 |               |          
|Trade names and other intangibles, net        |                                                                                                                              |                            | 933       |               |          
|Property and equipment, net                   |                                                                                                                              |                            | 101,687   |               |          
|Deferred tax asset                            |                                                                                                                              |                            | 54,358    |               |          
|Other assets                                  |                                                                                                                              |                            | 28,896    |               |          
|                                              |                                                                                                                              |                            |           |               |          
|                                              |                                                                                                                              | $                          | 1,868,345 |               | $        
|                                              |                                                                                                                              |                            |           |               |          
|Liabilities and Stockholders' Equity          |                                                                                                                             
|Current Liabilities:                          |                                                                                                                              |                            |           |               |          
|                                              | Current portion of long-term debt                                                                                            |                            | $         | 10,865        |          
|                                              | Accrued restructuring                                                                                                        |                            |           | 33,817        |          
|                                              | Accounts payable and other accrued expenses                                                                                  |                            |           | 101,893       |          
|                                              | Accrued salaries, wages and payroll taxes                                                                                    |                            |           | 81,496        |          
|                                              | Accrued self-insurance and other current liabilities                                                                         |                            |           | 30,978        |          
|                                              |                                                                                                                              |                            |           |               |          
|                                              |                                                                                                                              | Total current liabilities  |           |               | 259,049  
|Long-term debt, net of current portion        |                                                                                                                              |                            | 8,754     |               |          
|Convertible subordinated notes                |                                                                                                                              |                            | 206,997   |               |          
|Accrued self-insurance                        |                                                                                                                              |                            | 48,399    |               |          
|Deferred compensation                         |                                                                                                                              |                            | 25,368    |               |          
|Other long-term liabilities                   |                                                                                                                              |                            | 24,800    |               |          
|                                              |                                                                                                                              |                            |           |               |          
|                                              |                                                                                                                              | Total liabilities          |           |               | 573,367  
|                                              |                                                                                                                              |                            |           |               |          
|Commitments and contingencies (see footnotes) |                                                                                                                              |                            |           |               |          
|Stockholders' Equity:                         |                                                                                                                              |                            |           |               |          
|                                              | Preferred stock, par value $.01 per share; authorized 2,500,000 shares; none issued or outstanding                           |                            |           |              |          
|                                              | Common stock, par value $.01 per share; authorized 200,000,000 shares; issued 65,341,609 and 65,341,425 shares, respectively |                            |           | 653           |          
|                                              | Treasury stock, at cost, 6,965,718 and 3,587,793 shares, respectively                                                        |                            |           | (77,444       | )        
|                                              | Additional paid-in capital                                                                                                   |                            |           | 866,386       |          
|                                              | Retained earnings                                                                                                            |                            |           | 514,585       |          
|                                              | Accumulated other comprehensive loss                                                                                         |                            |           | (9,202        | )        
|                                              |                                                                                                                              |                            |           |               |          
|                                              |                                                                                                                              | Total stockholders' equity |           |               | 1,294,978
|                                              |                                                                                                                              |                            |           |               |          
|                                              |                                                                                                                              | $                          | 1,868,345 |               | $        
|                                              |                                                                                                                              |                            |           |               |          

See notes to Consolidated Financial Statements.

32

---



SPHERION CORPORATION AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY  For Fiscal Years Ended December 28, 2001, December 29, 2000 and December 31, 1999  (amounts in thousands)

|                                                                                           |                                    | Common
Stock                                                                     |     | Treasury
Stock |   | Additional
Paid-in
Capital |   | Retained
Earnings |         | Accumulated
Other
Comprehensive
(Loss)/Income |   | Total   |        
|------------------------------------------------------------------------------------------ | ---------------------------------- | -------------------------------------------------------------------------------- | --- | -------------- | - | -------------------------- | - | ----------------- | ------- | --------------------------------------------- | - | ------- | -------
|Balance as of December 25, 1998                                                            |                                    | $                                                                                | 473 |                | $ |                           |   | $                 | 468,032 |                                               | $ | 262,265 |        
|                                                                                           |                                    |                                                                                  |     |                |   |                            |   |                   |         |                                               |   |         |        
|Comprehensive income:                                                                      |                                    |                                                                                  |     |                |   |                            |   |                   |         |                                               |   |         |        
|                                                                                           | Net earnings                       |                                                                                  |     |               |   |                            |  |                   |         |                                              |   |         | 70,833 
|                                                                                           | Other comprehensive loss:          |                                                                                  |     |                |   |                            |   |                   |         |                                               |   |         |        
|                                                                                           |                                    | Foreign currency translation adjustments                                         |     |                |  |                            |   |                  |         |                                               |  |         |        
|                                                                                           |                                    |                                                                                  |     |                |   |                            |   |                   |         |                                               |   |         |        
|                                                                                           | Comprehensive income               |                                                                                  |     |                |   |                            |   |                   |         |                                               |   |         |        
|                                                                                           |                                    |                                                                                  |     |                |   |                            |   |                   |         |                                               |   |         |        
|Purchase of treasury stock                                                                 |                                    |                                                                                  |    |                |   | (89,368                    | ) |                   |        |                                               |   |        |        
|Common stock issued and treasury stock reissued in connection with the Norrell acquisition |                                    |                                                                                  | 175 |                |   | 54,182                     |   |                   | 383,025 |                                               |   |        |        
|Proceeds from exercise of employee stock options, including tax benefit                    |                                    |                                                                                  | 3   |                |   | 1,498                      |   |                   | 4,821   |                                               |   |        |        
|Proceeds from issuance of shares under Employee Stock Purchase Plan                        |                                    |                                                                                  | 2   |                |   | 1,651                      |   |                   | 1,481   |                                               |   |        |        
|Treasury stock reissued and compensation earned in connection with deferred compensation   |                                    |                                                                                  |    |                |   | 409                        |   |                   | 11,236  |                                               |   |        |        
|Other                                                                                      |                                    |                                                                                  |    |                |   |                           |   |                   | (23     | )                                             |   |        |        
|                                                                                           |                                    |                                                                                  |     |                |   |                            |   |                   |         |                                               |   |         |        
|Balance as of December 31, 1999                                                            |                                    |                                                                                  | 653 |                |   | (31,628                    | ) |                   | 868,572 |                                               |   | 333,098 |        
|                                                                                           |                                    |                                                                                  |     |                |   |                            |   |                   |         |                                               |   |         |        
|Comprehensive income:                                                                      |                                    |                                                                                  |     |                |   |                            |   |                   |         |                                               |   |         |        
|                                                                                           | Net earnings                       |                                                                                  |     |               |   |                            |  |                   |         |                                              |   |         | 74,526 
|                                                                                           | Other comprehensive income (loss): |                                                                                  |     |                |   |                            |   |                   |         |                                               |   |         |        
|                                                                                           |                                    | Foreign currency translation adjustments                                         |     |                |  |                            |   |                  |         |                                               |  |         |        
|                                                                                           | Unrealized gain on investment      |                                                                                  |     |               |   |                            |  |                   |         |                                              |   |         |       
|                                                                                           |                                    |                                                                                  |     |                |   |                            |   |                   |         |                                               |   |         |        
|                                                                                           | Comprehensive income               |                                                                                  |     |                |   |                            |   |                   |         |                                               |   |         |        
|                                                                                           |                                    |                                                                                  |     |                |   |                            |   |                   |         |                                               |   |         |        
|Purchase of treasury stock                                                                 |                                    |                                                                                  |    |                |   | (33,819                    | ) |                   |        |                                               |   |        |        
|Proceeds from exercise of employee stock options, including tax benefit                    |                                    |                                                                                  |    |                |   | 7,851                      |   |                   | (1,748  | )                                             |   |        |        
|Proceeds from issuance of shares under Employee Stock Purchase Plan                        |                                    |                                                                                  |    |                |   | 5,398                      |   |                   | (1,525  | )                                             |   |        |        
|Treasury stock reissued and compensation earned in connection with deferred compensation   |                                    |                                                                                  |    |                |   | 1,466                      |   |                   | 4,895   |                                               |   |        |        
|Other                                                                                      |                                    |                                                                                  |    |                |   |                           |   |                   | 8       |                                               |   |        |        
|                                                                                           |                                    |                                                                                  |     |                |   |                            |   |                   |         |                                               |   |         |        
|Balance as of December 29, 2000                                                            |                                    |                                                                                  | 653 |                |   | (50,732                    | ) |                   | 870,202 |                                               |   | 407,624 |        
|                                                                                           |                                    |                                                                                  |     |                |   |                            |   |                   |         |                                               |   |         |        
|Comprehensive income:                                                                      |                                    |                                                                                  |     |                |   |                            |   |                   |         |                                               |   |         |        
|                                                                                           | Net earnings                       |                                                                                  |     |               |   |                            |  |                   |         |                                              |   |         | 106,961
|                                                                                           | Other comprehensive income (loss): |                                                                                  |     |                |   |                            |   |                   |         |                                               |   |         |        
|                                                                                           |                                    | Foreign currency translation adjustments arising during the period               |     |                |  |                            |   |                  |         |                                               |  |         |        
|                                                                                           |                                    | Foreign currency translation adjustments related to the sale of Michael Page     |     |                |  |                            |   |                  |         |                                               |  |         |        
|                                                                                           |                                    | Foreign currency translation adjustments related to the sale of Recursos Humanos |     |                |  |                            |   |                  |         |                                               |  |         |        
|                                                                                           |                                    | Net unrealized gain on securities arising during the period                      |     |                |  |                            |   |                  |         |                                               |  |         |        
|                                                                                           |                                    | Gain on the sale of marketable securities included in net earnings               |     |                |  |                            |   |                  |         |                                               |  |         |        
|                                                                                           |                                    |                                                                                  |     |                |   |                            |   |                   |         |                                               |   |         |        
|                                                                                           | Comprehensive income               |                                                                                  |     |                |   |                            |   |                   |         |                                               |   |         |        
|                                                                                           |                                    |                                                                                  |     |                |   |                            |   |                   |         |                                               |   |         |        
|Purchase of treasury stock                                                                 |                                    |                                                                                  |    |                |   | (38,026                    | ) |                   |        |                                               |   |        |        
|Proceeds from exercise of employee stock options, including tax benefit                    |                                    |                                                                                  |    |                |   | 500                        |   |                   | (271    | )                                             |   |        |        
|Proceeds from issuance of shares under Employee Stock Purchase Plan                        |                                    |                                                                                  |    |                |   | 6,383                      |   |                   | (3,797  | )                                             |   |        |        
|Treasury stock reissued and compensation earned in connection with deferred compensation   |                                    |                                                                                  |    |                |   | 4,431                      |   |                   | 252     |                                               |   |        |        
|                                                                                           |                                    |                                                                                  |     |                |   |                            |   |                   |         |                                               |   |         |        
|Balance as of December 28, 2001                                                            |                                    | $                                                                                | 653 |                | $ | (77,444                    | ) | $                 | 866,386 |                                               | $ | 514,585 |        
|                                                                                           |                                    |                                                                                  |     |                |   |                            |   |                   |         |                                               |   |         |        

See notes to Consolidated Financial Statements.

33

---

SPHERION CORPORATION AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF CASH FLOWS  (amounts in thousands)

|                                                 |                                                                                                                                                      | Fiscal Years Ended                                                                 |                                                    
|------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | ---------------------------------------------------
|
|Cash Flows from Operating Activities:            |                                                                                                                                                      |                                                                                    |                                                    
|                                                 | Earnings before cumulative effect of change in accounting principle                                                                                  |                                                                                    | $                                                  
|                                                 | Adjustments to reconcile earnings before cumulative effect of change in accounting principle to net cash (used in) provided by operating activities: |                                                                                    |                                                    
|                                                 | Depreciation and amortization                                                                                                                        |                                                                                    |                                                    
|                                                 | Deferred income tax (benefit) expense                                                                                                                |                                                                                    |                                                    
|                                                 | Restructuring, asset impairments and other charges                                                                                                   |                                                                                    |                                                    
|                                                 | Gain on sale of Michael Page                                                                                                                         |                                                                                    |                                                    
|                                                 | Write-down of investment                                                                                                                             |                                                                                    |                                                    
|                                                 | Other non-cash charges                                                                                                                               |                                                                                    |                                                    
|                                                 | Changes in assets and liabilities, net of effects of acquisitions:                                                                                   |                                                                                    |                                                    
|                                                 |                                                                                                                                                      | Receivables                                                                        |                                                    
|                                                 |                                                                                                                                                      | Other assets                                                                       |                                                    
|                                                 |                                                                                                                                                      | Accounts payable, income taxes payable, accrued liabilities and other liabilities  |                                                    
|                                                 |                                                                                                                                                      | Restructuring and other charges                                                    |                                                    
|                                                 |                                                                                                                                                      |                                                                                    |                                                    
|                                                 |                                                                                                                                                      |                                                                                    | Net Cash (Used in) Provided by Operating Activities
|                                                 |                                                                                                                                                      |                                                                                    |                                                    
|Cash Flows from Investing Activities:            |                                                                                                                                                      |                                                                                    |                                                    
|                                                 | Proceeds from the sale of Michael Page, net of cash sold                                                                                             |                                                                                    |                                                    
|                                                 | Acquisitions and earnout payments, net of cash acquired                                                                                              |                                                                                    |                                                    
|                                                 | Capital expenditures, net                                                                                                                            |                                                                                    |                                                    
|                                                 | Investment in equity securities                                                                                                                      |                                                                                    |                                                    
|                                                 | Other                                                                                                                                                |                                                                                    |                                                    
|                                                 |                                                                                                                                                      |                                                                                    |                                                    
|                                                 |                                                                                                                                                      |                                                                                    | Net Cash Provided by (Used in) Investing Activities
|                                                 |                                                                                                                                                      |                                                                                    |                                                    
|Cash Flows from Financing Activities:            |                                                                                                                                                      |                                                                                    |                                                    
|                                                 | Debt proceeds                                                                                                                                        |                                                                                    |                                                    
|                                                 | Debt repayments                                                                                                                                      |                                                                                    |                                                    
|                                                 | Purchase of treasury stock                                                                                                                           |                                                                                    |                                                    
|                                                 | Other, net                                                                                                                                           |                                                                                    |                                                    
|                                                 |                                                                                                                                                      |                                                                                    |                                                    
|                                                 |                                                                                                                                                      |                                                                                    | Net Cash (Used in) Provided by Financing Activities
|                                                 |                                                                                                                                                      |                                                                                    |                                                    
|Increase (decrease) in cash and cash equivalents |                                                                                                                                                      |                                                                                    | 221,802                                            
|Cash and cash equivalents, beginning of period   |                                                                                                                                                      |                                                                                    | 38,457                                             
|                                                 |                                                                                                                                                      |                                                                                    |                                                    
|Cash and cash equivalents, end of period         |                                                                                                                                                      | $                                                                                  | 260,259                                            
|                                                 |                                                                                                                                                      |                                                                                    |                                                    
|Supplemental Cash Flow Information:              |                                                                                                                                                      |                                                                                    |                                                    
|                                                 | Cash paid during the year for:                                                                                                                       |                                                                                    |                                                    
|                                                 |                                                                                                                                                      | Income taxes                                                                       |                                                    
|                                                 |                                                                                                                                                      | Interest                                                                           |                                                    
|                                                 | Non-cash activities:                                                                                                                                 |                                                                                    |                                                    
|                                                 |                                                                                                                                                      | Loan notes and convertible promissory notes issued in connection with acquisitions |                                                    
|                                                 |                                                                                                                                                      | Stock issuance in connection with the Norrell acquisition                          |                                                    
|                                                 |                                                                                                                                                      | Reissuance of treasury stock in connection with the Norrell acquisition            |                                                    

See notes to Consolidated Financial Statements.

34

---



SPHERION CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BusinessSpherion Corporation and subsidiaries ("Spherion") delivers performance enhancing solutions
in Recruitment, Technology and Outsourcing services and currently operates in eight countries: Australia, Canada, Hong Kong, New Zealand, Singapore, The Netherlands, the United Kingdom and the United
States. Recruitment services include staffing and permanent placement of personnel in the following skill categories: office, clerical and administrative, light industrial, accounting/finance,
engineering, sales/marketing, human resources and law. Technology includes staffing and outsourcing (managed services) for a client's technology applications and infrastructure. Areas of expertise
include: quality assurance, project management, help desk, data center and network operations. Outsourcing assumes responsibility for client functions in call center and administrative services.
Spherion offers outsourcing services whereby its clients delegate to Spherion all responsibility for staffing and performance. In addition, Spherion provides human resource consulting services to help
clients in the planning, acquisition and optimization of its workforce. Spherion's human resource consulting offerings include outplacement, assessment, benchmarking and workforce consulting.

Principles of ConsolidationThe consolidated financial statements include the accounts of Spherion Corporation and its wholly
owned subsidiaries. All material intercompany transactions and balances have been eliminated. Spherion consolidates licensed operations under guidance prescribed by Statement of Financial Accounting
Standards No. 94, "Consolidation of All Majority-Owned Subsidiaries," which requires the consolidation of all majority-owned subsidiaries unless control is temporary or does not rest with the
majority owner. Certain prior year amounts have been reclassified to conform to the current year presentation.

Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from those estimates.

Fiscal YearSpherion's fiscal year is comprised of 52 or 53 weeks, ending on the last Friday in December. The fiscal years
ended December 28, 2001 and December 29, 2000 were 52 weeks. The fiscal year ended December 31, 1999 was 53 weeks.

Cash and Cash EquivalentsAll highly liquid investments (including investments in debt and auction rate securities) with
original maturities of 90 days or less at the time of purchase are classified as cash equivalents. Cash equivalents are carried at cost, which approximates fair value because of the
short-term maturities of these instruments.

Allowance for Doubtful AccountsAccounts receivable are carried at the amount estimated to be collectible. Accordingly,
allowances are provided for accounts receivable estimated to be uncollectible based on management's best estimates based on historical write-off levels. Recoveries are recognized in the
period they are received. The ultimate amount of accounts receivable that become uncollectible could differ from those estimated.

InvestmentsInvestments are classified as available-for-sale securities, reported at fair value and
are included in "Other assets" in the accompanying Consolidated Balance Sheets. Unrealized gains and losses are reported, net of tax, as a component of stockholders' equity. Unrealized losses are
charged against earnings when a decline in fair value is determined to be other than temporary. The specific identification method is used to determine cost of securities sold. There were no
investments at December 28, 2001.

35

---

During
the second quarter of 2000, Spherion made an equity investment in Worldwide Xceed Group, Inc., an internet-focused consulting group. In the fourth quarter of 2000, Spherion
determined that the decline in value of this investment was other than temporary and recorded a pre-tax charge to earnings of $24.8 million ($15.4 million
after-tax, or $0.22 per diluted share).

Intangible AssetsIntangible assets consist principally of goodwill and trade names and are being amortized on a
straight-line basis over periods of approximately 36 years.

Property and EquipmentProperty and equipment are stated at cost and depreciated using the straight-line method
over the estimated useful lives of the related assets. Leasehold improvements are amortized over the shorter of their estimated useful life or the lease term using the straight-line
method.
Maintenance and repairs, which do not improve or extend the life of an asset, are expensed as incurred.

Impairment of Long-Lived AssetsSpherion evaluates the recoverability of long-lived assets, including
intangible assets, as well as depreciation and amortization periods, to determine whether an adjustment to carrying values or a revision to estimated useful lives is appropriate. Recoverability is
determined through evaluation of anticipated cash flows on an undiscounted basis. If the estimated future cash flows are projected to be less than the carrying value, an impairment
write-down would be recorded, measured by the amount of the asset's carrying value in excess of fair value. See Note 3 for description of impairments recorded in 2001.

Accrued Self-Insurance LossesSpherion retains a portion of the risk under its workers' compensation, general
liability/professional liability, employment practices liability insurance programs and health insurance benefits programs. Reserves have been recorded which reflect the discounted estimated
liabilities including claims incurred but not reported. Workers' compensation losses, general liability/professional liability and employment practices liability losses have been discounted at 5.0% at
December 28, 2001 and 6.0% at December 29, 2000. Such liabilities are necessarily based on estimates and, while management believes that the amount is adequate, there can be no assurance
that changes to management's estimates may not occur due to limitations inherent in the estimation process. Changes in the estimates of these accruals are charged or credited to earnings in the period
determined. Spherion funds portions of its retained risks through deposits with insurance carriers and others.

Foreign Currency TranslationSpherion's foreign operations use the local currency as their functional currency. Assets and
liabilities of these operations are translated at the exchange rates in effect on the balance sheet date. Income statement items are translated at the average exchange rates for the year. The impact
of currency fluctuation is included in stockholders' equity as part of accumulated other comprehensive loss.

Revenue RecognitionSpherion generates revenues from sales of services by its company-owned and licensed operations and from
royalties earned on sales of services by its franchise operations. Franchise royalties, which are included in revenues, were $5.6 million, $8.0 million and $8.8 million for the
years ended December 28, 2001, December 29, 2000 and December 31, 1999, respectively. Staffing revenues and the related labor costs and payroll taxes are recorded in the period in
which services are performed. Outsourcing revenues are recognized when the service is provided. Placement revenues are recognized when services provided are substantially completed.

Spherion
utilizes two forms of franchising agreements. Under the first form, Spherion records franchise royalties, based upon the contractual percentage of franchise sales, in the period
in which the franchisee provides the service. Under the second form (termed "licensee"), revenues generated by the licensee and related direct costs are included as part of Spherion's consolidated
revenues and cost of services, since Spherion owns the operations with the licensee managing the business on a commission basis. The net distribution paid to the licensee is based upon a percentage of
the gross profit generated, and is captioned "licensee commissions" in the Consolidated Statements of Earnings.

36

---

Income TaxesDeferred taxes arise from temporary differences between the tax basis of an asset or liability and its reported
amount in the consolidated financial statements. Spherion does not provide for U.S. income taxes on the undistributed earnings of foreign operations as such earnings are considered to be invested for
an indefinite period of time and such earnings will only be repatriated when tax effective to do so. At December 28, 2001 and December 29, 2000, undistributed earnings of foreign
subsidiaries totaled $22.8 million and $104.7 million, respectively. It is not practicable to estimate the amount of the deferred tax liability on such earnings; however, foreign tax
credits would be available to reduce U.S. income taxes in the event of distribution of earnings of foreign subsidiaries. Valuation allowances on deferred tax assets are recorded to the extent it is
more likely than not that a tax benefit will not be realized.

Earnings Per ShareBasic earnings per share is computed by dividing Spherion's earnings by the weighted average number of
shares outstanding during the period. When the effects are not anti-dilutive, diluted earnings per share is computed by dividing Spherion's net earnings plus after-tax interest
on the convertible notes, by the weighted average number of shares outstanding and the impact of all dilutive potential common shares, primarily stock options, convertible notes, restricted stock and
deferred stock units. The dilutive impact of stock options is determined by applying the "treasury stock" method and the dilutive impact of the convertible notes is determined by applying the "if
converted" method.

Derivative Financial InstrumentsSpherion enters into interest rate swap agreements and foreign exchange forward contracts as
part of the management of its interest rate and foreign currency exchange rate exposures; it has no derivative financial instruments at December 28, 2001 and, in the past, none were held for
trading purposes and none of the instruments were leveraged. All financial instruments were put into place to hedge specific exposures. Amounts paid or received under swap agreements were recognized
over the terms of the agreements as adjustments to interest expense. Amounts receivable or payable under the agreements were included in receivables or accrued expenses in the prior year Consolidated
Balance Sheets. Gains and losses on foreign currency forward contracts offset gains and losses resulting from the underlying transactions. Gains and losses on contracts that hedged specific foreign
currency commitments were deferred and recorded in net earnings in the period in which the underlying transaction was recorded.

Stock-based CompensationSpherion accounts for stock-based compensation to employees using the intrinsic value method as
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. Accordingly, compensation cost for stock options issued to
employees is measured as the excess, if any, of the quoted market price of Spherion's stock at the date of grant over the amount an employee must pay for the stock. Compensation cost related to
restricted stock or deferred stock units granted is recognized in the period the compensation is earned and measured using the quoted market price on the effective grant date.

New Accounting Pronouncements and InterpretationsIn June 1998, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes accounting and reporting
standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at
its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the statement of earnings, and requires that a company must formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting. Spherion adopted the provisions of SFAS No. 133, as amended by SFAS No. 138, in the first quarter of 2001 and
recorded a charge for the cumulative effect of a change in accounting principle of $1.1 million, net of an income tax benefit of $0.7 million.

In
July 2001, the FASB issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." These standards establish accounting
and reporting for business combinations. SFAS No. 141 requires all business combinations entered into subsequent to June 30, 2001

37

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to be accounted for using the purchase method of accounting. SFAS No. 142 provides that goodwill and other intangible assets with indefinite lives will not be amortized, but will be tested for
impairment on an annual basis. Spherion will adopt the provisions of these statements in the first quarter of 2002. Spherion has completed its assessment of impairment of goodwill using the
requirements of SFAS No. 142 and will record a pre-tax transitional impairment charge to goodwill of $692 million in the first quarter of 2002. See Note 4.

In
August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which is effective for fiscal years beginning
after December 15, 2001. This Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supercedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the accounting and reporting provisions of Accounting Principles Board
Opinion No. 30, "Reporting the Results of OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," for the disposal of a segment of a business (as previously defined in that opinion). This statement also amends Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to eliminate the exception to consolidation for subsidiaries for which control is likely to be temporary. Spherion will adopt SFAS No. 144 in the first quarter of 2002. The impact
of such adoption is not anticipated to have a material effect on Spherion's financial statements.

2. ACQUISITIONS AND DISPOSITIONS



NORRELL CORPORATIONOn July 2, 1999, Spherion completed its acquisition of Norrell. Norrell provided services similar to those of Spherion,
primarily in the areas of recruitment, technology and outsourcing. Norrell shareholders received either a 0.9 share of Spherion common stock or a cash payment of $18.76 per share. The holders of
approximately 13% of Norrell's common stock elected to receive cash in lieu of Spherion stock and Spherion issued approximately 20.8 million shares to former Norrell shareholders and converted
existing Norrell stock options into options to purchase approximately 1.6 million shares of Spherion common stock. The value of the transaction including stock issued, cash paid and debt
assumed, was approximately $650.0 million. The acquisition has been accounted for using the purchase method of accounting. Accordingly, the operations of Norrell are included in the
Consolidated Statements of Earnings from the date of acquisition. Norrell's tangible and intangible assets and liabilities were adjusted to their fair market values. The excess of the purchase price
over the fair market value of Norrell's net tangible assets was approximately $537.0 million, which is being amortized over 40 years.

OTHER
ACQUISITIONSDuring 2000 and 1999, Spherion made certain other acquisitions that were accounted for under the purchase method of accounting. Their operations are
included in the Consolidated Statements of Earnings from the dates of acquisition. As a result of meeting certain earnings objectives, the former shareholders of certain acquired companies received
additional consideration of $28.7 million (of which $4.3 million was paid in the issuance of interest bearing loan notes) in 2001 under the terms of the acquisition agreements. During
2001, Spherion also had other acquisitions totaling $9.8 million, primarily related to acquired licensee and franchise operations to eliminate market conflicts.

38

---

The
fair value of assets acquired and liabilities assumed (excluding cash acquired) in connection with acquisitions made in 2001, 2000 and 1999 follows (in thousands):

Dec. 28, 2001

Dec. 29, 2000

Dec. 31, 1999Working capital (deficiency)

$


$
(23
)
$
179,415Goodwill and trade names


38,109


126,576


578,162Other net assets


350


946


78,044Debt assumed








(129,050
)Net assets acquired

$
38,459

$
127,499

$
706,571


Net
assets acquired in the year ended December 28, 2001 include $4.3 million for the non-cash issuance of loan notes in conjunction with prior period
acquisitions. Net assets acquired in the year ended December 29, 2000 include $26.4 million for the non-cash issuance of convertible promissory notes in conjunction with a
2000 acquisition and issuance of loan notes in conjunction with prior period acquisitions. In the year ended December 31, 1999, net assets acquired included the non-cash issuance of
stock to Norrell stockholders in the amount of $437.4 million.



During 2001, Spherion completed the sale of several businesses, the most significant of which was Michael Page. Spherion completed the initial public offering of
shares of Michael Page, disposing of 100% of Spherion's interest on April 2, 2001. Spherion's proceeds were approximately $710 million, net of taxes and expenses. Spherion recorded a
gain on the transaction of $305.7 million ($186.3 million after-tax) of which an $11.4 million ($7.2 million after-tax) gain related to foreign
currency gains on forward contracts.

Spherion
also assessed its portfolio of businesses and determined that three businesses did not provide the returns required by Spherion or were non-strategic. Consequently,
Spherion sold the StratfordGroup
(retained executive search), Tutor Recursos Humanos (commercial staffing in Spain) and JobOptions (internet job board) during the fourth quarter of 2001. These sales resulted in a loss of
$37.1 million.

The
following table summarizes the operating results for the sold business units for the periods they were owned by Spherion (in thousands):

Fiscal Years EndedDec. 28, 2001

Dec. 29, 2000

Dec. 31, 1999Revenues

$
203,177

$
685,043

$
556,931Earnings before interest and taxes

$
19,541

$
95,207

$
75,079


The
results of the sold businesses have been included in the Statements of Earnings and Cash Flows through the dates of their disposition.

3. RESTRUCTURING, ASSET IMPAIRMENTS AND OTHER CHARGES

Spherion has entered into various restructuring plans during 2001, 2000 and 1999. The 2000 and 1999 plans were related to rationalizing excess capacity resulting
from the Norrell acquisition. During 2001, Spherion was negatively impacted by the slowdown in the economy. Also during 2001, Spherion announced its Business Transformation Strategy which was focused
on increasing the predictability of revenues and earnings, continuous productivity improvements and enhancing profitability. All of these factors led to an assessment of the strategic direction and
product mix. Consequently, restructuring plans were adopted in 2001 to terminate redundant employees, reduce excess capacity and dispose of certain non-strategic assets (the "2001 Plans").

39

---

A
summary of the charges is as follows (in thousands):

Fiscal Years EndedDec. 28, 2001

Dec. 29, 2000

Dec. 31, 1999Restructuring

$
56,492

$
259

$
12,750Write-down of assets (including goodwill of $26,566)


42,729





Goodwill impairment


33,703





Integration costs and other charges


7,217





16,792$
140,141

$
259

$
29,542


2001 Plans

Restructuring costs in 2001 include employee severance costs of $24.7 million, facility closure costs and asset write-offs of
$31.9 million, professional fees related to the execution of the 2001 Plans of $2.8 million and reversal of over accruals of $3.0 million. The facility closure costs include
$20.7 million in lease termination costs and $11.2 million for the write-off of leasehold improvements on closed locations and write-down of office furniture and
equipment to their estimated fair value determined by comparable market information. These assets will be taken out of service at the time properties are abandoned and consequently will not be
depreciated further after abandonment. Depreciation expense related to these assets was approximately $3.0 million annually. These actions included the elimination of 1,311 positions, primarily
within the Recruiting and Outsourcing segments and the closure of 290 locations.

The
write-down of assets of $42.7 million includes the write-down of businesses sold or held for sale of $37.1 million and the
write-down of abandoned software of $5.6 million. The write-down of the business held for sale and businesses sold as of December 28, 2001 was for the estimated
loss on disposition of the StratfordGroup, Spherion's retained executive search business, JobOptions, an internet recruiting business and the commercial staffing operations in Spain. These businesses
were written-down to their
estimated net realizable values. These businesses generated $23.5 million of revenues and pretax losses of $9.4 million during 2001.

The
goodwill impairment of $33.7 million relates primarily to a write-down of goodwill associated with the impairment of the human resource consulting businesses,
which is included in the Outsourcing segment. Management reviewed the valuation of its human resource consulting business and determined that anticipated future cash flows from these businesses did
not support the carrying value and recorded an impairment charge based on the estimated fair market value derived from valuations of publicly traded competitors.

Other
charges include the severance cost for Spherion's former chief executive officer in the amount of $6.9 million.

2000 and 1999 Plans

Restructuring costs and charges of $12.8 million in 1999 included employee severance costs of approximately $3.7 million and facility closure costs
of $7.0 million primarily relating to the elimination of redundant branch locations. The facility closure costs included approximately $5.0 million in lease termination costs and
approximately $2.0 million in losses on the disposition of facility related fixed assets, primarily the write-off of leasehold improvements on closed branch locations and
write-down of furniture and fixtures to their estimated fair value, determined by comparable market information. In addition, as part of the 1999 Plan, Spherion recorded a charge of
approximately $2.1 million for the write-off of certain software programs that were no longer utilized as a result of the Norrell acquisition. These assets were taken out of service
at the time of the write-down and consequently were not depreciated further after the

40

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write-down. During 2000, remaining accruals of approximately $3.0 million were identified relating to the 1999 Plan that were not needed, primarily the result of the buyout of
existing lease obligations at better than expected rates and this $3.0 million was reversed to income. Spherion then undertook additional restructuring actions in the amount of
$3.2 million. These additional actions included the elimination of 71 positions, with most of these positions being administrative personnel within the Technology segment, and the closure of an
additional 14 locations.

Nonrecurring
integration costs of approximately $16.8 million in 1999 included approximately $7.6 million in costs relating to employees whose positions were eliminated and
were involved solely in exit functions and systems integrations, approximately $5.0 million in consulting costs primarily related to systems integrations, approximately $2.6 million for
a one-time acquisition completion incentive bonus, approximately $0.7 million in relocation of employees and approximately $0.9 million in other related integration costs.
Substantially all these costs were paid by December 31, 1999, and the remaining amounts were paid by December 29, 2000.

An
analysis of the restructuring plans, excluding the write-down of businesses that were held for sale and obsolete software, goodwill impairment and other charges including
severance cost of Spherion's former chief executive officer, along with amounts remaining to be distributed under restructuring plans initiated in 1999, 2000 and 2001 are as follows (dollar amounts in
thousands):

|                            |  | Facility
Closures |        | Number of
locations |      | Severance |   | Number of
personnel |   | Asset
write-offs |   | Total |       
|--------------------------- |  | ----------------- | ------ | ------------------- | ---- | --------- | - | ------------------- | - | ---------------- | - | ----- | ------
|1999 Plan charges           |  | $                 | 6,992  |                     | 43   |           | $ | 3,650               |   | 160              |   | $     | 2,108 
|Utilized during fiscal 1999 |  |                   | (1,340 | )                   | (22  | )         |   | (1,465              | ) | (48              | ) |       | (2,108
|                            |  |                   |        |                     |      |           |   |                     |   |                  |   |       |       
|Balance at Dec. 31, 1999    |  |                   | 5,652  |                     | 21   |           |   | 2,185               |   | 112              |   |       |      
|                            |  |                   |        |                     |      |           |   |                     |   |                  |   |       |       
|2000 Plan charges           |  |                   | 845    |                     | 14   |           |   | 2,399               |   | 71               |   |       |      
|Utilized during fiscal 2000 |  |                   | (2,898 | )                   | (35  | )         |   | (2,540              | ) | (102             | ) |       |      
|Reversal of over accrual    |  |                   | (2,007 | )                   |     |           |   | (978                | ) | (74              | ) |       |      
|                            |  |                   |        |                     |      |           |   |                     |   |                  |   |       |       
|Balance at Dec. 29, 2000    |  |                   | 1,592  |                     |     |           |   | 1,066               |   | 7                |   |       |      
|                            |  |                   |        |                     |      |           |   |                     |   |                  |   |       |       
|2001 Plan charges           |  |                   | 23,541 |                     | 290  |           |   | 24,692              |   | 1,311            |   |       | 11,215
|Utilized during fiscal 2001 |  |                   | (6,508 | )                   | (222 | )         |   | (16,030             | ) | (1,096           | ) |       | (2,795
|Reversal of over accrual    |  |                   | (821   | )                   | (11  | )         |   | (1,864              | ) | (96              | ) |       | (271  
|                            |  |                   |        |                     |      |           |   |                     |   |                  |   |       |       
|Balance at Dec. 28, 2001    |  | $                 | 17,804 |                     | 57   |           | $ | 7,864               |   | 126              |   | $     | 8,149 
|                            |  |                   |        |                     |      |           |   |                     |   |                  |   |       |       

The
remaining accruals, which are included in accrued restructuring in the accompanying Consolidated Balance Sheets, relate to lease payments on closed locations that will be paid out
through 2006 and severance costs which will be paid out during 2002.

41

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4. INTANGIBLE ASSETS

A summary of intangible assets follows (in thousands):

|                               |  | Remaining
Weighted
Average Life
(in years) |  | Dec. 28, 2001 |           | Remaining
Weighted
Average Life
(in years) |    | Dec. 29, 2000 |  
|------------------------------ |  | ------------------------------------------ |  | ------------- | --------- | ------------------------------------------ | -- | ------------- | -
|Goodwill                       |  | 36                                         |  | $             | 1,137,481 |                                            | 38 |               | $
|Trade names                    |  | 3                                          |  |               | 1,179     |                                            | 40 |               |  
|Other                          |  |                                           |  |               |          |                                            | 5  |               |  
|                               |  |                                            |  |               |           |                                            |    |               |  
|                               |  | 36                                         |  |               | 1,138,660 |                                            | 38 |               |  
|Less: accumulated amortization |  |                                            |  |               | (124,436  | )                                          |    |               |  
|                               |  |                                            |  |               |           |                                            |    |               |  
|                               |  |                                            |  | $             | 1,014,224 |                                            |    |               | $
|                               |  |                                            |  |               |           |                                            |    |               |  

Amortization
of goodwill for the years ended December 28, 2001, December 29, 2000 and December 31, 1999 amounted to $33.8 million, $38.1 million and
$28.6 million, respectively. Amortization of trade names and other intangibles for the years ended December 28, 2001, December 29, 2000 and December 31, 1999 amounted to
$1.4 million, $5.3 million and $5.6 million, respectively.

The
sale of Michael Page, the StratfordGroup, Tutor Recursos Humanos and JobOptions during 2001 resulted in a decrease to goodwill of $260.8 million and trade names of
$169.7 million, net of accumulated amortization.

5. PROPERTY AND EQUIPMENT

A summary of property and equipment follows (in thousands):

|                                                   |  | Life (in years) |  | Dec. 28, 2001 |          | Dec. 29, 2000 |  
|-------------------------------------------------- |  | --------------- |  | ------------- | -------- | ------------- | -
|Land                                               |  |                |  | $             | 4,167    |               | $
|Buildings                                          |  | 10-40           |  |               | 21,330   |               |  
|Equipment                                          |  | 3-8             |  |               | 157,769  |               |  
|Software, primarily third party purchased software |  | 3-5             |  |               | 27,948   |               |  
|Leasehold improvements and other                   |  | 3-5             |  |               | 11,405   |               |  
|                                                   |  |                 |  |               |          |               |  
|                                                   |  |                 |  |               | 222,619  |               |  
|Less accumulated depreciation and amortization     |  |                 |  |               | (120,932 | )             |  
|                                                   |  |                 |  |               |          |               |  
|                                                   |  |                 |  | $             | 101,687  |               | $
|                                                   |  |                 |  |               |          |               |  

Depreciation
and amortization of property and equipment for the years ended December 28, 2001, December 29, 2000 and December 31, 1999 amounted to
$32.5 million, $37.5 million, and $31.0 million, respectively.

The
sale of Michael Page resulted in a decrease to property and equipment of $38.4 million, net of accumulated depreciation. All other dispositions did not materially affect the
property and equipment balance.

42

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6. LONG-TERM DEBT

A summary of long-term debt follows (in thousands):

Dec. 28, 2001

Dec. 29, 2000U.S. dollar convertible subordinated notes, due 2005

$
206,997

$
206,997U.S. dollar convertible promissory notes, due 2005


8,000


8,000Revolving Loan Facility due 2004:British pound sterling denominated borrowings





212,006U.S. dollar denominated borrowings





30,000U.S. dollar loan facility, secured by accounts receivable, due 2001





214,432Australian dollar term loan, due 2006





37,364Other foreign debt


1,384


42,359Loan notes denominated in British pound sterling, due 2002


10,235


24,952Other domestic debt





4226,616


776,114Less current maturities of long-term debt


(10,865
)

(286,203
)Less U.S. dollar convertible subordinated notes, due 2005


(206,997
)

(206,997
)$
8,754

$
282,914


In
connection with the sale of Michael Page, Spherion repaid amounts outstanding under the Revolving Loan Facility, the U.S. Dollar Loan Facility secured by accounts receivable and the
Australian Dollar Term Loan as discussed below.

The
U.S. dollar convertible subordinated notes (the "Notes") were issued in May 1998 and are convertible into common stock at any time prior to maturity at a conversion rate of
26.8052 shares per each $1,000 principal amount, equivalent to a conversion price of approximately $37.31 per share. Interest on the Notes is payable semi-annually on June 1 and
December 1 of each year at a rate of 41/2%. The Notes are redeemable, in whole or in part, at the option of Spherion at any time on or after June 1, 2001 at the redemption
prices (together with accrued interest to the redemption date) set forth below. Such redemption prices (expressed as a percentage of principal amount) are as follows for the 12-month
period beginning on June 1 of the following years:

Year

Redemption
Price2001

102.571
%2002

101.929
%2003

101.286
%2004

100.643
%June 1, 2005 and thereafter

100.000
%


The
Notes are unsecured obligations subordinated in right of payment to all existing and future Senior Debt (as defined in the indenture) of Spherion and will be effectively subordinated
in right of payment to all Senior Debt and other liabilities of Spherion and Spherion's subsidiaries. The Notes will not restrict Spherion or its subsidiaries from incurring additional Senior Debt or
other indebtedness.

In
October 2000, Spherion issued $8.0 million of interest-bearing convertible promissory notes due October 1, 2005 in conjunction with the purchase of 80% of the
membership interests of JobOptions, LLC.

Spherion
has a multi-currency syndicated credit agreement ("Revolving Loan Facility") with a total capacity of $400 million of which $75 million terminates in 2002 and
$325 million terminates in 2004. All borrowings under the Revolving Loan Facility were repaid in April 2001 with the proceeds from the sale of Michael Page. This agreement provides a
multi-currency revolving loan facility. Borrowings under this

43

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facility are unsecured and interest rates on amounts outstanding under the revolving loan and loan notes are based on LIBOR plus a variable margin. The Revolving Loan Facility contains customary
covenants, which include restrictions on the payment of cash dividends, as well as the maintenance of certain financial tests including minimum net worth and EBITDA (earnings before interest, income
taxes, depreciation and amortization adjusted to reflect operating earnings), debt and interest coverage, as well as restrictions on the incurrence of liens and additional indebtedness. The average
interest rates on outstanding borrowings under the Revolving Loan Facility, including the effects of interest rate swaps in 2000, for the years ended December 28, 2001 and December 29,
2000 were 6.7% and 7.9%, respectively.

In
July 1999, Spherion added a $250.0 million facility ("U.S. dollar loan facility") secured by Spherion's accounts receivable. Borrowings under the U.S. Dollar loan
facility were repaid in April 2001 with the proceeds from the sale of Michael Page, and the facility was terminated in May 2001. Interest on this facility was based on commercial paper
market rates plus a margin, and the total rate on average was 6.6% and 6.8% for the years ended December 28, 2001 and December 29, 2000, respectively.

In
1999, Spherion issued $53.0 million of Australian Dollar Term Loan. Borrowings outstanding under the Australian Dollar Term Loan were repaid in April 2001 with the
proceeds from the sale of Michael Page. The Australian Dollar Term Loan was unsecured and interest was based on Australian bank bills plus a variable margin and the total rate on average was 7.4% and
8.3% for the period outstanding during the years ended December 28, 2001 and December 29, 2000, respectively.

As
of December 28, 2001, Spherion had the ability to borrow approximately $23 million under the Revolving Loan Facility. Maturities of debt outstanding at
December 28, 2001 are $10.9 million, $0.5 million, $0.2 million, and $215.0 million in 2002, 2003, 2004 and 2005, respectively.

7. INCOME TAXES

Income from continuing operations before income taxes in the United States and outside the United States, along with components of the income tax provision
(benefit), are as follows (in thousands):

Dec. 28, 2001

Dec. 29, 2000

Dec. 31, 1999Income from continuing operations before income taxes:United States

$
180,312

$
44,513

$
58,490Foreign


14,761


81,798


65,392$
195,073

$
126,311

$
123,882Current tax expense:Federal

$
66,517

$
3,479

$
14,646State and local


12,140


2,297


2,776Foreign


10,955


32,989


27,45389,612


38,765


44,875Deferred tax (benefit) expense:Federal


(2,410
)

9,091


4,308State and local


(202
)

761


1,188Foreign


(2
)

3,168


2,678(2,614
)

13,020


8,174Total provision for income taxes

$
86,998

$
51,785

$
53,049


44

---

The
following table reconciles the U.S. Federal income tax rate to Spherion's effective tax rate:

Dec. 28, 2001

Dec. 29, 2000

Dec. 31, 1999Statutory Rate

35.0
%
35.0
%
35.0
%Increase (decrease) in rate resulting from:State and local income taxes, net of Federal benefit

4.3

1.6

2.1Nondeductible amortization of intangibles

5.3

9.6

7.8Wages to work credits

(1.7
)
(3.9
)
(2.3
)Foreign tax credits

(26.9
)


Gain on sale of Michael Page

28.5



Other, net

0.1

(1.3
)
0.2Effective tax rate

44.6
%
41.0
%
42.8
%


Significant
components of Spherion's deferred tax assets and liabilities are as follows (in thousands):

Dec. 28,
2001

Dec. 29,
2000Current deferred tax assets (liabilities):Self-insurance and accrued compensation

$
13,852

$
13,683Sale of Interim HealthCare business


1,967


2,010Accrued expenses, including acquisition and restructure costs


19,420


10,965Receivables allowances


3,351


5,795Foreign and other





(2,507
)38,590


29,946Noncurrent deferred tax assets (liabilities):Deferred compensation


16,861


16,440Self-insurance


18,236


18,913Fixed assets


(5,447
)

(2,000
)Intangible assets


24,317


14,985Investment in equity securities





9,136Foreign tax credits





18,600Foreign and other


391


2,26654,358


78,340Valuation allowance





(18,600
)54,358


59,740Net deferred tax assets

$
92,948

$
89,686


As
of December 31, 2000 Spherion had foreign tax credits in the amount of $18.6 million for which a full valuation allowance was recorded. During 2001
Spherion expects to utilize its foreign tax credits as a result of the disposition of Michael Page. Accordingly, the valuation allowance of $18.6 million was reversed in 2001.

Unremitted
earnings of foreign subsidiaries are considered to be permanently invested and, accordingly, United States income taxes have not been provided on these earnings. If such
earnings were remitted, foreign tax credits would substantially offset any resulting United States income tax. At December 28, 2001, the estimated amount of unremitted earnings of foreign
subsidiaries totaled $22.8 million.

45

---

8. EMPLOYEE BENEFIT PLANS

Spherion has a voluntary defined contribution 401(k) benefit plan covering substantially all eligible U.S. employees. This plan has a basic match, which is based
on employee contributions, and a discretionary match based on employee contributions and, in the U.S., the attainment of certain financial objectives. Contributions, net of forfeitures, by Spherion
under the plan amounted to $1.3 million, $1.5 million and $3.7 million for the years ended December 28, 2001, December 29, 2000 and December 31, 1999,
respectively. Spherion's subsidiary, Michael Page, which was sold on April 2, 2001, operated a defined contribution plan covering substantially all eligible employees. Contributions by Spherion
under this plan amounted to $1.7 million, $4.7 million and $3.6 million for the years ended December 28, 2001, December 29, 2000 and December 31, 1999,
respectively, net of forfeitures.

Spherion
also has a non-qualified deferred compensation plan for highly compensated employees who are not eligible to participate in Spherion's 401(k) benefit plan. The plan
allows eligible employees to defer receipt of a portion of their compensation. Employee deferrals earn a return based on each employee's elected hypothetical plan investments including amounts
represented by deferred stock units of Spherion's common stock. Spherion matches and accrues certain amounts deferred pursuant to this plan based upon the same criteria as the 401(k) plan. All
Spherion matches are represented by deferred stock units of Spherion's common stock. The plan is not funded but Spherion has investments in company owned life insurance policies classified as Other
Assets in the accompanying Consolidated Balance Sheets in the amount of $18.0 million and $15.2 million at December 28, 2001 and December 29, 2000, respectively, and the
earnings from these investments partially offset Spherion's cost of providing the benefit. The deferred compensation, along with company matching amounts and accumulated investment earnings, is
accrued. Such accrual amounted to $31.4 million and $29.4 million at December 28, 2001 and December 29, 2000, respectively, the long-term portion of which was
included in deferred compensation and the short-term portion in accrued self-insurance and other current liabilities in the Consolidated Balance Sheets. The deferred compensation and
company matching of amounts represented by deferred stock units of Spherion are included in additional paid-in capital in the Consolidated Balance Sheets.

Spherion
has adopted an Employee Stock Purchase Plan that provides substantially all eligible employees who have been employed for at least six months an opportunity to purchase shares
of its common stock at a discount of 15%. The aggregate amount an employee may purchase each calendar year is limited to a maximum of 15% of an employee's compensation or $25,000. There were 355,772
and 296,794 shares issued in 2001 and 2000, respectively, under this plan. In 2000, an additional 1,000,000 shares were authorized for issuance to and purchase by eligible employees. A total of
594,866 shares are available as of December 28, 2001 for purchase under the plan, which expires on July 1, 2005.

9. STOCK-BASED COMPENSATION PLANS

Spherion has one primary stock option plan, the 2000 Stock Incentive Plan. Under the plan, options may be granted to outside directors and employees of Spherion
and its subsidiaries to purchase Spherion's common stock for periods not to exceed ten years at a price that is not less than 100% of fair market value on the date of grant. At December 28,
2001 and December 29, 2000, Spherion had 1,270,540 and 691,000 shares, respectively, reserved for future grants under the plan.

46

---

Changes
under these stock option plans for 2001, 2000 and 1999 were as follows:

|                                   |  | Dec. 28, 2001 |   | Dec. 29, 2000 |       | Dec. 31, 1999
|---------------------------------- |  | ------------- | - | ------------- | ----- | -------------
|
|Outstanding at beginning of year   |  | 9,713,745     |   | $             | 18.54 |              
|Granted                            |  | 2,240,617     |   |               | 7.32  |              
|Converted from Norrell options     |  |              |   |               |      |              
|Exercised                          |  | (29,241       | ) |               | 6.91  |              
|Forfeited                          |  | (3,252,612    | ) |               | 18.86 |              
|                                   |  |               |   |               |       |              
|Outstanding at end of year         |  | 8,672,509     |   | $             | 15.56 |              
|                                   |  |               |   |               |       |              
|Options exercisable at end of year |  | 4,655,695     |   | $             | 18.74 |              
|                                   |  |               |   |               |       |              

The
following table summarizes information about fixed stock options outstanding at December 28, 2001:

|                |  | Options Outstanding |  | Options Exercisable
|--------------- |  | ------------------- |  | -------------------
|
|$  0.00-$  9.99 |  | 2,128,035           |  | 9.16               
|$10.00-$14.99   |  | 2,284,552           |  | 7.22               
|$15.00-$19.99   |  | 1,481,268           |  | 6.25               
|$20.00-$24.99   |  | 1,828,296           |  | 7.35               
|$25.00-$29.99   |  | 905,110             |  | 5.49               
|$30.00-$35.56   |  | 45,248              |  | 6.06               
|                |  |                     |  |                    
|                |  | 8,672,509           |  | 7.37               
|                |  |                     |  |                    

In
December 2001, Spherion commenced a tender offer for certain stock options held by its U.S. resident employees. The offer granted holders of options with
exercise prices of $18.00 or more the ability to tender 21/2 stock options with exercise prices of $18.00 or more for one new option to be granted on August 9, 2002 at a price
equal to the fair market value on the date of the grant. Under this offer, 2,224,388 options were forfeited and tendered in January 2002 for which Spherion will issue new options in
August 2002 to purchase 889,737 shares.

Spherion
accounts for stock-based compensation using the intrinsic value method of accounting as prescribed by APB Opinion No. 25. Using this method, no compensation expense has
been recorded for its stock option plans. The following table summarizes the impact on net earnings and earnings per share had

47

---

Spherion adopted the fair value based method prescribed by SFAS 123, "Accounting for Stock-Based Compensation" (in thousands, except per share amounts) for the fiscal years ended:

Dec. 28, 2001

Dec. 29, 2000

Dec. 31, 1999Net earnings:As reported

$
106,961

$
74,526

$
70,833Pro forma


102,275


67,027


63,398Net earnings per share:Basic:As reported


1.80


1.17


1.29Pro forma


1.72


1.05


1.15Diluted:As reported


1.72


1.16


1.27Pro forma


1.65


1.05


1.14


The
fair value of options at grant date was estimated using the Black-Scholes multiple option model where each vesting increment is treated as a separate option with its
own expected life and own fair value. The following weighted average assumptions were used:

Dec. 28, 2001

Dec. 29, 2000

Dec. 31, 1999Expected life (in years)


3


3


2Interest rate


4.46
%

5.97
%

5.34
%Volatility


49.00
%

47.00
%

39.00
%Weighed average per share fair value

$
2.70

$
4.61

$
5.30


During
2001 and 2000, Spherion granted approximately 637,000 and 284,000, respectively, deferred stock units of Spherion's common stock with prices ranging from $6.98 to
$8.95 and $11.31 to $18.69, respectively. The deferred stock units vest between one and seven years or a shorter period based upon certain performance criteria. The value of these deferred stock units
is being amortized ratably over the vesting period.

48

---

10. STOCKHOLDER RIGHTS PLAN

On February 17, 1994, Spherion's Board of Directors adopted a rights plan to protect stockholders in the event of an unsolicited attempt to acquire
Spherion which is not believed by the Board of Directors to be in the best interest of stockholders. Under the plan, a dividend of one right (a "Right") per share was declared and paid on each share
of Spherion's common stock outstanding on April 1, 1994. As to shares issued after such date, rights will automatically attach to them after their issuance.

Under
the plan, registered holders of each Right may purchase from Spherion one one-hundredth of a share of a new class of Spherion's preferred stock, $0.01 par value per
share, at a price of $150.00, subject to adjustment, when the Rights become exercisable. The Rights become exercisable when a person or group of persons acquires 15% or more of the outstanding shares
of Spherion's common stock without the prior written approval of Spherion's Board of Directors (an "Unapproved Stock Acquisition"), and after ten business days following the commencement of a tender
offer that would result in an Unapproved Stock Acquisition. If a person or group of persons makes an Unapproved Stock Acquisition, the registered holder of each Right has the right to purchase, for
the exercise price of the Right, a number of shares of Spherion's common stock having a market value equal to twice the exercise price of the Right. In the event of an Unapproved Stock Acquisition,
and if following the Unapproved Stock Acquisition, Spherion is involved in either (i) a merger or (ii) a sale of 50% or more of Spherion's assets or earning power, then in such case, the
registered holder of each Right has the right to purchase, for the exercise price of the Right, a number of shares of the common stock of the acquiring company having a market value equal to twice the
exercise price of the Right.

After
an Unapproved Stock Acquisition, but before any person or group of persons acquires 50% or more of the outstanding shares of Spherion's common stock, the Board of Directors may
exchange all or part of the then outstanding and exercisable Rights for common stock at an exchange ratio of one share of common stock per Right. Upon any such exchange, the right of any holder to
exercise a Right terminates.

Spherion
may redeem the Rights at a price of $0.01 per Right at any time prior to an Unapproved Stock Acquisition. The Rights expire on April 1, 2004, unless extended by the Board
of Directors. Until a Right is exercised, the holder thereof, as such, has no rights as a stockholder of Spherion, including the right to vote or to receive dividends. The issuance of the Rights alone
has no dilutive effect and does not affect reported earnings per share.

11. FINANCIAL INSTRUMENTS AND FAIR VALUES

Spherion has utilized interest rate swap agreements to reduce the impact on interest expense of fluctuating interest rates on its variable-rate debt.
Spherion had a variable-to-variable interest rate swap agreement outstanding, which effectively converted interest from a British LIBOR basis to a broader index and capped
Spherion's exposure to upward movement in rates at 8.5%. This agreement was terminated during the first quarter of 2001 at a cost of $1.3 million in anticipation of repaying substantially all
variable-rate debt during the second quarter of 2001 with the proceeds from the sale of Michael Page. There were no such agreements outstanding as of December 28, 2001. Spherion
received an average variable rate of 5.9% and paid an average variable rate of 6.7% during the period the swap was outstanding during the year ended December 28, 2001. The notional amount
outstanding at December 29, 2000 was $112.0 million. Spherion received an average variable rate of 6.2% and paid an average variable rate of 6.7% during the twelve months ended
December 29, 2000.

At
December 28, 2001, Spherion had no outstanding foreign currency contracts. At December 29, 2000, Spherion had outstanding foreign currency forward contracts to sell
Australian dollars in the notional amount of $82.6 million for the purpose of hedging intercompany amounts outstanding with its Australian subsidiaries.

49

---

Exposure
to market risk on interest rate and foreign currency financial instruments results from fluctuations in interest and currency rates, respectively, during the periods in which
the contracts are outstanding. The counterparties to Spherion's interest rate swap agreements and currency exchange contracts consist of a diversified group of major financial institutions, each of
which is rated investment grade. Spherion is exposed to credit risk to the extent of potential nonperformance by counterparties on financial instruments. Any potential credit exposure does not exceed
the fair value as stated below. Spherion believes the risk of incurring losses due to credit risk is remote.

The
carrying amount of cash and cash equivalents approximates fair value due to the short-term maturities of these instruments. The costs to terminate the outstanding
interest rate swap and the book value as of December 29, 2000 were approximately $1.8 million and a $0.2 million payable, respectively. Termination of the foreign currency forward
contracts as of December 29, 2000 would have resulted in a gain of $11.4 million. In estimating the fair value of its derivative positions, Spherion utilizes quoted market prices, if
available, or quotes obtained from outside sources. The cost to terminate Spherion's fixed-rate convertible subordinated notes as of December 28, 2001 and December 29, 2000
was $162.5 million and $140.6 million, respectively, with a $207.0 million carrying value. The fair value of Spherion's fixed-rate debt is estimated based on quoted
market prices for the same issue. The fair values of all other financial instruments, including debt other than the Notes, approximate their book values as the instruments are short-term
in nature or contain market rates of interest.

12. COMMITMENTS AND CONTINGENCIES

Substantially all of Spherion's field operations are conducted in leased premises. Spherion also leases computer equipment. Total lease expense for the years
ended December 28, 2001, December 29, 2000 and December 31, 1999 was $44.7 million, $51.6 million and $37.6 million, respectively. Future minimum lease
payments under non-cancelable leases as of December 28, 2001 are $42.4 million, $34.4 million, $25.8 million, $16.9 million and $9.7 million in
2002, 2003, 2004, 2005 and 2006, respectively. Future minimum lease payments of $15.6 million and $1.6 million as of December 28, 2001 and December 29, 2000, respectively,
which are related to facility closures under Spherion's Business Transformation Strategy, have been accrued and are included as part of Accrued Restructuring in the Consolidated Balance Sheets.

Spherion
had outstanding irrevocable letters of credit of approximately $71.4 million (same as fair value) and surety bonds outstanding of approximately $23.9 million the
majority of which matures in May 2002. These instruments primarily collateralize Spherion's recorded obligations under certain workers' compensation insurance programs. The level of collateral
required is determined by the insurance carrier based on claims experience of the programs and may vary from year to year. The agreement between Spherion and the carrier provides that additional
collateral may be required in the event that Spherion's senior debt rating falls below investment grade. This collateral may be in any form acceptable to the carriers and could include additional
letters of credit or cash.

Spherion,
in the ordinary course of its business, is threatened with or named as a defendant in various lawsuits. Spherion's management does not expect that the outcome of any of these
lawsuits, individually or collectively, will have a material adverse effect on Spherion's financial condition, results of operations or cash flows.

On
April 2, 2001, Cincinnati Financial Corporation ("CFC") filed a lawsuit against Spherion in the U.S. District Court, Southern District of Ohio seeking $50 million in
compensatory damages and $300 million in punitive damages. The lawsuit arises out of a dispute between the parties in connection with Spherion's contract to develop a software application for
use with CFC's insurance business. The plaintiff's complaint alleges the following causes of action: breach of contract, fraud, negligence and misrepresentation. Spherion denies the allegations of
CFC's complaint and intends to vigorously defend against the claims. On April 2, 2001, Spherion filed a lawsuit against CFC in U.S. District Court, Northern

50

---

District of Illinois seeking collection from CFC of $2,212,000 in unpaid fees in connection with the contract. Management believes there is no basis for the amount of damages which is sought in the
plaintiff's case. Management further believes that Spherion's insurance will provide adequate coverage of this claim and therefore it is not expected to have a material impact on Spherion's
consolidated financial position, liquidity or results of operations.

Interim
HealthCare Inc., Catamaran Acquisition Corp. and Cornerstone Equity Investors IV, L.P. (collectively, the "Interim HealthCare Plaintiffs") have an action pending against
Spherion in the
Delaware Court of Chancery. Their complaint, filed on June 26, 2001 and amended on July 24, 2001, relates to Spherion's divestiture of Interim HealthCare (the "Healthcare Divestiture")
and seeks damages of approximately $10 million for breach of contract, reformation of the purchase agreement to reduce the purchase price by approximately $24 million, or rescission of
the contract. The same parties are also seeking damages against Spherion in an action alleging multiple breach of contract claims arising out of the Healthcare Divestiture. An order has been entered
allowing the same judge to preside over both actions. Management believes the resolution of this matter will not have a material impact on Spherion's consolidated financial position, liquidity or
results of operations.

13. SEGMENT INFORMATION

Effective in the fourth quarter of 2001, as a result of its Business Transformation Strategy, Spherion changed its basis of segmentation to the following:
Recruitment, Technology and Outsourcing. Management believes that the new reportable segments better reflect the management and fiscal responsibilities within Spherion as a result of the 2001
implementation of its business transformation strategy. Spherion evaluates the performance of its operating segments and allocates resources based on revenues, gross profit and segment operating
profit. Segment operating profit is defined as income before unallocated central costs, amortization expense, net interest expense, income taxes and special charges (restructuring, asset impairments
and other charges, gain on sale of Michael Page, gain on sale of marketable securities, write-down of investment and Year 2000 costs). All material intercompany revenues and expenses have
been eliminated. All previous year amounts have been restated for comparative purposes.

51

---

Information
on operating segments and a reconciliation to earnings before income taxes and cumulative effect of change in accounting principle for the periods indicated are as follows
(in thousands):

|                          |                                                                            | Fiscal Years Ended           |          
|------------------------- | -------------------------------------------------------------------------- | ---------------------------- | ---------
|
|Revenues:                 |                                                                            |                              |          
|                          | RecruitmentExcluding Michael Page                                         |                              | $        
|                          | Technology                                                                 |                              |          
|                          | Outsourcing                                                                |                              |          
|                          |                                                                            |                              |          
|                          |                                                                            | Total Excluding Michael Page |          
|                          | RecruitmentMichael Page                                                   |                              |          
|                          |                                                                            |                              |          
|                          |                                                                            |                              | $        
|                          |                                                                            |                              |          
|Gross Profit:             |                                                                            |                              |          
|                          | RecruitmentExcluding Michael Page                                         |                              | $        
|                          | Technology                                                                 |                              |          
|                          | Outsourcing                                                                |                              |          
|                          |                                                                            |                              |          
|                          |                                                                            | Total Excluding Michael Page |          
|                          | RecruitmentMichael Page                                                   |                              |          
|                          |                                                                            |                              |          
|                          |                                                                            |                              | $        
|                          |                                                                            |                              |          
|Segment Operating Profit: |                                                                            |                              |          
|                          | RecruitmentExcluding Michael Page                                         |                              | $        
|                          | Technology                                                                 |                              |          
|                          | Outsourcing                                                                |                              |          
|                          |                                                                            |                              |          
|                          |                                                                            | Total Excluding Michael Page |          
|                          | RecruitmentMichael Page                                                   |                              |          
|                          |                                                                            |                              |          
|                          |                                                                            |                              | 103,673  
|                          | Unallocated central costs                                                  |                              |          
|                          | Amortization expense                                                       |                              |          
|                          | Interest expense                                                           |                              |          
|                          | Interest income                                                            |                              |          
|                          | Restructuring, asset impairments and other charges                         |                              |          
|                          | Gain on sale of Michael Page                                               |                              |          
|                          | Gain on sale of marketable securities                                      |                              |          
|                          | Write-down of investment                                                   |                              |          
|                          | Year 2000 costs                                                            |                              |          
|                          |                                                                            |                              |          
|                          | Earnings before income taxes and cumulative change in accounting principle |                              | $        
|                          |                                                                            |                              |          
|Depreciation Expense:     |                                                                            |                              |          
|                          | RecruitmentExcluding Michael Page                                         |                              | $        
|                          | Technology                                                                 |                              |          
|                          | Outsourcing                                                                |                              |          
|                          |                                                                            |                              |          
|                          |                                                                            | Total Excluding Michael Page |          
|                          | RecruitmentMichael Page                                                   |                              |          
|                          |                                                                            |                              |          
|                          |                                                                            | $                            | 32,477   
|                          |                                                                            |                              |          
|Total Assets:             |                                                                            |                              |          
|                          | RecruitmentExcluding Michael Page                                         |                              | $        
|                          | Technology                                                                 |                              |          
|                          | Outsourcing                                                                |                              |          
|                          | Corporate                                                                  |                              |          
|                          |                                                                            |                              |          
|                          |                                                                            | Total Excluding Michael Page |          
|                          | RecruitmentMichael Page                                                   |                              |          
|                          |                                                                            |                              |          
|                          |                                                                            | $                            | 1,868,345
|                          |                                                                            |                              |          

52

---

|Services Information:        |                     |   |                              |           |   |           |           |   |           |          
|---------------------------- | ------------------- | - | ---------------------------- | --------- | - | --------- | --------- | - | --------- | ---------
|Revenues:                    |                     |   |                              |           |   |           |           |   |           |          
|                             | Staffing            |   | $                            | 1,987,793 |   | $         | 2,534,194 |   | $         | 2,276,930
|                             | Outsourcing         |   |                              | 458,161   |   |           | 425,554   |   |           | 267,025  
|                             | Permanent Placement |   |                              | 87,541    |   |           | 135,076   |   |           | 93,374   
|                             |                     |   |                              |           |   |           |          
|                             |                     |   | Total Excluding Michael Page |           |   | 2,533,495 |           |   | 3,094,824 |          
|                             | Michael Page        |   |                              | 179,642   |   |           | 645,999   |   |           | 530,642  
|                             |                     |   |                              |           |   |           |          
|                             |                     | $ | 2,713,137                    |           | $ | 3,740,823 |           | $ | 3,167,971 |          
|                             |                     |   |                              |           |   |           |          
|Geographic Information:      |                     |   |                              |           |   |           |           |   |           |          
|Revenues:                    |                     |   |                              |           |   |           |           |   |           |          
|                             | North America       |   | $                            | 2,228,877 |   | $         | 2,732,535 |   | $         | 2,274,293
|                             | Europe              |   |                              | 344,922   |   |           | 776,231   |   |           | 642,828  
|                             | Australia/Asia      |   |                              | 139,338   |   |           | 232,057   |   |           | 250,850  
|                             |                     |   |                              |           |   |           |          
|                             |                     | $ | 2,713,137                    |           | $ | 3,740,823 |           | $ | 3,167,971 |          
|                             |                     |   |                              |           |   |           |          
|Property and Equipment, Net: |                     |   |                              |           |   |           |           |   |           |          
|                             | North America       |   | $                            | 90,717    |   | $         | 99,107    |   | $         | 92,337   
|                             | Europe              |   |                              | 6,179     |   |           | 41,711    |   |           | 35,580   
|                             | Australia/Asia      |   |                              | 4,791     |   |           | 8,275     |   |           | 8,059    
|                             |                     |   |                              |           |   |           |          
|                             |                     | $ | 101,687                      |           | $ | 149,093   |           | $ | 135,976   |          
|                             |                     |   |                              |           |   |           |          

Spherion has no single customer representing greater than 10% of revenues. Revenues in the U.K. were $273.1 million, $487.0 million
and $401.3 million for the years ended December 28, 2001,
December 29, 2000 and December 31, 1999, respectively. Property and equipment, net in the U.K. were $3.5 million, $18.7 million and $19.4 million at
December 28, 2001, December 29, 2000 and December 31, 1999, respectively.

14. QUARTERLY FINANCIAL DATA(unauditedamounts in thousands, except share data)

The
following is a tabulation of the quarterly results of operations and other data for the fiscal years ended December 28, 2001 and December 29, 2000.

|                                                                                             |      | Quarter Ended
|-------------------------------------------------------------------------------------------- | ---- | -------------
|
|Revenues                                                                                     |      | $            
|Gross profit                                                                                 |      |              
|Earnings (loss) before cumulative effect of change in accounting principle                   |      |              
|Net earnings (loss)                                                                          |      |              
|Basic earnings (loss) per share before cumulative effect of change in accounting principle   |      |              
|Basic earnings (loss) per share                                                              |      |              
|Diluted earnings (loss) per share before cumulative effect of change in accounting principle |      |              
|Diluted earnings (loss) per share                                                            |      |              
|Share price:                                                                                 |      |              
|                                                                                             | High |              
|                                                                                             | Low  |              

The fourth and second quarters of 2001 include an after-tax gain on the sale of Michael Page of $0.3 million and
$178.8 million, respectively. The gain in the fourth quarter was less than one cent per basic and diluted share and in the second quarter was $3.03 per basic share and $2.74 per diluted share.
The first quarter of 2001 includes an after-tax gain on the sale of Michael Page related to foreign currency gains on forward contracts of $7.2 million or $0.12 per basic and
diluted share.

53

---

The
fourth, third and first quarters of 2001 include after-tax charges for restructuring, asset impairments and other charges in the amount of $3.5 million,
$50.0 million and $40.3 million, respectively, or $0.06, $0.84, and $0.67 per basic and diluted share.

The
fourth quarter of 2000 includes the write-down of the investment in Worldwide Xceed Group, Inc., which resulted in an after-tax charge of
$15.4 million or $0.24 per basic and diluted share.

15. EARNINGS PER SHARE

The following table reconciles the numerator (earnings) and denominator (shares) of the basic and diluted earnings per share computations for earnings before
cumulative effect of change in accounting principle:

|                               |                                             | Fiscal Years Ended
(amounts in thousands, except per share amounts)
|------------------------------ | ------------------------------------------- | -------------------------------------------------------------------
|
|
|Basic EPS                      |                                             | $                                                                  
|                               |                                             |                                                                    
|Effect of Dilutive Securities: |                                             |                                                                    
|                               | Stock options and other dilutive securities |                                                                    
|                               | Convertible subordinated notes              |                                                                    
|                               |                                             |                                                                    
|Diluted EPS                    |                                             | $                                                                  
|                               |                                             |                                                                    

54

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Item 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There has been no change in the registrant's principal accountants during the two most recent fiscal years or any subsequent interim period.

PART III

Items 10, 11, 12 and 13.

Certain information regarding executive officers of the Registrant is contained in Part I. The remaining information required by Item 10 and the
information required by Items 11, 12 and 13 of this Part III is omitted because, no later than 120 days from December 28, 2001, Spherion will file and distribute its definitive
proxy statement for its 2002 annual meeting of stockholders containing the information required by such Items. Such omitted information is incorporated herein by this reference.

Item 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

The
following consolidated financial statements of Spherion Corporation and subsidiaries are filed as part of this Report:

PageIndependent Auditors' Report

30Consolidated Statements of Earnings

31Consolidated Balance Sheets

32Consolidated Statements of Stockholders' Equity

33Consolidated Statements of Cash Flows

34Notes to Consolidated Financial Statements

35


The
following financial statement schedule is filed as part of this Report:

Schedule IIValuation
and Qualifying Accounts

Schedules
not filed herewith are either not applicable, the information is not material or the information is set forth in the consolidated financial statements or notes thereto.

|Exhibit
Number |  | Exhibit Name                                                                                                                                                                                                  
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1            |  | Restated Certificate of Incorporation of the registrant, as last amended on July 7, 2000, filed as Exhibit 3.1 to the registrant's Report on Form 8-K filed July 7, 2000, is incorporated herein by reference.
|3.2            |  | By-Laws of registrant, amended and restated as of April 9, 2001, filed as Exhibit 3.2 to registrant's Form 10-Q for the quarter ended June 29, 2001, is incorporated herein by reference.                     
|4.1            |  | Form of Stock Certificate, filed as Exhibit 4.1 to registrant's Form 10-K for the fiscal year ended December 29, 2000, is incorporated herein by reference.                                                   
|4.2            |  | Rights Agreement dated as of March 17, 1994 between the registrant and Boatmen's Trust Company, filed as Exhibit 1.1 to the registrant's Form 8-A filed April 11, 1994, is incorporated herein by reference.  
|               |  |                                                                                                                                                                                                               

55

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|Exhibit
Number |  | Exhibit Name                                                                                                                                                                                                                                                                                                                                                                                                                   
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                
|4.3            |  | Restated Certificate of Designation, Preferences and Rights of Participating Preferred Stock of the registrant as filed with the Secretary of State of the State of Delaware, filed as Exhibit 4.3 to the registrant's
Report on Form 8-K filed July 7, 2000, is incorporated herein by reference.                                                                                                                             
|4.4            |  | Amendment No. 1, dated as of June 26, 1996, to Rights Agreement dated March 17, 1994, between the registrant, Boatmen's Trust Company and ChaseMellon Shareholder Services L.L.C., filed as Exhibit 4.1(A) to the registrant's
Form 10-Q for the quarter ended September 27, 1996, is incorporated herein by reference.                                                                                                        
|4.5            |  | Amendment No. 2, dated as of February 25, 1997, to Rights Agreement dated March 17, 1994, between the registrant and ChaseMellon Shareholder Services L.L.C., filed as Exhibit 4.1(B) to the registrant's Form 10-Q for the
quarter ended March 28, 1997, is incorporated herein by reference.                                                                                                                                 
|4.6            |  | Articles Fourth, Fifth, Seventh, Eighth and Tenth of the Restated Certificate of Incorporation of the registrant, as last amended July 7, 2000, filed as Exhibit 4.6 to the registrant's Form 10-Q for the quarter ended June 30, 2000,
 are incorporated herein by reference.                                                                                                                                                 
|4.7            |  | Sections Four through Twelve and Thirty-five through Forty-one of the Bylaws of the registrant, amended and restated as of April 9, 2001, filed as Exhibit 4.7 to registrant's Form 10-K for the fiscal year ended December 29, 2000,
is incorporated herein by reference.                                                                                                                                                     
|4.8            |  | Certificate of Increase of Shares Designated as Participating Preferred Stock, filed as Exhibit 2.2 to the registrant's Form 8-A/A2, dated November 3, 1997, is incorporated herein by reference.                                                                                                                                                                                                                              
|4.9            |  | Indenture, including form of Notes, dated as of May 27, 1998, from the registrant to The Bank of New York with respect to the registrant's 41/2% Convertible Subordinated Notes due 2005, issued or to be issued pursuant
to the registrant's Form S-3 dated April 23, 1998, filed on May 6, 1998, filed as Exhibit 4.9 to the registrant's Form 10-Q for the quarter ended June 26, 1998, is incorporated herein by reference.
|4.10           |  | Amendment No. 3, dated as of January 20, 1998, to Rights Agreement dated as of March 17, 1994, between the registrant and ChaseMellon Shareholder Services LLC., filed as Exhibit 4.10 to the registrant's Form 10-K for the
fiscal year ended December 25, 1998, is incorporated herein by reference.                                                                                                                         
|4.11           |  | Amendment No. 4, dated as of November 21, 2000, to Rights Agreement dated March 17, 1994, between the registrant, ChaseMellon Shareholder Services LLC and the Bank of New York, filed as Exhibit 4.11 to registrant's Form 10-K
for the fiscal year ended December 29, 2000, is incorporated herein by reference.                                                                                                             
|4.12           |  | Amendment No. 5, dated as of March 23, 2001, to Rights Agreement dated March 17, 1994, by and between the registrant and the Bank of New York, filed as Exhibit 4.12 to registrant's Form 10-Q for the quarter ended
March 30, 2001, is incorporated herein by reference.                                                                                                                                                      
|10.1           |  | Registrant's 1994 Stock Option Plan for Franchisees, Licensees and Agents, as amended through and restated as of August 10, 1999, filed as Exhibit 10.1 to the registrant's Form 10-Q for the quarter ended September 24, 1999, is
incorporated herein by reference.                                                                                                                                                           
|10.3           |  | Form of Indemnification Agreement dated August 10, 1999 between the registrant and each director of the registrant, filed as Exhibit 10.2 to the registrant's Form 10-Q for the quarter ended September 24, 1999, is incorporated
herein by reference.                                                                                                                                                                         
|10.4           |  | Severance Agreement dated as of April 23, 2001, by and between the registrant and Raymond Marcy, filed as Exhibit 10.4 to registrant's Form 10-Q for the quarter ended March 30, 2001, is incorporated herein by
reference.                                                                                                                                                                                                    
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                

56

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|Exhibit
Number |  | Exhibit Name                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.5           |  | Second Amended and Restated Credit Agreement, dated April 2, 2001, by and among the registrant, the Borrowing Subsidiaries and Bank of America, N.A. as Administrative Agent, Fleet National Bank, as Documentation
Agent, Citibank, N.A., as Syndication Agent and Banc of America Securities LLC, as Sole Lead Arranger and Bank Manager, and the Bank Parties thereto, filed as Exhibit 10.5 to registrant's Form 10-Q for the quarter ended June 29, 2001,
is incorporated herein by reference.                                                  
|10.6           |  | Amendment Agreement No. 1 dated June 22, 2001 to the Second Amended and Restated Credit Agreement dated April 2, 2001, by and among the registrant, the Borrowing Subsidiaries, Bank of America, N.A., as Administrative Agent, Fleet
National Bank, as Documentation Agent, Citibank, N.A., as Syndication Agent and Banc of America Securities LLC, as Sole Lead Arranger and Bank Manager and the Banks Parties thereto, filed as Exhibit 10.6 to registrant's Form 10-Q for the
quarter ended June 29, 2001, is incorporated herein by reference.
|10.7           |  | Interim Services Inc. 1997 Long Term Executive Compensation and Outside Directors Stock Option Plan, filed as Exhibit I to the registrant's Proxy Statement dated April 10, 1997, is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                               
|10.8           |  | Interim Services Inc. Incentive Plan for 162(m) Executives, filed as Exhibit III to the registrant's Proxy Statement dated April 10, 1997, is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                      
|10.11          |  | Norrell Corporation 1994 Stock Incentive Plan, filed as Exhibit 10.27 to Norrell Corporation's Registration Statement on Form S-1, as filed with the Securities and Exchange Commission on June 10, 1994, is incorporated herein by
reference.                                                                                                                                                                                                                                                                                                       
|10.17          |  | Restated Stock Purchase Agreement, dated September 26, 1997 among Interim Services Inc., Catamaran Acquisition Corp. and Cornerstone Equity Investors IV, L.P., filed as Exhibit 2.1 to the registrant's Form 8-K dated September 26,
1997 and filed October 13, 1997, is incorporated herein by reference.                                                                                                                                                                                                                                          
|10.18          |  | The Deferred Compensation Plan of Interim Services Inc., filed as Exhibit 4.1 to the registrant's Form S-8 filed on July 23, 1997, is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                              
|10.19          |  | Spherion Corporation Outside Directors' Compensation Plan, effective May 22, 2001, filed as Exhibit 10.10 to the registrant's Form 10-Q for the quarter ended June 29, 2001, is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                    
|10.20          |  | Spherion Corporation Stock Purchase Assistance Plan, filed as Exhibit 10.20 to the registrant's Form 10-Q for the quarter ended September 29, 2000, is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                             
|10.22          |  | Spherion Corporation 2000 Stock Incentive Plan, filed as Exhibit 10.22 to registrant's Form 10-K for the fiscal year ended December 29, 2000, is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                   
|10.39          |  | Spherion Corporation Amended and Restated 2000 Employee Stock Purchase Plan, filed as Exhibit 10.39 to the registrant's Form 10-Q for the quarter ended June 29, 2001, is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                          
|10.44          |  | First Amendment dated March 5, 1999, to the Interim Services Inc. Deferred Compensation Plan, filed as Exhibit 10.44 to registrant's Form 10-K for the fiscal year ended December 29, 2000, is incorporated herein by
reference.                                                                                                                                                                                                                                                                                                                     
|10.45          |  | Second Amendment dated June 14, 1999, to the Interim Services Inc. Deferred Compensation Plan, filed as Exhibit 10.45 to registrant's Form 10-K for the fiscal year ended December 29, 2000, is incorporated herein by
reference.                                                                                                                                                                                                                                                                                                                    
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

57

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|Exhibit
Number                    |                                                                                                  | Exhibit Name                                                                                                                                                                                                                                               
|--------------------------------- | ------------------------------------------------------------------------------------------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                  |                                                                                                  |                                                                                                                                                                                                                                                            
|10.46                             |                                                                                                  | Third Amendment dated August 1, 2000, to the Interim Services Inc. Deferred Compensation Plan, filed as Exhibit 10.46 to registrant's Form 10-K for the fiscal year ended December 29, 2000, is
incorporated herein by reference.                          
|10.51                             |                                                                                                  | Employment Agreement dated April 9, 2001, by and between the registrant and Cinda A. Hallman, filed as Exhibit 10.51 to registrant's Form 10-Q for the quarter ended March 30, 2001, is incorporated herein by reference.                                  
|10.52                             |                                                                                                  | Fourth Amendment to the Interim Services Inc. Deferred Compensation Plan dated July 7, 2000, filed as Exhibit 10.52 to the registrant's Form 10-Q for the quarter ended June 29, 2001, is incorporated herein by
reference.                                
|10.53                             |                                                                                                  | Fifth Amendment to the Spherion Corporation Deferred Compensation Plan dated January 1, 2001, filed as Exhibit 10.53 to the registrant's Form 10-Q for the quarter ended June 29, 2001, is incorporated herein by
reference.                               
|10.55                             |                                                                                                  | Form of Employment Agreement by and between the registrant and the individuals listed on Schedule A attached thereto, filed as Exhibit 10.55 to the registrant's Form 10-Q for the quarter ended June 29, 2001, is incorporated herein
by reference.       
|10.56                             |                                                                                                  | Form of Change in Control Agreement by and between the registrant and the individuals listed on Schedule A attached thereto, filed as Exhibit 10.56 to the registrant's Form 10-Q for the quarter ended June 29, 2001, is incorporated
herein by reference.
|10.57                             |                                                                                                  | Form of Employment Agreement by and between the registrant and the individuals listed on Schedule A attached thereto, filed as Exhibit 10.57 hereto.                                                                                                       
|10.58                             |                                                                                                  | Form of Change in Control Agreement by and between the registrant and the individuals listed on Schedule A attached thereto, filed as Exhibit 10.58 hereto.                                                                                                
|10.59                             |                                                                                                  | Spherion Corporation Deferred Stock Plan (as amended through April 10, 2001) filed as Exhibit 10.59 to the registrant's Form 10-Q for the quarter ended June 29, 2001, is incorporated herein by reference.                                                
|11.                               |                                                                                                  | See "Earnings Per Share" in the Notes to Consolidated Financial Statements included at page 48 herein.                                                                                                                                                     
|21.                               |                                                                                                  | Subsidiaries of the registrant, filed as Exhibit 21 hereto.                                                                                                                                                                                                
|23.1                              |                                                                                                  | Consent of Deloitte & Touche LLP, filed as Exhibit 23.1 hereto.                                                                                                                                                                                            
|(b) REPORTS ON FORM 8-K          
|                                  | During the last quarter of the period covered by this report, no reports on Form 8-K were filed.
|(c) EXHIBITS FILED WITH THIS FORM
|10.57                             |                                                                                                  | Form of Employment Agreement by and between the registrant and the individuals listed on Schedule A attached thereto.                                                                                                                                      
|10.58                             |                                                                                                  | Form of Change in Control Agreement by and between the registrant and the individuals listed on Schedule A attached thereto.                                                                                                                               
|21.                               |                                                                                                  | Subsidiaries of the registrant.                                                                                                                                                                                                                            
|23.1                              |                                                                                                  | Consent of Deloitte & Touche LLP.                                                                                                                                                                                                                          
|(d) OTHER FINANCIAL STATEMENTS   

There
were no other financial statements of the type described in subparagraph (d) of Item 14 of Part IV required to be filed herein.

58

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

|               |  | SPHERION CORPORATION
|-------------- |  | --------------------
|March 27, 2002 |  | By                  

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the date indicated.

|Signature                               |  | Title   
|--------------------------------------- |  | --------
|                                        |  |         
|/s/STEVEN S. ELBAUMSteven S. Elbaum     |  | Director
|/s/WILLIAM F. EVANSWilliam F. Evans     |  | Director
|/s/JEROME B. GROSSMANJerome B. Grossman |  | Director
|/s/CINDA A. HALLMANCinda A. Hallman     |  | Director
|/s/J. IAN MORRISIONJ. Ian Morrision     |  | Director
|/s/A. MICHAEL VICTORYA. Michael Victory |  | Director
|(Signed as to each on March 27, 2002)  
|                                        |  |         

59

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|/s/CINDA A. HALLMANCinda A. Hallman |  | President and Chief Executive
Officer (principal
executive officer)               
|----------------------------------- |  | ----------------------------------------------------------------------------------
|/s/ROY G. KRAUSERoy G. Krause       |  | Executive Vice President and
Chief Financial Officer
(principal financial officer)
|/s/MARK W. SMITHMark W. Smith       |  | Vice President Business
Services (principal
accounting officer)                   

(Signed
as to each on March 27, 2002)

60

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SPHERION CORPORATION AND SUBSIDIARIES  SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS(amounts in thousands)

|Column A                            |             | Column B |          | Column C Additions |   | Column D |         | Column E |       
|----------------------------------- | ----------- | -------- | -------- | ------------------ | - | -------- | ------- | -------- | ------
|
|Fiscal Year Ended December 31, 1999 |             |          |          |                    |   |          |         |          |       
|Allowance for doubtful accounts     |             | $        | (8,937   | )                  | $ | (6,685   | )       | $        | (5,944
|                                    |             |          |          |                    |   |          |         |          |       
|Accumulated Amortization:           |             |          |          |                    |   |          |         |          |       
|                                    | Goodwill    |          | $        | (57,261            | ) | $        | (28,605 | )        | $     
|                                    | Trade names |          |          | (9,521             | ) |          | (5,422  | )        |       
|                                    | Other       |          |          | (552               | ) |          | (137    | )        |       
|                                    |             |          |          |                    |   |          |         |          |       
|                                    |             | $        | (67,334  | )                  | $ | (34,164  | )       | $        | 763   
|                                    |             |          |          |                    |   |          |         |          |       
|Fiscal Year Ended December 29, 2000 |             |          |          |                    |   |          |         |          |       
|Allowance for doubtful accounts     |             | $        | (16,956  | )                  | $ | (9,907   | )       | $        | (2,429
|                                    |             |          |          |                    |   |          |         |          |       
|Accumulated Amortization:           |             |          |          |                    |   |          |         |          |       
|                                    | Goodwill    |          | $        | (85,423            | ) | $        | (38,100 | )        | $     
|                                    | Trade names |          |          | (14,602            | ) |          | (5,100  | )        |       
|                                    | Other       |          |          | (464               | ) |          | (174    | )        |       
|                                    |             |          |          |                    |   |          |         |          |       
|                                    |             | $        | (100,489 | )                  | $ | (43,374  | )       | $        | 3,773 
|                                    |             |          |          |                    |   |          |         |          |       
|Fiscal Year Ended December 28, 2001 |             |          |          |                    |   |          |         |          |       
|Allowance for doubtful accounts     |             | $        | (21,643  | )                  | $ | (8,654   | )       | $        |      
|                                    |             |          |          |                    |   |          |         |          |       
|Accumulated Amortization:           |             |          |          |                    |   |          |         |          |       
|                                    | Goodwill    |          | $        | (120,958           | ) | $        | (33,836 | )        | $     
|                                    | Trade names |          |          | (18,475            | ) |          | (1,371  | )        |       
|                                    | Other       |          |          | (330               | ) |          |        |          |       
|                                    |             |          |          |                    |   |          |         |          |       
|                                    |             | $        | (139,763 | )                  | $ | (35,207  | )       | $        | 2,916 
|                                    |             |          |          |                    |   |          |         |          |       

61

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