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 fiscal year ended December 26, 2003

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) 308-7600(Registrant's telephone number, including area code)

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

|                            |  | Name of each exchange  
|--------------------------- |  | -----------------------
|Title of each class         |  | 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 ý    No o

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  Yes
ý    No 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, par value $.01 per share ("Common Stock"), as of June 27, 2003 on the New York Stock Exchange, was $399,593,709.

Number
of shares of Registrant's Common Stock outstanding on February 20, 2004 was 60,161,147.

Documents
Incorporated by Reference:

Certain
specified portions of the registrant's definitive proxy statement to be filed within 120 days after December 26, 2003, are incorporated herein by reference in
response to Part III, Items 10, 11, 13 and 14, inclusive, and to certain portions of Part III, Item 12.



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PART I

Item 1.    BUSINESS

As used in this report, the terms "we," "us," "our," "Spherion" and the "Company" refer to Spherion Corporation and its consolidated subsidiaries, unless
otherwise expressly stated or the context otherwise requires.

Company Overview

We provide temporary staffing services, managed services and permanent placement services and currently operate in eight countries: Australia, Canada, Hong Kong,
New Zealand, Panama, The Netherlands, the United Kingdom and the United States. Temporary staffing services include personnel in the following skill categories: clerical, light industrial, information
technology, finance and accounting, legal and administrative. Managed services include services where we assume the operation and management of a customer function such as a call center, recruitment
process, help desk, administrative services, data center or network operations. Permanent placement is a service where our employees locate talent on behalf of our customers, screen the candidates and
assist in the recruitment efforts. Founded in 1946, we are headquartered in Fort Lauderdale, Florida, and operate a network of over 800 locations. Spherion Corporation is incorporated under the laws
of the State of Delaware.

For
the year ended December 26, 2003, we had revenues of $2.1 billion, of which $1,827.6 million, $119.8 million and $122.1 million were related to
operations in North America, Europe and the Asia/Pacific region, respectively.

During
the first quarter of 2004, we decided to dispose of our operations in the United Kingdom, The Netherlands and in the Asia/Pacific region, as well as our court reporting operation
in the United
States. See Note 17, "Subsequent Events," in the accompanying consolidated financial statements for further discussion.

On
April 4, 2003, in connection with a three-year old agreement, we acquired 85% of our Canadian franchise operation for consideration of $21.6 million,
including $10.9 million of debt assumed. We also entered into a new put/call agreement with the minority interest holder that can be exercised by either party any time after December 31,
2005, which would require/allow us to purchase the remaining 15% interest in this operation. The results of this operation are included in the Staffing Services operating segment and our consolidated
results of operations as of the acquisition date.

During
2002, we adopted a plan to dispose of certain technology consulting businesses in the United Kingdom and The Netherlands and Saratoga, a human capital measurement business in the
United States. We completed the disposal of one of these subsidiaries prior to December 27, 2002 and disposed of the remaining two subsidiaries during the first half of 2003. As a result of our
decision to dispose of these businesses, operating results for all periods presented and the related assets and liabilities as of December 27, 2002, have been reclassified as discontinued
operations in the accompanying consolidated financial statements in accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets."

During
2001, we completed the sale of several businesses, the most significant of which was Michael Page Group PLC. We completed the initial public offering of shares of Michael Page
Group PLC, disposing of 100% of our interest on or about April 2, 2001. Our proceeds were approximately $710 million, net of taxes and expenses. We 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. Michael Page produced revenues of $179.6 million and earnings before interest and taxes of $28.8 million during 2001 and is included in the consolidated statements of
operations and cash flows through the disposition date. We also assessed our portfolio of businesses and determined that three businesses did not provide the returns required by us or were
non-strategic. Consequently, we sold

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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. These businesses produced revenues of $23.6 million and had losses before interest and taxes of $(9.3) million during 2001 and are included in the consolidated
statements of operations and cash flows through the dates of their disposition. Operating results from each of these businesses were not reclassified as discontinued operations as they were disposed
of prior to our adoption of SFAS No. 144.

Industry Overview

Spherion Corporation is a diversified staffing company with primary operations in North America. The North American staffing market is estimated to be between
$80 billion (per Deutsche Bank Securities Inc.) and $97 billion according to Staffing Industry Analysts, Inc. in 2002. This market includes temporary staffing, permanent
placement and other services similar to the Company's for a variety of skills.

The
staffing industry is estimated to be up to 50% concentrated in professional skills, including information technology, finance and accounting, legal, administrative and other which
are consistent with the skills offered within the Company's Professional Services operating segment. The balance of the North American staffing market is concentrated on services in the clerical and
light industrial skill sets, similar to the Company's Staffing Services operating segment.

Business
conditions in the staffing industry are economically sensitive. During 2001-2003 revenues declined for Spherion and many of its peers in the industry due to weak
economic conditions. However, demographics of the labor force continue to indicate that the overall labor pool will shrink over the next 10 years, creating a shortage of qualified job
candidates, especially for certain professional workers. This shortage increases the need for businesses to use the services of Spherion and other companies within the staffing industry. Staffing
industry growth rates are estimated to be between 5% and 15% depending on skill set.

The
Company also provides staffing and recruiting services in the United Kingdom, The Netherlands and the Asia/Pacific region. The staffing industry in those geographies is estimated to
be $26.5 billion, $5.7 billion and $4.5 billion, respectively.

Operations Overview

As a result of management structure changes, we reorganized the Company in 2003 around two basic operating segmentsStaffing Services and Professional
Services. We believe this new operating structure will allow us to streamline our business and create synergies within existing operating units. This change was effective during the fourth quarter of
2003 and all prior periods have been restated into the new segments for comparability purposes.

Within
our Staffing Services operating segment, we provide three primary servicestemporary staffing, managed services, and permanent placement. Within our
Professional Services operating segment, we provide temporary staffing and permanent placement services. These services are further described as follows:



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The
following table represents the 2003 revenues derived from each of these services within our two operating segments (in thousands):

Staffing Services

Professional ServicesAmount

% Total

Amount

% TotalTemporary staffing

$
1,054,516

74.4
%
$
599,365

91.8
%Managed services


349,693

24.7
%




%Permanent placement


12,093

0.9
%

53,851

8.2
%Total

$
1,416,302

100.0
%
$
653,216

100.0
%


Within
the services described above, the Staffing Services operating segment concentrates on placement and temporary staffing of individuals with clerical and light industrial skill
sets. All managed services are provided within the Staffing Services operating segment. The Professional Services operating segment concentrates on temporary staffing and placement of higher-level
skill sets such as information technology, finance and accounting, legal and administrative. All locations outside of North America are included in the Professional Services organization as the skill
sets they provide align closely with that segment. See Note 14, Segment Information, in the accompanying consolidated financial statements for additional information regarding the revenues,
profits and losses and total assets for both our Staffing Services and Professional Services operating segments for 2003, 2002 and 2001.

Location Structure

Our locations are company-owned, licensed or franchised. We believe that we can increase profitability and serve our customer base through a combination of
company-owned, licensed and franchised locations. For 2003, 87.1% of revenues were derived from company-owned locations, with the remaining derived from franchised and licensed locations.

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The
following table details the number of locations which are company-owned, licensed and franchised, as well as the number of locations that are located in North America and
internationally as of the end of the periods listed.

Fiscal Years Ended
DecemberNumber of Locations2003

2002

2001Company-owned locations

606

580

604Licensed locations

114

130

225Franchised locations

91

112

112Total

811

822

941North America

761

761

853International

50

61

88Total

811

822

941




We operate both company-owned branch and customer on-premise locations. A branch location is designed to serve multiple customers in a geographic
market, while the customer on-premise location is established at the customer's location to serve only that customer. As of December 26, 2003, we operated 606 company-owned branch
and customer on-premise locations, which increased from the prior year due primarily to the acquisition of the Canadian franchise operation in 2003. Future new or closed locations is
driven by sales success creating the need for new company-owned branches and customer on-premise locations. Our international locations are company-owned branches or customer on-premise
locations.



Fiscal Years Ended December2003

2002

2001Licensee revenue

$
253,088

$
285,667

$
341,873Licensee commissions as a % of gross profit


75
%

70
%

63
%Number of licensees


51


58


84Number of licensee locations


114


130


225


We
grant licenses, which give the licensee the right to establish a recruitment business utilizing our trade names, service marks, advertising materials, sales programs, operating
procedures, manuals and forms within a designated territory. We typically grant licensees the exclusive right to establish an office to market and provide light industrial and clerical temporary
personnel within a designated geographic area. We also assist our licensees in obtaining business from our national accounts and provide them with national, regional and cooperative local advertising.
License agreements are generally for an initial term of 10 years and are renewable for successive 5-year terms at our discretion. Our licensees operate within both the Staffing
Services and Professional Services operating segments.

Licensees
operate within the framework of our policies and standards. We provide workers' compensation, general liability, professional liability, fidelity bonding and state unemployment
coverage for temporary employees. We bill all customers serviced by licensees in our name and collect the remittances. Licensees use our computer systems.

In
our licensee arrangements, we act as the principal in customer transactions through direct contractual relationships with the customers, owning related customer receivables and being
the legal

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employer
of the temporary employee and the licensee acts as our agent providing certain sales and recruiting services. Sales by the licensed locations are included in our revenues and the direct costs
of services (payroll for the temporary employees and related payroll taxes and employee benefits) are included in our cost of services. We are responsible for paying the wages of the temporary
employees and all related payroll taxes, employee benefits and insurance and collecting accounts receivable. The licensee is responsible to reimburse us up to 100% of uncollected accounts receivable
(bad debts are deducted from commission payments). However, we bear the loss in cases where the licensee does not have sufficient financial wherewithal to reimburse uncollectible accounts.

The
licensee is responsible for establishing their location and paying their related administrative and operating expenses, such as the rent, utilities and salaries of their
full-time office employees. The licensee receives a commission from us, which averaged 75% of the licensed offices' gross profit for the year ended December 26, 2003. Our
consolidated statements of operations reflect the licensee commission as an operating expense, but do not include the rent, utilities and salaries of the licensee's full-time office
employees since these expenses are the responsibility of the licensee. Our consolidated balance sheets include the accounts receivable, payroll liabilities for temporary employees and related employee
benefit liabilities and the licensee commission payable.

From
time to time, we will finance a portion of the purchase price of the license at market rates of interest or provide working capital loans to licensees. The outstanding principal
balance of such notes receivable was $1.2 million as of December 26, 2003.

The
number of licensees has decreased over the past two years as we have terminated license agreements (usually by converting the licensee to a franchisee) primarily to reduce our
exposure to workers' compensation losses. We may continue to identify licensees whose operating practices are not aligned with our operating strategy and convert these operations to company-owned,
franchised or independent operations.



Fiscal Years Ended December2003

2002

2001Franchisee royalty revenue (in thousands)

$
7,267

$
7,266

$
5,553Royalty revenue as a % of franchisee sales


4.2
%

4.0
%

3.7
%Number of franchisees


24


23


16Number of franchisee locations


91


112


112


We
have been granting franchises for approximately 40 years. Most franchise agreements are 10 years in length and renewable every 5 years thereafter. A number of
franchisees are second-generation owners. Most franchisees operate more than one franchise.

We
grant franchisees the right to market and furnish staffing services within a designated geographic area using our trade names, service marks, advertising materials, sales programs,
operating procedures, manuals and forms. We provide franchisees with our national, regional and local advertising. Franchisees operate their businesses autonomously within the framework of our
policies and standards and recruit, employ and pay their own full-time and temporary employees. Franchisees are responsible for all employment related taxes and workers' compensation costs
of their employees. Franchisees do not use our computer systems. We receive royalty fees from each franchise based upon the franchisee's revenue.

From
time to time, we will finance a portion of the purchase price of the franchise at market rates of interest or provide working capital loans to franchisees. The outstanding principal
balance of such notes receivable was $3.0 million as of December 26, 2003. The number of franchisees has increased over the past two years as we have converted licensees to franchisees
and also as we have focused our company-

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owned
and licensed offices on major markets while focusing franchisees on tertiary markets. The number of franchisee locations decreased in 2003 as a result of the Canadian franchise acquisition,
whereby their offices were converted to company-owned branches.

Acquisitions

We currently do not expect to undertake any significant acquisitions. However, we may consider small acquisitions within each operating segment to fill geographic
needs or to complete a service offering.

On
April 4, 2003, in connection with a three-year old agreement, we acquired 85% of our Canadian franchise operation for consideration of $21.6 million,
including $10.9 million of debt assumed. We also entered into a new put/call agreement with the minority interest holder that can be exercised by either party any time after December 31,
2005, which would require/allow us to purchase the remaining 15% interest in this operation.

In
2002, we acquired one small recruitment business and a few of our licensed and franchised operations, aggregating $3.7 million. Our expenditures for acquisitions during 2001
were $38.5 million, including cash, stock and notes and primarily related to contingent payments for acquisitions consummated in prior years and for repurchases of licensed and franchised
operations.

We
are generally the purchaser of choice when a Spherion franchisee or licensee decides to sell its business. We have a right of first refusal on any franchise or license sale at the
same terms and conditions as may be agreed with another purchaser (who ultimately must be approved by us, even if we waive our right of first refusal), and we have a standard end of term purchase
option on our licenses and our more recently granted franchises, however we are not obligated in our standard agreements to repurchase either our franchisees or licensees.

Competition

We operate in highly competitive and fragmented markets in our operating segments. Within temporary staffing and permanent placement services, there are low
barriers to entry. Within managed services, there can be significant barriers to entry as capital and systems requirements are higher.

The
staffing industry is served by thousands of competitors with most of them small, local operations. There are several very large national and international competitors who also
directly compete with us. The local competitors are generally characterized as independent operators serving local marketplaces. These operations are generally not well capitalized and consequently
the number of these competitors will vary upon overall economic conditions with the number decreasing in more difficult economic times. The ability to fund working capital requirements is one of the
key success factors for these competitors. Local competitors may also be more flexible in offering alternatives to their customers in either attracting candidates or in servicing the customer, but
generally cannot service national customers due to their systems or lack of geographic coverage. We compete with local competitors in all of our jurisdictions when the customer is a local or retail
customer, and we expect to continue to do so.

Many
of the large national and international competitors are characterized by very broad geographic coverage, large and complex information systems that can handle numerous legal and
regulatory requirements and substantial financial resources. We compete against these companies for the largest customers (primarily Fortune 500 companies) where the customer requires broad geographic
coverage, competitive national pricing and typically consolidated reporting to assist it in better controlling costs. Since most national customers use a central procurement department, the industry
has moved towards consolidated competitive bidding with these customers with pricing one of the key selection criteria in obtaining the contract. This has led to intense price competition within the
staffing and recruitment industry over the past few years and a focus on reducing back office processing costs, primarily by installing enterprise-wide information systems. To keep pace with our major
national and international competitors,

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we
have been implementing an enterprise-wide information system to lower back office processing costs and increase reporting capabilities. We anticipate that price competition with these larger
competitors will continue.

We
believe that our customers primarily focus on the following key factors in selecting a service provider: location or geographic coverage, price and service delivery. Geographic
coverage is important from the customer and candidate standpoint. Customers require that their providers be able to service most, if not all, of their locations. Location is important to the candidate
because many candidates are unwilling to travel outside of their particular geographic market for a position. We have over 800 locations worldwide and believe that our coverage is adequate in the
markets we serve. As discussed above, price is one of the major factors in terms of selecting a provider. Service delivery is
understanding the customers' specific job requirements through consultative assessments, the ability to provide the right candidate for the right job and the ability to measure the quality of job
performance. Factors in obtaining qualified candidates for employment assignments with customers include the quality of available opportunities, wages, responsiveness to work schedules and the number
of available work hours. No single customer accounted for 10 percent or more of our consolidated revenues in 2003.

Within
the Staffing Services operating segment, some of our largest competitors are Adecco S.A., Manpower Inc. and Kelly Services, Inc.. Within the Professional Services
operating segment, we compete with Robert Half International Inc., MPS Group, Inc. and Kforce Inc. among others.

Trademarks

Through our subsidiaries, we maintain a number of trademarks, trade names and service marks in the United States and certain other countries. We believe that many
of these marks and trade names, including SPHERION®, NORRELL® and ON-PREMISE® are important to our business. In addition, we maintain other intangible
property rights.

Through
our subsidiaries, we currently use and have applications for registration pending on various marks, including the following: MAKING THE WORKPLACE WORK BETTERSM,
KNOWLEDGESPHERESM, EMERGING WORKFORCESM and SALESFITSM.

Our
United States trademark registration for SPHERION® expires October 9, 2011, but is renewable indefinitely for successive ten-year terms. Our United
States trademark registration for INTERIM® expires April 6, 2013, but is renewable indefinitely for successive ten-year terms. Our United States trademark registration
for NORRELL® expires on March 8, 2013, 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 temporary 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.

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We have 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. We do not anticipate that these legal structures and
requirements will have a material effect on our growth or prospects. However, any material change in national or local regulation of staffing services could have a material adverse effect on us.

Our
sale of franchises and licenses is regulated by the Federal Trade Commission and by authorities in approximately 15 states and two Canadian provinces. Under these laws, we must
deliver a franchise offering circular (similar to a prospectus) to prospective franchisees or licensees. These and other state laws may also apply substantive standards that govern the relationship
between franchisors and franchisees. In states where we are selling franchises or licenses, we have filed either the appropriate registration or obtained an exemption from registration when required.
We do not anticipate that these requirements or other state laws will have a material effect on our ability to sell franchises or licenses or operate our business through franchised or licensed
offices.

Employees

We estimate that we employed approximately 297,000 people in 2003. Approximately 4,000 individuals were employed full-time in both our national and
international operations and the remaining 293,000 individuals were billable personnel assigned with our customers, of whom approximately 58,000 were assigned, on average, at any given time.

Seasonality and Cyclical Nature of Business

SeasonalityOur businesses are seasonal in nature with customer related demand generally at its
highest point during the third and fourth quarters and lowest during the first quarter. The third and fourth quarters are normally higher as our customers increase their temporary workforces for the
holiday season. We typically experience a decrease of approximately 5 - 10% in our first quarter revenues in comparison with fourth quarter revenues. The decrease in first
quarter revenue for 2003, 2002 and 2001 was 8%, 9% and 6%, respectively, in comparison with the preceding fourth quarters.

Cyclical Nature of the BusinessThe staffing industry has historically been considered to be cyclical, often acting as an
indicator of both economic downswings and upswings. Staffing customers tend to use temporary staffing to supplement their existing workforces and generally hire permanent workers when
long-term demand is expected to increase. As a consequence of this, our revenues tend to increase quickly when the economy begins to grow. Conversely, our revenues also tend to decrease
quickly when the economy begins to contract as our customers reduce temporary workers before terminating their own employees. While we have a number of longer-term managed service
contracts, which are not as directly dependent upon the economic cycle, these revenues are not significant enough to offset the impact of cyclical economic activity in our larger service offerings.

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Executive Officers of the Registrant

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

|Name and Age           |  | Position                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|---------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Cinda A. Hallman, 59   |  | Chief Executive Officer since April 2001; President from April 2001 to July 2003; Director since February 1995; Director, Toys "R" Us, Inc. since April 2003; Director, Bowater Incorporated from November 2000 to April
2003. 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. Ms. Hallman has been on a
medical leave of absence since July 2003. On March 10, 2004, the Company announced that Ms. Hallman will not resume the office of chief executive officer and will retire effective April 10, 2004. Ms. Hallman will also resign her
position as a member of the board of directors at that time.
|Roy G. Krause, 57      |  | President and Chief Operating Officer since July 2003; Executive Vice President and Chief Financial Officer from October 1995 to July 2003. Mr. Krause is acting as our principal executive officer and has been since July 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Byrne K. Mulrooney, 43 |  | President, Staffing Services since September 2003; President, Operations SolutionsMidwest Region of Electronic Data Systems ("EDS") from July 2001 to August 2003; Vice President, Portfolio Management of EDS from January 2000 to July 2001; Vice
President, Distributed Systems Services of EDS from May 1999 to January 2000; Solutions ManagerWAN Data Services, IBM Corporation from March 1998 to April 1999.                                                                                                                                                                                                                                                                                                                                      
|Eric Archer, 46        |  | Senior Vice President and President of Professional Services since August 2003; President, Professional Recruiting Group from January 1998 to August 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Mark W. Smith, 41      |  | Senior Vice President and Chief Financial Officer since July 2003; Vice President, Business Services from September 2002 to July 2003; Vice President, Business Services and Controller from August 2001 to September 2002; Vice President, Finance and
Administration from June 2000 to August 2001; Vice President, Finance from June 1997 to June 2000.                                                                                                                                                                                                                                                                                                                                                                                                  
|Lisa G. Iglesias, 38   |  | Senior Vice President, General Counsel and Secretary since August 2003; General Counsel, Vice President and Secretary from July 1999 to August 2003; Associate Counsel from August 1998 to July 1999. From September 1994 to August 1998, associate with
the law firm of Greenberg Traurig, Fort Lauderdale, Florida.                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Richard A. Lamond, 57  |  | Senior Vice President and Chief Human Resources Officer since November 2002. From 1973 to 2002, Senior Vice PresidentHuman Resources and Administration for Millennium Chemicals Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

The board expects to name a new CEO in the next several months through a search process that had been planned as a contingency in light of Ms. Hallman's
medical leave. The Company has retained a national executive search firm to conduct the search.

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Availability of Reports and Other Information

Our corporate website ishttp://www.spherion.com.We make available on this website, free of charge, access to our
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statement on Schedule 14A and amendments
to those materials filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934 as soon as reasonably practicable after we electronically submit such
materials to the Securities and Exchange Commission. In addition, the Commission's website ishttp://www.sec.gov.The Commission makes available on its
website, free of charge, reports, proxy and information statements, and other information regarding issuers, such as us, that file electronically with the Commission. Information provided on our
website or on the Commission's website is not part of this Annual Report on Form 10-K.

Item 2.    PROPERTIES

Our corporate headquarters are located at 2050 Spectrum Boulevard, Fort Lauderdale, Florida, in a 125,000 square-foot building owned by us, plus a
leased annex of 37,250 square feet of additional space in the immediate vicinity. In addition, we lease approximately 70,000 square feet in Alpharetta, Georgia for operating functions. All other field
locations operate in space held primarily under three to five year leases providing fixed monthly rentals. Our corporate headquarters and our field locations are used by both our Staffing Services and
our Professional Services operating segments. We believe that our facilities are adequate for our needs.

Item 3.    LEGAL PROCEEDINGS

In the ordinary course of our business, we are threatened with or named as a defendant in various lawsuits. We maintain insurance in such amounts and with such
coverages and deductibles as we believe are reasonable and prudent. The principal risks that we insure against are workers' compensation, personal injury, bodily injury, property damage, professional
malpractice, errors and omissions, employment practices and fidelity losses. Our management does not expect that the outcome of any pending lawsuits relating to such matters, individually or
collectively, will have a material adverse effect on our financial condition, results of operations or cash flows.

Interim
HealthCare Inc., Catamaran Acquisition Corp. and Cornerstone Equity Investors IV, L.P. have an action pending against us in the Delaware Court of Chancery. Their
complaint, filed on June 26, 2001 and amended on July 24, 2001, relates to our divestiture of Interim HealthCare (the "Healthcare Divestiture") in 1997 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 us 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. Our motion for summary judgment was granted for the reformation claim. The cases went to trial in December 2003. In addition to the claims mentioned above, the
plaintiffs also were permitted to enter evidence in support of a diminution of value claim, for which they are seeking in excess of $25 million in damages. The parties will be filing
post-trial briefs, with a ruling expected sometime in the second half of 2004. We do not have insurance coverage for these claims. We believe the resolution of this matter will not have a
material impact on our consolidated financial position, liquidity or results of operations above the amounts we have already provided for.

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 fiscal year ended December 26, 2003.

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PART II

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

Our 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:

2003

High

LowFirst Quarter

$
6.86

$
3.80Second Quarter


6.98


3.80Third Quarter


7.86


5.72Fourth Quarter


10.10


6.752002

High

LowFirst Quarter

$
12.00

$
8.40Second Quarter


12.84


9.76Third Quarter


11.93


6.74Fourth Quarter


7.05


5.35


On
February 20, 2004, there were approximately 2,450 holders of record of our common stock.

We
did not pay cash dividends in 2002 or 2003, and do not intend to pay cash dividends in the foreseeable future. In addition, our new loan facility, which we entered into in
July 2003, may restrict our ability to pay cash dividends in certain circumstances.

The
information required by Item 201(d) of Regulation S-K is set forth in Part III, Item 12 of this Annual Report on Form 10-K.

12

---

Item 6.    SELECTED FINANCIAL DATA

The following table summarizes selected financial information for each of the most recent five fiscal years and should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and the accompanying consolidated financial statements included in this Annual Report on Form 10-K.

|                                           |                                            | Fiscal Years Ended
(in thousands, except per share data
and operating information)
|------------------------------------------ | ------------------------------------------ | ----------------------------------------------------------------------------------
|
|Statement of Operation Data:               |                                            |                                                                                   
|Revenues excluding Michael Page            |                                            | $                                                                                 
|Michael Page (2)                           |                                            |                                                                                   
|                                           |                                            |                                                                                   
|                                           | Total revenues                             |                                                                                   
|Gross profit                               |                                            |                                                                                   
|(Loss) earnings from continuing operations |                                            |                                                                                   
|Net (loss) earnings                        |                                            |                                                                                   
|(Loss) earnings per shareBasic:           |                                            |                                                                                   
|                                           | (Loss) earnings from continuing operations |                                                                                   
|                                           | Net (loss) earnings per share              |                                                                                   
|(Loss) earnings per shareDiluted:         |                                            |                                                                                   
|                                           | (Loss) earnings from continuing operations |                                                                                   
|                                           | Net (loss) earnings per share              |                                                                                   
|Weighted Average Shares:                   |                                            |                                                                                   
|                                           | Basic                                      |                                                                                   
|                                           | Diluted                                    |                                                                                   
|Balance Sheet Data (8):                    |                                            |                                                                                   
|Total assets                               |                                            | $                                                                                 
|Long-term debt, net of current portion     |                                            |                                                                                   
|Working capital                            |                                            |                                                                                   
|Operating Information (8):                 |                                            |                                                                                   
|Operating locations                        |                                            |                                                                                   

---

13

---

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

Organization of Information

Management's Discussion and Analysis provides a narrative on our financial performance and condition that should be read in conjunction with the accompanying
consolidated financial statements. It includes the following sections:



Company Overview

Spherion Corporation provides temporary staffing, managed service and permanent placement services. Founded in 1946, we are headquartered in Fort Lauderdale,
Florida, and operate a network of over 800 locations with operations in North America, Europe and the Asia/Pacific region. Our locations are company-owned, licensed or franchised. As of
December 26, 2003, we had 606 company-owned offices, 114 licensed locations and 91 franchised locations.

During
the fourth quarter of 2003, as a result of management structure changes, we reorganized the Company around two basic operating segmentsStaffing Services and
Professional Services. We believe this new operating structure will allow us to streamline our business and create synergies within existing operating units. The Staffing Services operating segment
includes clerical and light industrial temporary staffing, managed services and permanent placement. The Professional Services operating segment includes temporary staffing and permanent placement of
employees that specialize in information technology, finance and accounting, legal and administrative skill sets. See theOperations Overviewsection of
Part I of this Annual Report on Form 10-K for a further description of our operating segments.

Executive Summary

We operate in a large, fragmented market with positive long-term prospects. The staffing market is economically sensitive and declined during the past
couple of years due to the weak economy. We face a challenging operating environment that requires a cost effective, competitive infrastructure and balanced revenue growth to achieve profitability.
The staffing industry has experienced three years of weak markets, and in addition, faces the economic effect of increasing state unemployment and medical and worker's compensation costs (burden
costs). The weaker markets have in part contributed to significant price competition and lower margins as major staffing competitors attempt to maintain or increase market share. This price
competition along with the higher burden costs has led to pressure on gross profit margins. These market conditions are likely to continue as long as unemployment remains at its current

14

---

level.
However, we have taken important steps to address these issues and move towards growth and profitability. We have reorganized the Company into two operating segments with a simplified structure
and are focusing on sales discipline and service quality. We are also beginning the rollout of our enterprise-wide information system, which is expected to create a more efficient
operating model.

We
currently believe that many of the economic conditions impacting our business are improving. Signs of this improvement include:



As
previously mentioned, during the fourth quarter of 2003, we made organizational management changes and changed our reporting segments in response to these changes. The new Staffing
Services operating segment principally includes our North America staffing and managed service businesses. The key reasons behind the combination are:



The
new Professional Services operating segment consists principally of the combination of our United States technology staffing and professional recruiting operations, along with our
professional staffing operations in the United Kingdom, The Netherlands and Asia/Pacific. The key reasons behind the combination are:



During
2003, we began the implementation of our enterprise-wide information system with the implementation of new general ledger, fixed asset and accounts payable modules in
July. At the end of the

15

---

third
quarter, we implemented the new payroll module for non-temporary staff and began the roll-out of the front office and payroll and billing modules for temporary staff. By
the end of the fourth quarter, we had converted approximately 30 pilot locations to this front office and temporary payroll and billing system, and we had another 90 offices converted by the end of
February 2004. We currently anticipate that all domestic locations will be converted to the new system early in the third quarter of 2004.

Operating Results

Consolidated Operating Results





16

---



The following is a brief summary of current and prior period restructuring activities. This should be read in conjunction with Note 4, Restructuring, Asset
Impairments and Other Charges, in the accompanying consolidated financial statements. A summary of the charges is as follows (in thousands):

Fiscal Years EndedDecember 26,
2003

December 27,
2002

December 28,
2001Restructuring

$
5,213

$
(7,361
)
$
53,651Write-down of assets (including goodwill of $26.6 million)








42,729Goodwill impairment








33,703Other charges





17,810


7,217$
5,213

$
10,449

$
137,300




During the second half of 2003, we identified certain cost reduction opportunities primarily related to the realignment of our operating segments and adopted a
restructuring plan (the "2003 Plan") to eliminate redundancies and centralize business support functions by terminating 149 personnel and to reduce excess capacity with the closure of 13 offices,
resulting in a restructuring charge of $5.8 million. This charge included $2.9 million relating to the Staffing Services operating segment, $2.2 million relating to the
Professional Services operating segment and the remainder of the charge related to corporate initiatives directed at lowering back office technology costs. We expect to incur approximately
$3.0 million in additional restructuring charges during the first quarter of 2004, as the enterprise-wide information system implementation and further integration of several
business lines near completion. We believe this will be the last charge associated with this restructuring activity.

As
a result of the 2003 Plan, we expect to realize future annual benefits to our operating expenses of $7.6 million relating to salaries and related benefits and
$0.4 million relating to property expenses beginning in the first quarter of 2004, with additional savings throughout 2004. Remaining property and severance payments under the 2003 Plan will be
funded through operating cash flows in future periods.

During
2003, as part of our on-going restructuring monitoring process, accruals of $0.6 million were identified that were unnecessary, primarily as the result of lower
severance costs than initially anticipated, lower broker fees and lower fixed asset write-offs and these amounts were reversed to income.

17

---



During 2002, no restructuring activities were undertaken, however, $7.4 million of restructuring charges from prior years were determined to be
unnecessary, primarily as a result of the buyout or sublease of existing lease obligations at better than expected rates and the favorable resolution of severance payouts, and these amounts were
reversed to income.

During
the second quarter of 2002, we recorded other charges (included in "restructuring, asset impairments and other charges" in the accompanying consolidated statements of operations)
in the amount of $10.0 million for additional anticipated losses associated with the sublease of Norrell's former headquarters building due to the continued deterioration of the rental market
in Atlanta, Georgia. During the fourth quarter of 2002, we recorded asset impairment and other charges in connection with the write-down of assets of approximately $4.3 million
relating to our proprietary vendor management technology and services, and $3.5 million relating to obligations under an employment contract with a former executive.



Restructuring plans were adopted in 2001 to terminate redundant employees, reduce excess capacity and dispose of certain non-strategic assets (the
"2001 Plan"). These actions included the elimination of 1,206 positions and the closure of 287 locations. Restructuring costs of $53.7 million in 2001 include employee severance costs of
$22.5 million, facility closure costs and asset write-offs of $31.3 million, professional fees related to the execution of the 2001 Plan of $2.8 million and reversal
of over accruals of $3.0 million. 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 goodwill impairment of $33.7 million relates primarily to a write-down of goodwill associated with
the impairment of the human resource consulting businesses. Other charges include the severance cost for our former chief executive officer in the amount of $6.9 million.

Operating Segments

We evaluate the performance of our operating segments and allocate resources based on revenues, gross profit and segment operating profit. Segment operating
profit from continuing operations is defined as income before unallocated central costs, amortization expense, interest expense, interest income, income taxes and special charges (restructuring, asset
impairments and other charges, goodwill impairment, other gains and gain on sale of Michael Page). All material intercompany revenues and expenses have been eliminated. Under the guidance of SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," amounts related to discontinued operations have been eliminated from our segment information below.

18

---

Information
on operating segments and a reconciliation to (loss) earnings from continuing operations before income taxes, discontinued operations and cumulative effect of changes in
accounting principle for the periods indicated are as follows (in thousands):

|          |                                | Fiscal Years Ended |  
|--------- | ------------------------------ | ------------------ | -
|
|
|Revenues: |                                |                    |  
|          | Staffing Services              |                    | $
|          | Professional Services          |                    |  
|          |                                |                    |  
|          | Total, Excluding Michael Page: |                    |  
|          | Michael Page                   |                    |  
|          |                                |                    |  
|          | Total                          |                    | $
|          |                                |                    |  

|                                 |                                                                                                                                                  |  |   | % of Revenues |   |      |   | % of Revenues |          |   |      | % of Revenues |  
|-------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------ |  | - | ------------- | - | ---- | - | ------------- | -------- | - | ---- | ------------- | -
|Gross Profit:                    |                                                                                                                                                  |  |   |               |   |      |   |               |          |   |      |               |  
|                                 | Staffing Services                                                                                                                                |  | $ | 272,389       |   | 19.2 | % | $             | 310,698  |   | 21.3 | %             | $
|                                 | Professional Services                                                                                                                            |  |   | 206,908       |   | 31.7 | % |               | 216,640  |   | 32.9 | %             |  
|                                 |                                                                                                                                                  |  |   |               |   |      |   |               |          |   |      |               |  
|                                 | Total, Excluding Michael Page:                                                                                                                   |  |   | 479,297       |   | 23.2 | % |               | 527,338  |   | 24.9 | %             |  
|                                 | Michael Page                                                                                                                                     |  |   |              |   |     | % |               |         |   |     | %             |  
|                                 |                                                                                                                                                  |  |   |               |   |      |   |               |          |   |      |               |  
|                                 | Total                                                                                                                                            |  | $ | 479,297       |   | 23.2 | % | $             | 527,338  |   | 24.9 | %             | $
|                                 |                                                                                                                                                  |  |   |               |   |      |   |               |          |   |      |               |  
|Segment Operating Profit (Loss): |                                                                                                                                                  |  |   |               |   |      |   |               |          |   |      |               |  
|                                 | Staffing Services                                                                                                                                |  | $ | 22,450        |   | 1.6  | % | $             | 39,135   |   | 2.7  | %             | $
|                                 | Professional Services                                                                                                                            |  |   | (2,136        | ) | -0.3 | % |               | (292     | ) | 0.0  | %             |  
|                                 |                                                                                                                                                  |  |   |               |   |      |   |               |          |   |      |               |  
|                                 | Total, Excluding Michael Page:                                                                                                                   |  |   | 20,314        |   | 1.0  | % |               | 38,843   |   | 1.8  | %             |  
|                                 | Michael Page                                                                                                                                     |  |   |              |   |     | % |               |         |   |     | %             |  
|                                 |                                                                                                                                                  |  |   |               |   |      |   |               |          |   |      |               |  
|                                 | Total                                                                                                                                            |  |   | 20,314        |   | 1.0  | % |               | 38,843   |   | 1.8  | %             |  
|                                 |                                                                                                                                                  |  |   |               |   |      |   |               |          |   |      |               |  
|                                 | Unallocated central costs                                                                                                                        |  |   | (30,812       | ) |      |   |               | (26,566  | ) |      |               |  
|                                 | Amortization expense                                                                                                                             |  |   | (448          | ) |      |   |               | (321     | ) |      |               |  
|                                 | Interest expense                                                                                                                                 |  |   | (6,101        | ) |      |   |               | (11,192  | ) |      |               |  
|                                 | Interest income                                                                                                                                  |  |   | 5,455         |   |      |   |               | 5,914    |   |      |               |  
|                                 | Restructuring, asset impairments, and other charges                                                                                              |  |   | (5,213        | ) |      |   |               | (10,449  | ) |      |               |  
|                                 | Goodwill impairment                                                                                                                              |  |   |              |   |      |   |               | (291,497 | ) |      |               |  
|                                 | Other gains                                                                                                                                      |  |   | 313           |   |      |   |               | 10,458   |   |      |               |  
|                                 | Gain on sale of Michael Page                                                                                                                     |  |   |              |   |      |   |               |         |   |      |               |  
|                                 |                                                                                                                                                  |  |   |               |   |      |   |               |          |   |      |               |  
|                                 | (Loss) earnings from continuing operations before discontinued operations, income taxes and cumulative effect of changes in accounting principle |  | $ | (16,492       | ) |      |   | $             | (284,810 | ) |      |               | $
|                                 |                                                                                                                                                  |  |   |               |   |      |   |               |          |   |      |               |  

---

19

---

Segment Operating Results



Information on the Staffing Services operating segment's skill sets and service lines for the periods indicated are as follows (in thousands):

|                                |                     | Fiscal Years Ended      |  
|------------------------------- | ------------------- | ----------------------- | -
|
|
|Revenue by Skill:               |                     |                         |  
|                                | Clerical            |                         | $
|                                | Light Industrial    |                         |  
|                                |                     |                         |  
|                                |                     | Segment Revenue         |  
|                                |                     |                         |  
|Revenue by Service:             |                     |                         |  
|                                | Temporary Staffing  |                         | $
|                                | Managed Services    |                         |  
|                                | Permanent Placement |                         |  
|                                |                     |                         |  
|                                |                     | Segment Revenue         |  
|                                |                     |                         |  
|Gross Profit Margin by Service: |                     |                         |  
|(As % of Applicable Revenue)    |                     |                         |  
|                                | Temporary Staffing  |                         |  
|                                | Managed Services    |                         |  
|                                | Permanent Placement |                         |  
|                                |                     | Total Staffing Services |  



RevenuesStaffing Services revenues decreased 2.9% to $1,416.3 million in 2003 from $1,458.3 million in the
prior year. Staffing Services revenues for 2003 include $50.2 million of revenues from our Canadian operations acquired on April 4, 2003. Excluding this acquisition, Staffing Services
revenues would have been $1,366.1 million, a decrease from the prior year of 6.3%.



Gross ProfitGross profits decreased 12.3% to $272.4 million from $310.7 million in the prior year and the
overall gross profit percentage was 19.2% in 2003 compared to 21.3% in the prior year. Excluding

20

---

the
Canadian acquisition, gross profits were $262.3 million, or a decrease of 15.6% from prior year and the overall gross profit percentage was 19.2%. The decrease in gross profits, excluding
Canada, from prior year of 15.6% was due primarily to pricing pressures, a shift in the mix of business to lower margin temporary staffing services in addition to managed services revenue declines in
domestic call centers, help desks and data centers which have a relatively consistent amount of fixed costs.

Segment Operating ProfitStaffing Services segment operating profit was $22.5 million compared to $39.1 million
in the prior year. Excluding the Canadian acquisition, the Staffing Services operating profit was $21.6 million or a decrease of 44.8% from the prior year. The decrease from prior year,
excluding Canada, was due to the decrease in gross profit of $48.4 million as described above, partially offset by lower operating expenses of $30.9 million. Excluding Canada, operating
expenses as a percentage of revenues were 17.6% compared to 18.6% in the prior year. The decrease in operating expenses is due to cost control activities including a reduction in employee costs to
match lower
revenues and the disposition of our proprietary vendor management technology and services in the fourth quarter of 2002.

OutlookIn spite of sequential increases in temporary staffing revenue that began in the second quarter of 2003, the market
remains highly competitive and is characterized by intense pricing pressures and competitive bidding. If the temporary staffing industry continues to recover, revenues may increase. Pricing pressures
are likely to continue at least in the near term and state unemployment costs will increase in 2004. As such, gross profit margins may decrease further until unemployment levels are reduced and higher
costs are passed on to customers. Therefore, we plan to focus our resources to grow our business with small and mid-sized customers where pricing pressures tend to be less severe. We
remain uncertain about the outlook for managed services in 2004 as customers continue to use service offerings in countries overseas that enable reduced price levels. Additionally, current managed
service contracts will continue to expire during 2004, and we are unsure as to whether or not we will be able to renew or replace them.



RevenuesStaffing Services revenues decreased 13.4% to $1,458.3 million in 2002 from $1,684.0 million in 2001
primarily due to decreases in demand in all of our major product offerings.



Gross ProfitStaffing Services gross profits decreased 15.5% to $310.7 million from $367.6 million in the prior
year and the overall gross profit percentage was 21.3% in 2002 compared to
21.8% in 2001. The decrease in overall gross profits is primarily due to the decrease in revenues discussed above. The decrease in the gross profit percentage is due to pricing pressures in the
temporary staffing business and lower permanent placement revenues as a percentage of total revenues which was partially offset by higher gross profit as a result of contract termination fees in the
call center business and a higher percentage of revenue from technology managed services.

21

---

Segment Operating ProfitStaffing Services segment operating profit decreased 30.5% to $39.1 million in 2002 from
$56.3 million in 2001. The decrease from prior year was due to the decrease in gross profit of $56.9 million, as described above, partially offset by lower operating expenses of
$39.7 million. Operating expenses as a percentage of revenues were relatively flat at 18.6% compared to 18.5% in the prior year as lower operating expenses within temporary staffing services
were offset by higher operating expenses within human resource consulting services and increased expenses in managed services sales, marketing and product development to facilitate growth of the
managed services business.



Information on the Professional Services operating segment's skill sets and service lines for the periods indicated are as follows (in thousands):

|                                |                        | Fiscal Years Ended          |  
|------------------------------- | ---------------------- | --------------------------- | -
|
|
|Revenue by Skill:               |                        |                             |  
|                                | Information Technology |                             | $
|                                | Finance and Accounting |                             |  
|                                | Legal and Other        |                             |  
|                                | Administrative         |                             |  
|                                |                        |                             |  
|                                |                        | Segment Revenue             |  
|                                |                        |                             |  
|Revenue by Service:             |                        |                             |  
|                                | Temporary Staffing     |                             | $
|                                | Permanent Placement    |                             |  
|                                |                        |                             |  
|                                |                        | Segment Revenue             |  
|                                |                        |                             |  
|Gross Profit Margin by Service: |                        |                             |  
|(As % of Applicable Revenue)    |                        |                             |  
|                                | Temporary Staffing     |                             |  
|                                | Permanent Placement    |                             |  
|                                |                        | Total Professional Services |  

---



RevenuesProfessional Services revenues decreased 0.7% to $653.2 million in 2003 from
$657.8 million in the prior year. During 2003, the Professional Services operating segment experienced increases in both temporary staffing and permanent placement services within the finance
and accounting, legal and other and administrative skill sets. Finance and accounting demand increased significantly as the economy began to recover and was partially the result of mortgage
refinancing activity and new financial compliance regulations in the United States. Legal and other increased due to organic growth within these service lines. These increases largely offset the
decreases in information technology as demand for information technology related services continued to decrease in the United States and Australia. Revenues from foreign operations in the United
Kingdom, The Netherlands and Australia were relatively flat with the prior year as revenue decreases in local currencies were largely offset by the weakening of the U.S. dollar which caused the local
currency to convert to a higher number of U.S. dollars. This foreign exchange impact amounted to approximately $32 million.

Gross ProfitProfessional Services gross profits decreased 4.5% to $206.9 million from $216.6 million in the
prior year and the overall gross profit percentage was 31.7% in 2003 compared with 32.9% in the

22

---

prior
year. This decrease is due to pricing pressures within domestic and foreign temporary staffing services, the two most significant impacts were in information technology and in our foreign
operations. This decrease was partially offset by an increase due to a shift in the mix of business to permanent placement services and higher margin temporary staffing services within the United
States, primarily within the finance and accounting skill sets.

Segment Operating Profit (Loss)Professional Services segment operating loss was $(2.1) million compared to $(0.3) million in
the prior year. The increased loss from prior year was due to the decrease in gross profit of $9.7 million as described above, partially offset by lower operating expenses of
$7.9 million. Operating expenses as a percentage of revenues were 32.0% compared to 33.0% in the prior year. The decrease in operating expenses is due primarily to lower technology related
operating expenses as we continue to reduce these expenses in line with lower revenues. Operating losses from foreign operations amounted to $(10.2) million in 2003.

OutlookIn spite of increases during the second half of 2003 in temporary staffing revenues, particularly within the finance
and accounting skills, the market remains highly competitive for technology skills and demand is still weak in the marketplace. We believe that pricing pressures will continue at least in the near
term for technology skills but expect finance and accounting demand to remain strong as the economy continues to recover. We plan to focus our resources to grow our business with small and
mid-sized customers where pricing pressures tend to be less severe. Margins will be impacted by higher state unemployment costs in 2004 until these costs are fully passed on to our
customers.



RevenuesProfessional Services revenues decreased 18.1% to $657.8 million in 2002 from to
$803.4 million in the prior year. Information technology revenue decreased $101.4 million due to a sharp decrease in demand in the United States. Administrative revenues decreased
primarily due to the sale of the Company's operations in Spain at the end of 2001. Other revenues decreased due to lower demand for engineering skills and the sale of the Company's retained search
firm during 2001 (StratfordGroup), which was partially offset by organic revenue growth in the legal and other area.

Gross ProfitProfessional Services gross profits decreased 24.3% to $216.6 million from $286.0 million in the
prior year and the overall gross profit percentage was 32.9% in 2002 compared
with 35.6% in the prior year. This decrease is primarily due to lower spreads between bill and pay rates within the domestic technology skills, partially offset by improved consultant utilization.
Also contributing to the decrease in the gross profit rate was the sale of the retained search business (StratfordGroup) during 2001 and lower revenues from the permanent placement businesses in the
United States and in Europe (permanent placement revenues have 100% gross profit as commissions are shown as an operating expense).

Segment Operating Profit (Loss)Professional Services segment operating loss was $(0.3) million in 2002 compared to an
operating profit of $20.3 million in 2001. The decrease from prior year was due to the decrease in gross profit of $69.4 million as described above, partially offset by lower operating
expenses of $48.8 million. Operating expenses as a percentage of revenues were relatively flat at 33.0% compared to 33.1% in the prior year. The largest decline in this segment's operating
profit was largely due to the decrease in demand for information technology services in 2002 as compared to 2001, in addition to the economic slow-down which decreased demand in our
international operations.

Unallocated central costs

2003 compared with 2002Unallocated central costs increased 16.0% to $30.8 million in 2003
compared to $26.6 million in 2002. Unallocated central costs increased in 2003 primarily due to higher non-capitalizable costs of approximately $7.0 million related to the
implementation of our enterprise-wide information system which was partially offset by other decreases in general corporate overhead of

23

---

approximately
$3.0 million. As a percentage of consolidated revenues, these costs were 1.5% during 2003 compared to 1.3% in 2002.

2002 compared with 2001Unallocated central costs remained constant at $26.6 million when compared to the prior year.
Unallocated central costs in 2002 included approximately $2.0 million in costs relating to the identification and selection of our enterprise-wide information system, while 2001
unallocated central costs included charges recorded for a $2.5 million bad debt provision related to a loan made to a company in which we previously had an investment, and higher professional
fees associated with our 2001 business strategy. As a percentage of consolidated revenues, these costs were 1.3% during 2002 compared to 1.1% in 2001 (excluding Michael Page which did not
significantly impact central cost levels in 2001).

Liquidity And Capital Resources

Historically, we have financed our operations through cash generated by operating activities and bank lines of credit. Our principal uses of cash are capital
expenditures, working capital needs and repayment of debt. The nature of our business requires payment of wages to our temporary employees and consultants on a weekly or bi-weekly basis,
while payments from customers are generally received 30-60 days after billing.



As of December 26, 2003, we had total cash resources available of $21.2 million of which $10.5 million was held in the United States and the
remainder by foreign subsidiaries. This was a decrease of $44.2 million from December 27, 2002, and is due primarily to the use of cash for capital expenditures, the acquisition of our
Canadian operations and working capital needs. Total operating cash flow in 2003 of $50 million included tax refunds of approximately $81 million.

Cash
flows from operating, investing and financing activities, as reflected in the accompanying consolidated statements of cash flows, are summarized as follows:

Fiscal Years EndedDecember 26,
2003

December 27,
2002

December 28,
2001Cash Provided By (Used In):Operating Activities

$
50,040

$
39,163

$
(19,588
)Investing Activities


(82,241
)

(119,238
)

787,525Financing Activities


(12,007
)

(114,728
)

(546,135
)(Decrease) increase in cash and cash equivalents

$
(44,208
)
$
(194,803
)
$
221,802


Cash provided by operating activities in 2003 was higher than 2002 and 2001 primarily due to cash provided by working capital. Cash provided or (used) by changes
in working capital was $31.3 million for 2003, $(26.1) million for 2002 and $(34.9) million for 2001.



24

---



Cash
used in investing activities in 2003 is primarily related to capital expenditures of $60.5 million. Current year capital expenditures included the investment in our
enterprise-wide information system, which amounted to $38.6 million ($45.8 million including notes payable for capital
purchases) for the fiscal year ended 2003. We paid $10.7 million (excluding the assumption of debt) to acquire 85% of our Canadian franchise during the second quarter of 2003. Cash used in
investing activities in 2002 was primarily to fund $85.9 million of insurance deposits to collateralize workers' compensation obligations. Capital expenditures for 2002 included
$9.3 million ($15.0 million including notes payable for capital purchases) relating to our enterprise-wide information system. In 2001, the sale of Michael Page generated
gross cash proceeds before tax payments and debt pay down of $852.7 million. In addition, in 2001 we 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 (including $5.2 million relating
to Michael Page) for 2001 include the normal replacement of hardware and software as well as office furnishings and leasehold improvements.

We
expect additional capital spending for our enterprise-wide information system investment to be approximately $2 million to $3 million for the twelve months
ended December 31, 2004. We expect our total 2004 capital expenditures of $18 million to $20 million to be funded through operating cash flow or through borrowings under our
existing credit facility.

Cash
used in financing activities was substantially lower in 2003 than in 2002 and 2001 primarily due to lower debt repayments than in prior years. Debt repayments during 2003 relate to
the repurchase of a portion of our 41/2% convertible subordinated notes, the repayment of a portion of the debt assumed in conjunction with the Canadian acquisition and repayment of a
portion of the short-term notes payable for software and related costs. The use of cash during 2002 primarily reflects the repurchase of some of our 41/2% convertible
subordinated notes and the repayment of short-term borrowings associated with prior years acquisitions. Cash used by financing activities for 2001 primarily reflects the repayment of debt
with proceeds from the sale of Michael Page and share repurchases of $38.0 million. During 2001, we purchased approximately 4.0 million shares of our common stock at an average price of
$9.42 per share.



We believe that a combination of our existing cash balances, other liquid assets, operating cash flows, and existing bank lines of credit, taken together, provide
adequate resources to fund ongoing operating requirements and required or planned capital expenditures in 2004. During 2003, we elected to no longer have our debt rated by Standard and Poor's and plan
to do the same with Moody's Financial Services during the first half of 2004. We intend to refinance our $89.7 million 41/2% convertible subordinated notes as they come due.

In
July 2003, we cancelled our 364-day U.S. dollar loan facility and entered into a four-year U.S. dollar loan facility (also secured by substantially all
of our domestic accounts receivable). The new loan facility provides us $200 million of on-balance sheet financing through July of 2007, with an option (expiring in
July 2006) to increase the facility to a maximum of $250 million. Interest on this facility is based on LIBOR plus a credit spread. Our credit facility provides for certain affirmative
and negative covenants which may limit the total availability under this facility based upon our ability to meet these covenants. These covenants include, but are not limited to: a fixed charge
coverage ratio; limitations on capital expenditures,

25

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additional
debt incurred, mergers, consolidations or sales and transactions with international subsidiaries. Failure to meet compliance with one or more of these covenants in the future could affect
the amount of availability we have to borrow against and as a result, our liquidity and financial condition may be adversely affected. As of December 26, 2003, there were no amounts outstanding
under this facility and total availability under this facility was approximately $150 million.

In
May 1998, we issued $207.0 million of 41/2% Convertible Subordinated Notes ("Notes") due June 1, 2005. During 2002, our Board of Directors
authorized us to repurchase from time to time any of our outstanding Notes in such amounts and on such terms as deemed advisable by management if approached by a bondholder. During 2003, we
repurchased an aggregate face value of $7.0 million of the Notes for a purchase price of $6.6 million. During 2002, we repurchased an aggregate face value of $110.3 million of the
Notes for a purchase price of $98.7 million. We recorded a gain, net of bond issuance cost write-offs, of $0.3 million and $10.5 million, for the fiscal years ending
December 26, 2003 and December 27, 2002, respectively, which is included in "Other gains" in the accompanying consolidated statements of operations. Repurchases during 2003 and 2002 are
not necessarily indicative of the future. Additional repurchases, if any, will depend on factors such as the prevailing market price of the Notes, overall market conditions and alternative uses of our
liquidity.

Contractual Obligations and Commitments (in thousands)

|                                |       | Payments due by period
|------------------------------- | ----- | ----------------------
|
|Long-term debt obligations      |       | $                     
|Capital lease obligations       |       |                       
|Operating lease obligations (3) |       |                       
|Purchase obligations (1)        |       |                       
|Other liabilities (2)           |       |                       
|                                |       |                       
|                                | Total |                       
|                                |       |                       

---

In
connection with the acquisition of our Canadian franchise we entered into a new put/call agreement with the minority interest holder that can be exercised by either party any time
after December 31, 2005, which would require/allow us to purchase the remaining 15% interest in this operation. If the put or the call were exercised, the purchase price would be primarily
determined based upon the net assets and gross profits from this operation in future periods. Based upon these factors, the purchase price using 2003 operating results and net assets as of the end of
the year would approximate $2.5 million. As this amount is not truly determinable or certain to be paid at this point in time, it is not included in the table above.

Spherion
does not have or engage in any off-balance sheet arrangements.

26

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Critical Accounting Policies

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, liabilities, revenues and expenses and the disclosure of contingencies. Due to the inherent uncertainty involved in making
estimates, actual results reported in future periods may be materially different from those estimates. The following policies are those that we consider to be the
most critical. See Note 1, Summary of Significant Accounting Policies, for further description of these and all other accounting policies.

Allowance for Doubtful AccountsManagement analyzes aged receivables and the related allowance for doubtful accounts on a
monthly basis. Based upon our historical experience, receivables reaching certain aged brackets, or when deemed by management to be uncollectible, are reserved for and/or consequently
written-off. Historically, losses from uncollectible accounts have not exceeded our allowance. Due to the judgment used in making these assumptions, the ultimate amount of accounts
receivable that become uncollectible could differ from our original estimate due to a worsening financial position in the economy or with our customers and could result in charges or credits to
amounts recorded in selling, general and administrative expenses.

Intangible AssetsEffective at the beginning of 2002, Spherion adopted Statement of Financial Accounting Standards ("SFAS")
No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 provides that goodwill and other intangible assets with indefinite lives should not be amortized, but will be tested for
impairment on an annual basis. As a result of the initial adoption of SFAS No. 142, we recorded a pre-tax charge to earnings of $691.6 million ($615.6 million
after-tax) as of January 1, 2002. Additionally, we performed our annual impairment test as of November 22, 2002, and recorded an additional impairment charge of
$291.5 million. These charges were determined based primarily on management's estimated fair value of each reporting unit using both the discounted present value of anticipated future cash
flows and the comparable market prices of competitors. Management considered a number of factors, including valuations or appraisals, when determining these fair values. We performed our annual
impairment test as of November 2003, which did not result in an indication of impairment. Due to the judgment inherent in estimating future cash flows, there could be further charges to
operations for up to the full value of our goodwill balance, which is currently $50.0 million, if the markets in which we operate decline or if the market values of competitors decrease.

Accrued Self-Insurance Losses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. Estimated losses for workers' compensation, general liability/professional
liability and employment practices have been discounted at 4.5% and 5.0% at December 26, 2003 and December 27, 2002, respectively, and are based on actuarial estimates. Changes in
legislation, the cost of health care services, claims processing costs, or increased litigation could all affect the adequacy of these estimated liabilities. Prolonged changes in interest rates for
long-term bonds could also affect the discount rate used in estimating these liabilities. A decrease of 1% in the discount rate would result in an additional pre-tax expense of
approximately $1.7 million. Management reviews these assumptions and related reserves and changes in the estimates of these accruals are charged or credited to operations in the period
determined. Due to the judgment used in recording these reserves, the ultimate amount of reserves that are needed could differ from our original estimate and could result in charges or credits to
amounts recorded in cost of services and/or selling, general and administrative expenses.

Stock-based CompensationWe account 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 our stock at the date of grant over the amount an employee must pay for the stock.

27

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No
stock-based employee compensation cost relating to stock options is reflected in net (loss) earnings, as all options granted under this plan had exercise prices equal to the market
value of the underlying common stock on the date of grant. If we had applied the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," to stock-based
employee compensation, our net loss for the year ended December 26, 2003, would have been $(17.0) million or $(0.28) per diluted share. The fair value of options at grant date was estimated
using the Black-Scholes multiple option model. Changes in any of the assumptions used in this model for 2003 (expected life of 3.2 years, a weighted-average risk free interest rate of 2.27%,
volatility of 59.00% and no expected dividends), would change the weighted average per share fair value of $4.11. If our stock continues to experience a high degree of price volatility or if employees
begin to exercise more options (which may indicate a longer option life), the fair value of our options would increase. The assumptions we used are based upon our historical experience, however future
results could differ from these assumptions. Currently there would not be any effect on our operations due to changes in these assumptions, however if we choose to adopt the provisions of SFAS
No. 123, changes in these assumptions could impact our operating results.

Income TaxesAt December 26, 2003, we have a net deferred tax asset of $165.0 million. This deferred tax asset
was evaluated under the guidelines of SFAS No. 109, "Accounting for Income Taxes," and a determination on the basis of objective factors was made that the asset will be realized through
future years taxable earnings. If we determine that future taxable earnings will be insufficient to recover the deferred tax assets, we will be required to write-off all or a portion of the deferred
tax asset by a charge to earnings.

New Accounting Pronouncements

See Note 1, Summary of Significant Accounting Policies in the accompanying consolidated financial statements for discussion of New Accounting
Pronouncements.

Inflation

The effects of inflation on our operations were not significant during the periods presented in the accompanying consolidated financial statements.

Impact of the Euro

The Euro became the legal tender for our operations in The Netherlands effective January 1, 2002. The costs of addressing the Euro conversion were not
material. The overall Euro conversion did not have a material impact on our financial condition or results of operations.

Seasonality And Cyclical Nature Of Business

SeasonalityOur businesses are seasonal in nature with customer related demand generally at its highest point during the third
and fourth quarters and lowest during the first quarter. The third and fourth quarters are normally higher as our customers increase their temporary workforces for the holiday season. We typically
experience a decrease of approximately 5 - 10% in our first quarter revenues in comparison with fourth quarter revenues. The decrease in first quarter revenue for 2003, 2002
and 2001 was 8%, 9% and 6%, respectively in comparison with the preceding fourth quarters.

Cyclical Nature of the BusinessThe staffing industry has historically been considered to be cyclical, often acting as an
indicator of both economic downswings and upswings. Staffing customers tend to use temporary staffing to supplement their existing workforces and generally hire permanent workers when long term demand
is expected to increase. As a consequence of this, our revenues tend to increase quickly when the economy begins to grow. Conversely, our revenues also tend to decrease quickly when the economy begins
to contract as our customers reduce temporary workers before terminating their own

28

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employees.
While we have a number of longer-term managed service contracts which are not as directly dependent upon the economic cycle, these revenues are not significant enough to offset
the impact of cyclical economic activity in our larger service offerings.

Forward Looking StatementsSafe Harbor

In evaluating our 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 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 both of our operating 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, have greater marketing, technical and financial resources, and have stronger brand and name recognition than us. As a
result, some of our competitors may be in a better position to capitalize on new technologies and changes in customer requirements,
and to devote more resources than we can to the development, promotion and sale of their service offerings.

There
has been a significant increase in the number of customers consolidating their staffing services purchases with a single provider or with a small number of providers. The trend to
consolidate purchases has in some cases made it more difficult for us to obtain or retain customers. We also face the risk that certain of our current and prospective customers may decide to provide
similar services internally. Additionally, pricing pressures have intensified as customers have continued to competitively bid new contracts. This trend is expected to continue for the foreseeable
future. As a result, we cannot assure you that we will not encounter increased competition in the future.

Any significant economic downturn could result in our customers using fewer temporary employees or the loss or bankruptcy of a significant
customer.

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, as businesses reduce their hiring of permanent employees, revenue from our recruitment services is adversely affected. As a result, any significant economic downturn could have a
material adverse effect on our business, financial condition or results of operations. During 2002 and 2001 the slowdown in the U.S. economy significantly impacted the staffing market, which in turn
reduced our revenues significantly.

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A
loss or a bankruptcy of a significant customer or a number of customers from one of our operating segments, or reduced business from such customers, 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 customers 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 customers or to successfully bid for
new customer projects. We must continually evaluate and upgrade our base of available qualified personnel to keep pace with changing customer needs and emerging technologies. Competition for
individuals with proven
professional or technical skills always exists. We could have difficulty attracting and retaining sufficient numbers of qualified personnel necessary for our business to succeed.

We may not achieve the intended effects of our business strategy.

Our
business strategy is primarily based on profitable growth in our North American operations and we plan to grow at rates equal to or in excess of our major competitors. We are
implementing steps to improve the number and type of services that we sell to our existing and new customers and have reorganized our reporting segments into two segments that are focused on the type
of employee skills that the customer requires. By combining like skill sets within each segment and emphasizing the depth and penetration of our marketing efforts within each segment, we plan to grow
more rapidly. We also expect to reduce our operating costs further as we combine management teams and offices. Although these actions are designed to improve our marketing efforts and increase
revenues and profits, there is no assurance that we will be successful. We may not be successful in reducing our operating costs by combining management teams and reducing the number of offices or in
generating sufficient productivity improvements to offset intense pricing pressures.

Our investment in technology initiatives may not yield their intended results.

We
are investing approximately $60 to $65 million over two to three years in a new enterprise-wide information system. This initiative is designed to replace many of
our existing systems, including disparate legacy systems from various acquisitions, so that many of our administrative functions and operations can be combined and communicate in a state of the art,
enterprise-wide integrated system. Although these technology initiatives are intended to increase productivity and operating efficiencies while lowering costs, we cannot assure you that
these initiatives will yield their intended results. Delays in completing or an inability to successfully complete these technology initiatives could adversely affect our operations, liquidity and
financial condition.

Regulatory challenges to our tax filing positions could result in additional taxes.

In
2002, we engaged in transactions that generally had the effect of accelerating certain future projected tax deductions and losses, resulting in an increase in the amount of net
operating losses and capital losses available for carry back into prior tax years. As a result of these transactions, our tax refund for the 2002 filing year was increased by approximately
$60 million. We believe that we have appropriately reported these transactions in our tax returns, and that we have established adequate reserves with respect to any tax liabilities that may
arise in relation to these transactions should our position be challenged by the Internal Revenue Service. However, an unfavorable settlement or adverse resolution of a challenge by the Internal
Revenue Service could result in the repayment of some or all of the refund received.

30

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Failure to meet certain covenant requirements under our credit facility could impact part or all of our availability to borrow under this
facility.

Our
credit facility provides for certain affirmative and negative covenants which may limit the total availability under this facility based upon our ability to meet these covenants.
These covenants include, but are not limited to: a fixed charge coverage ratio; limitations on capital expenditures, additional debt incurred, mergers, consolidations or sales and transactions with
international subsidiaries. Failure to meet compliance with one or more of these covenants in the future could affect the amount of availability we have to borrow against and as a result, our
liquidity and financial condition may be adversely affected.

We may be exposed to employment-related claims and costs that could have a material adverse affect on 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. 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 medical insurance for 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
customers to absorb the increased costs related to unemployment insurance or workers' compensation benefits. Future earnings could also be adversely affected if state governments successfully
challenge prior year unemployment experience ratings. We are also required to comply with regulations concerning the maintenance of employee health care data. Costs related to maintaining this data
could increase.

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,



31

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Our failure or inability to perform under customer contracts could result in damage to our reputation and give rise to legal claims against
us.

Certain
areas of our business require us to assume a greater level of responsibility for developing or maintaining processes on behalf of our customers. Many of these processes are
critical to the operation of our customers' businesses. Our failure or inability to complete these engagements satisfactorily could have a material adverse effect on our customers' 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 a 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. See Part I, Item 3, Legal Proceedings for more information.

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

Some
of our customer contracts permit termination in the event our performance is not consistent with service levels specified in those contracts. Our customers' ability to terminate
contracts creates uncertain revenue streams. In addition, if customers 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 customers 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 contracts provide for credits to our customers 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 customer contract or the deterioration of the financial condition or prospects of a customer may result in an impairment of the net book value of the assets we use
in connection with that contract.

Managing or integrating any future acquisitions may strain our resources.

In
the future, we may acquire other businesses to expand our service offerings, broaden our customer base or expand our geographic presence. Acquisitions involve a number of additional
risks, including the diversion of management's attention from our existing operations, the failure to retain key personnel or customers of an acquired business, the assumption of unknown liabilities
of the acquired business for which there are inadequate reserves, the potential impairment of acquired intangible assets and the ability to successfully integrate the business. We could experience
financial or other setbacks if any of the businesses that we acquire have liabilities or problems of which we are not aware. Further, we cannot assure you that any future acquired businesses will
generate anticipated revenues or earnings. As a result, the anticipated benefits from future acquisitions may not be achieved.

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Item 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of December 26, 2003, the majority of our cash and cash equivalents were invested in investment grade money market funds. These financial instruments
are not considered to be subject to interest rate risk due to their short duration.

We
are exposed to interest rate risk related to a portion of our debt. Our outstanding variable-rate debt at both December 26, 2003 and December 27, 2002 was
$8.0 million. Based on the outstanding balance, a change of 1% in the interest rate would have caused a change in interest expense of approximately $0.1 million in both 2003 and 2002, on
an annual basis.

From
time to time, we participate in foreign exchange hedging activities to mitigate the impact of changes in foreign currency exchange rates. We attempt to hedge transaction exposures
through natural offsets. To the extent this is not practicable, exposure areas which are considered for hedging include foreign currency denominated receivables and payables, intercompany loans and
firm committed transactions and dividends related to foreign subsidiaries. We use financial instruments, principally forward exchange contracts, in our management of foreign currency exposures. We do
not enter into forward contracts for trading purposes. In estimating the fair value of derivative positions, we utilize quoted market prices, if available, or quotes obtained from outside sources. As
of December 26, 2003, we had one outstanding forward contract to sell 5.0 million Canadian dollars. The fair value or cost to unwind is not material to our consolidated results of
operations. As of December 27, 2002, we had no outstanding forward contracts.

When
foreign currency financial instruments are outstanding, exposure to market risk on these instruments results from fluctuations in currency rates during the periods in which the
contracts are outstanding. The counterparties to our currency exchange contracts consist of a diversified group of major financial institutions, each of which is rated investment grade. We are 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. We believe the risk of incurring
losses due to credit risk is remote.

The
carrying amount of cash and cash equivalents, trade receivables and other current assets approximates fair value due to the short-term maturities of these instruments.
Our insurance deposits earn a fixed interest rate as determined at the time of funding and are carried at fair value or $95.1 million and $88.7 million as of December 26, 2003 and
December 27, 2002, respectively.
Company-owned life insurance policies are carried at fair market value which approximated $17.1 million and $15.9 million as of December 26, 2003 and December 27, 2002,
respectively.

The
fair value of our fixed-rate convertible subordinated notes as of December 26, 2003 and December 27, 2002 was $88.8 million and $87.2 million,
respectively, with a $89.7 million and $96.7 million carrying value at December 26, 2003 and December 27, 2002, respectively. The fair value of our 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.

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Item 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

|                                                |  | Page
|----------------------------------------------- |  | ----
|Independent Auditors' Report                    |  | 35  
|Consolidated Statements of Operations           |  | 36  
|Consolidated Balance Sheets                     |  | 37  
|Consolidated Statements of Stockholders' Equity |  | 38  
|Consolidated Statements of Cash Flows           |  | 39  
|Notes to Consolidated Financial Statements      |  | 40  

34

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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 26, 2003 and December 27, 2002, and the related
consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 26, 2003. Our audits also included the financial statement
schedule listed in the Index at Item 15. 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 26, 2003 and
December 27, 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 26, 2003, 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
Standards No. 133.

As
discussed in Notes 1 and 2 to the consolidated financial statements, in 2002 Spherion changed its method of accounting for goodwill and other intangible assets to conform to Statement of
Financial Accounting Standards No. 142.

DELOITTE &
TOUCHE LLP
Certified Public Accountants

Fort
Lauderdale, Florida
March 10, 2004

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

|                                                                                                                                                 |                                                                                                                                    | Fiscal Years Ended |          
|------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------- | ------------------ | ---------
|
|Revenues                                                                                                                                         |                                                                                                                                    | $                  | 2,069,518
|Cost of services                                                                                                                                 |                                                                                                                                    |                    | 1,590,221
|                                                                                                                                                 |                                                                                                                                    |                    |          
|Gross profit                                                                                                                                     |                                                                                                                                    |                    | 479,297  
|                                                                                                                                                 |                                                                                                                                    |                    |          
|Selling, general and administrative expenses                                                                                                     |                                                                                                                                    |                    | 445,428  
|Licensee commissions                                                                                                                             |                                                                                                                                    |                    | 44,367   
|Amortization of intangibles                                                                                                                      |                                                                                                                                    |                    | 448      
|Interest expense                                                                                                                                 |                                                                                                                                    |                    | 6,101    
|Interest income                                                                                                                                  |                                                                                                                                    |                    | (5,455   
|Restructuring, asset impairments and other charges                                                                                               |                                                                                                                                    |                    | 5,213    
|Goodwill impairment                                                                                                                              |                                                                                                                                    |                    |         
|Other gains                                                                                                                                      |                                                                                                                                    |                    | (313     
|Gain on sale of Michael Page                                                                                                                     |                                                                                                                                    |                    |         
|                                                                                                                                                 |                                                                                                                                    |                    |          
|                                                                                                                                                 |                                                                                                                                    |                    | 495,789  
|                                                                                                                                                 |                                                                                                                                    |                    |          
|(Loss) earnings from continuing operations before income taxes, discontinued operations and cumulative effect of changes in accounting principle |                                                                                                                                    |                    | (16,492  
|Income tax benefit (expense)                                                                                                                     |                                                                                                                                    |                    | 5,516    
|                                                                                                                                                 |                                                                                                                                    |                    |          
|(Loss) earnings from continuing operations before discontinued operations and cumulative effect of changes in accounting principle               |                                                                                                                                    |                    | (10,976  
|                                                                                                                                                 |                                                                                                                                    |                    |          
|Discontinued Operations:                                                                                                                         |                                                                                                                                    |                    |          
|                                                                                                                                                 | Loss from discontinued operations (including loss on disposal of $1,227 and $12,819 in 2003 and 2002, respectively)                |                    |          
|                                                                                                                                                 | Income tax (expense) benefit                                                                                                       |                    |          
|                                                                                                                                                 |                                                                                                                                    |                    |          
|                                                                                                                                                 | Net loss from discontinued operations                                                                                              |                    |          
|                                                                                                                                                 |                                                                                                                                    |                    |          
|(Loss) earnings before cumulative effect of changes in accounting principle                                                                      |                                                                                                                                    |                    | (13,913  
|Cumulative effect of changes in accounting principle, net of income tax benefits of $76,012 and $681 in 2002 and 2001, respectively              |                                                                                                                                    |                    |         
|                                                                                                                                                 |                                                                                                                                    |                    |          
|Net (loss) earnings                                                                                                                              |                                                                                                                                    | $                  | (13,913  
|                                                                                                                                                 |                                                                                                                                    |                    |          
|(Loss) earnings per shareBasic:                                                                                                                 |                                                                                                                                    |                    |          
|                                                                                                                                                 | (Loss) earnings from continuing operations before discontinued operations and cumulative effect of changes in accounting principle |                    | $        
|                                                                                                                                                 | Loss from discontinued operations                                                                                                  |                    |          
|                                                                                                                                                 | Cumulative effect of changes in accounting principle                                                                               |                    |          
|                                                                                                                                                 |                                                                                                                                    |                    |          
|                                                                                                                                                 |                                                                                                                                    | $                  | (0.23    
|                                                                                                                                                 |                                                                                                                                    |                    |          
|(Loss) earnings per shareDiluted:                                                                                                               |                                                                                                                                    |                    |          
|                                                                                                                                                 | (Loss) earnings from continuing operations before discontinued operations and cumulative effect of changes in accounting principle |                    | $        
|                                                                                                                                                 | Loss from discontinued operations                                                                                                  |                    |          
|                                                                                                                                                 | Cumulative effect of changes in accounting principle                                                                               |                    |          
|                                                                                                                                                 |                                                                                                                                    |                    |          
|                                                                                                                                                 |                                                                                                                                    | $                  | (0.23    
|                                                                                                                                                 |                                                                                                                                    |                    |          
|Basic weighted average shares outstanding                                                                                                        |                                                                                                                                    |                    | 59,951   
|Diluted weighted average shares outstanding                                                                                                      |                                                                                                                                    |                    | 59,951   

See Notes to Consolidated Financial Statements.

36

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

|                                                      |                                                                                                    | December 26,
2003          |         | December 27,
2002 |        
|----------------------------------------------------- | -------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ----------------- | -------
|Assets                                                |                                                                                                    |                            |         |                   |        
|Current Assets:                                       |                                                                                                    |                            |         |                   |        
|                                                      | Cash and cash equivalents                                                                          |                            | $       | 21,248            |        
|                                                      | Receivables, less allowance for doubtful accounts of $6,671 and $6,760                             |                            |         | 334,015           |        
|                                                      | Deferred tax asset                                                                                 |                            |         | 20,868            |        
|                                                      | Income tax receivable                                                                              |                            |         | 20,710            |        
|                                                      | Insurance deposit                                                                                  |                            |         | 27,412            |        
|                                                      | Other current assets                                                                               |                            |         | 15,247            |        
|                                                      | Assets of discontinued operations                                                                  |                            |         |                  |        
|                                                      |                                                                                                    |                            |         |                   |        
|                                                      |                                                                                                    | Total current assets       |         |                   | 439,500
|Goodwill                                              |                                                                                                    |                            | 49,977  |                   |        
|Property and equipment, net                           |                                                                                                    |                            | 133,448 |                   |        
|Deferred tax asset                                    |                                                                                                    |                            | 144,154 |                   |        
|Insurance deposit                                     |                                                                                                    |                            | 67,688  |                   |        
|Intangibles and other assets                          |                                                                                                    |                            | 30,067  |                   |        
|                                                      |                                                                                                    |                            |         |                   |        
|                                                      |                                                                                                    | $                          | 864,834 |                   | $      
|                                                      |                                                                                                    |                            |         |                   |        
|Liabilities and Stockholders' Equity                  |                                                                                                    |                            |         |                   |        
|Current Liabilities:                                  |                                                                                                    |                            |         |                   |        
|                                                      | Current portion of long-term debt                                                                  |                            | $       | 6,939             |        
|                                                      | Accrued restructuring                                                                              |                            |         | 5,531             |        
|                                                      | Accounts payable and other accrued expenses                                                        |                            |         | 97,019            |        
|                                                      | Accrued salaries, wages and payroll taxes                                                          |                            |         | 60,282            |        
|                                                      | Accrued insurance reserves                                                                         |                            |         | 36,849            |        
|                                                      | Other current liabilities                                                                          |                            |         | 7,391             |        
|                                                      | Liabilities of discontinued operations                                                             |                            |         |                  |        
|                                                      |                                                                                                    |                            |         |                   |        
|                                                      |                                                                                                    | Total current liabilities  |         |                   | 214,011
|Long-term debt, net of current portion                |                                                                                                    |                            | 8,325   |                   |        
|Convertible subordinated notes                        |                                                                                                    |                            | 89,748  |                   |        
|Accrued insurance reserves                            |                                                                                                    |                            | 29,110  |                   |        
|Accrued income tax payable                            |                                                                                                    |                            | 79,423  |                   |        
|Deferred compensation and other long-term liabilities |                                                                                                    |                            | 32,372  |                   |        
|                                                      |                                                                                                    |                            |         |                   |        
|                                                      |                                                                                                    | Total liabilities          |         |                   | 452,989
|                                                      |                                                                                                    |                            |         |                   |        
|Commitments and contingencies (see Note 13)           |                                                                                                    |                            |         |                   |        
|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 shares    |                            |         | 653               |        
|                                                      | Treasury stock, at cost, 5,425,781 and 6,376,964 shares, respectively                              |                            |         | (54,971           | )      
|                                                      | Additional paid-in capital                                                                         |                            |         | 852,995           |        
|                                                      | Accumulated deficit                                                                                |                            |         | (402,600          | )      
|                                                      | Accumulated other comprehensive income (loss)                                                      |                            |         | 15,768            |        
|                                                      |                                                                                                    |                            |         |                   |        
|                                                      |                                                                                                    | Total stockholders' equity |         |                   | 411,845
|                                                      |                                                                                                    |                            |         |                   |        
|                                                      |                                                                                                    | $                          | 864,834 |                   | $      
|                                                      |                                                                                                    |                            |         |                   |        

See Notes to Consolidated Financial Statements.

37

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SPHERION CORPORATION AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY  For Fiscal Years Ended December 26, 2003, December 27, 2002 and December 28, 2001  (amounts in thousands)

|                                                                                         |                                    | Common
Stock                                                                                          |     | Treasury
Stock |   | Additional
Paid-In
Capital |   | Retained
Earnings
(Accumulated
Deficit) |         | Accumulated
Other
Comprehensive
Income/(Loss) |   | Total    |         
|---------------------------------------------------------------------------------------- | ---------------------------------- | ----------------------------------------------------------------------------------------------------- | --- | -------------- | - | -------------------------- | - | --------------------------------------- | ------- | --------------------------------------------- | - | -------- | --------
|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 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  |         
|                                                                                         |                                    |                                                                                                       |     |                |   |                            |   |                                         |         |                                               |   |          |         
|Comprehensive loss:                                                                      |                                    |                                                                                                       |     |                |   |                            |   |                                         |         |                                               |   |          |         
|                                                                                         | Net loss                           |                                                                                                       |     |               |   |                            |  |                                         |         |                                              |   |          | (903,272
|                                                                                         | Other comprehensive income:        |                                                                                                       |     |                |   |                            |   |                                         |         |                                               |   |          |         
|                                                                                         |                                    | Foreign currency translation adjustments arising during the period                                    |     |                |  |                            |   |                                        |         |                                               |  |          |         
|                                                                                         |                                    |                                                                                                       |     |                |   |                            |   |                                         |         |                                               |   |          |         
|                                                                                         | Comprehensive loss                 |                                                                                                       |     |                |   |                            |   |                                         |         |                                               |   |          |         
|                                                                                         |                                    |                                                                                                       |     |                |   |                            |   |                                         |         |                                               |   |          |         
|Purchase of treasury stock                                                               |                                    |                                                                                                       |    |                |   | (1,660                     | ) |                                         |        |                                               |   |         |         
|Proceeds from exercise of employee stock options, including tax benefit                  |                                    |                                                                                                       |    |                |   | 1,760                      |   |                                         | (493    | )                                             |   |         |         
|Proceeds from issuance of shares under Employee Stock Purchase Plan                      |                                    |                                                                                                       |    |                |   | 3,609                      |   |                                         | (2,089  | )                                             |   |         |         
|Treasury stock reissued and compensation earned in connection with deferred compensation |                                    |                                                                                                       |    |                |   | 6,875                      |   |                                         | (4,253  | )                                             |   |         |         
|                                                                                         |                                    |                                                                                                       |     |                |   |                            |   |                                         |         |                                               |   |          |         
|Balance as of December 27, 2002                                                          |                                    |                                                                                                       | 653 |                |   | (66,860                    | ) |                                         | 859,551 |                                               |   | (388,687 | )       
|                                                                                         |                                    |                                                                                                       |     |                |   |                            |   |                                         |         |                                               |   |          |         
|Comprehensive income:                                                                    |                                    |                                                                                                       |     |                |   |                            |   |                                         |         |                                               |   |          |         
|                                                                                         | Net loss                           |                                                                                                       |     |               |   |                            |  |                                         |         |                                              |   |          | (13,913 
|                                                                                         | Other comprehensive income:        |                                                                                                       |     |                |   |                            |   |                                         |         |                                               |   |          |         
|                                                                                         |                                    | Foreign currency translation adjustments arising during the period                                    |     |                |  |                            |   |                                        |         |                                               |  |          |         
|                                                                                         |                                    | Foreign currency translation adjustments related to the sale of The Netherlands technology subsidiary |     |                |  |                            |   |                                        |         |                                               |  |          |         
|                                                                                         |                                    |                                                                                                       |     |                |   |                            |   |                                         |         |                                               |   |          |         
|                                                                                         | Comprehensive income               |                                                                                                       |     |                |   |                            |   |                                         |         |                                               |   |          |         
|                                                                                         |                                    |                                                                                                       |     |                |   |                            |   |                                         |         |                                               |   |          |         
|Proceeds from exercise of employee stock options, including tax benefit                  |                                    |                                                                                                       |    |                |   | 4,670                      |   |                                         | (2,463  | )                                             |   |         |         
|Proceeds from issuance of shares under Employee Stock Purchase Plan                      |                                    |                                                                                                       |    |                |   | 3,092                      |   |                                         | (2,042  | )                                             |   |         |         
|Treasury stock reissued and compensation earned in connection with deferred compensation |                                    |                                                                                                       |    |                |   | 4,127                      |   |                                         | (2,051  | )                                             |   |         |         
|                                                                                         |                                    |                                                                                                       |     |                |   |                            |   |                                         |         |                                               |   |          |         
|Balance as of December 26, 2003                                                          |                                    | $                                                                                                     | 653 |                | $ | (54,971                    | ) | $                                       | 852,995 |                                               | $ | (402,600 | )       
|                                                                                         |                                    |                                                                                                       |     |                |   |                            |   |                                         |         |                                               |   |          |         

See Notes to Consolidated Financial Statements.

38

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

|                                                 |                                                                                                                                                              | Fiscal Years Ended                                                                 |                                                    
|------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------- | ---------------------------------------------------
|
|Cash Flows from Operating Activities:            |                                                                                                                                                              |                                                                                    |                                                    
|                                                 | (Loss) earnings before cumulative effect of changes in accounting principle                                                                                  |                                                                                    | $                                                  
|                                                 | Adjustments to reconcile (loss) earnings before cumulative effect of changes in accounting principle to net cash provided by (used in) operating activities: |                                                                                    |                                                    
|                                                 | Discontinued operations provision                                                                                                                            |                                                                                    |                                                    
|                                                 | Gain on bond repurchase                                                                                                                                      |                                                                                    |                                                    
|                                                 | Goodwill impairment                                                                                                                                          |                                                                                    |                                                    
|                                                 | Depreciation and amortization                                                                                                                                |                                                                                    |                                                    
|                                                 | Deferred income tax (benefit) expense                                                                                                                        |                                                                                    |                                                    
|                                                 | Restructuring, asset impairments and other charges                                                                                                           |                                                                                    |                                                    
|                                                 | Gain on sale of Michael Page                                                                                                                                 |                                                                                    |                                                    
|                                                 | Other non-cash charges                                                                                                                                       |                                                                                    |                                                    
|                                                 | Changes in assets and liabilities, net of effects of acquisitions:                                                                                           |                                                                                    |                                                    
|                                                 |                                                                                                                                                              | Receivables                                                                        |                                                    
|                                                 |                                                                                                                                                              | Other assets                                                                       |                                                    
|                                                 |                                                                                                                                                              | Income tax receivable                                                              |                                                    
|                                                 |                                                                                                                                                              | Accounts payable, accrued liabilities and other liabilities                        |                                                    
|                                                 |                                                                                                                                                              | Accrued income taxes                                                               |                                                    
|                                                 |                                                                                                                                                              | Restructuring liabilities                                                          |                                                    
|                                                 |                                                                                                                                                              |                                                                                    |                                                    
|                                                 |                                                                                                                                                              |                                                                                    | Net Cash Provided by (Used in) Operating Activities
|                                                 |                                                                                                                                                              |                                                                                    |                                                    
|Cash Flows from Investing Activities:            |                                                                                                                                                              |                                                                                    |                                                    
|                                                 | Proceeds from the sale of Michael Page, net of cash sold                                                                                                     |                                                                                    |                                                    
|                                                 | Acquisitions and earn-out payments, net of cash acquired                                                                                                     |                                                                                    |                                                    
|                                                 | Capital expenditures, net                                                                                                                                    |                                                                                    |                                                    
|                                                 | Insurance deposit                                                                                                                                            |                                                                                    |                                                    
|                                                 | Proceeds from sale of assets                                                                                                                                 |                                                                                    |                                                    
|                                                 | Other                                                                                                                                                        |                                                                                    |                                                    
|                                                 |                                                                                                                                                              |                                                                                    |                                                    
|                                                 |                                                                                                                                                              |                                                                                    | Net Cash (Used in) Provided by Investing Activities
|                                                 |                                                                                                                                                              |                                                                                    |                                                    
|Cash Flows from Financing Activities:            |                                                                                                                                                              |                                                                                    |                                                    
|                                                 | Debt proceeds                                                                                                                                                |                                                                                    |                                                    
|                                                 | Debt repayments                                                                                                                                              |                                                                                    |                                                    
|                                                 | Repurchase of convertible subordinated notes                                                                                                                 |                                                                                    |                                                    
|                                                 | Purchase of treasury stock                                                                                                                                   |                                                                                    |                                                    
|                                                 | Proceeds from exercise of employee stock options                                                                                                             |                                                                                    |                                                    
|                                                 | Other, net                                                                                                                                                   |                                                                                    |                                                    
|                                                 |                                                                                                                                                              |                                                                                    |                                                    
|                                                 |                                                                                                                                                              |                                                                                    | Net Cash Used in Financing Activities              
|                                                 |                                                                                                                                                              |                                                                                    |                                                    
|(Decrease) increase in cash and cash equivalents |                                                                                                                                                              |                                                                                    | (44,208                                            
|Cash and cash equivalents, beginning of period   |                                                                                                                                                              |                                                                                    | 65,456                                             
|                                                 |                                                                                                                                                              |                                                                                    |                                                    
|Cash and cash equivalents, end of period         |                                                                                                                                                              | $                                                                                  | 21,248                                             
|                                                 |                                                                                                                                                              |                                                                                    |                                                    
|Supplemental Cash Flow Information:              |                                                                                                                                                              |                                                                                    |                                                    
|                                                 | Cash paid (received) during the year for:                                                                                                                    |                                                                                    |                                                    
|                                                 |                                                                                                                                                              | Income taxes                                                                       |                                                    
|                                                 |                                                                                                                                                              | Interest                                                                           |                                                    
|                                                 | Non-cash activities:                                                                                                                                         |                                                                                    |                                                    
|                                                 |                                                                                                                                                              | Loan notes and convertible promissory notes issued in connection with acquisitions |                                                    
|                                                 |                                                                                                                                                              | Short-term notes payable entered into for purchase of software and related costs   |                                                    
|                                                 |                                                                                                                                                              | Debt assumed with Canadian acquisition                                             |                                                    

See Notes to Consolidated Financial Statements.

39

---



SPHERION CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BusinessSpherion Corporation provides temporary staffing services, managed services and permanent
placement services and currently operates in eight countries: Australia, Canada, Hong Kong, New Zealand, Panama, The Netherlands, the United Kingdom and the United States. Temporary staffing services
include personnel in the following skill categories: clerical, light industrial, information technology, finance and accounting, legal and administrative. Managed services includes services where
Spherion assumes the operation and management of a customer function such as a call center, employment process, help desk, administrative services, data center or network operations. Permanent
placement is a service where Spherion employees locate talent on behalf of its customers, screen the candidates and assist in the recruitment efforts. Spherion has two operating segments, Staffing
Services and Professional Services. Founded in 1946, Spherion is headquartered in Fort Lauderdale, Florida, and operates a network of over 800 locations.

Principles of ConsolidationThe accompanying consolidated financial statements include the accounts of Spherion Corporation
and its wholly-owned subsidiaries ("Spherion"). All material intercompany transactions and balances have been eliminated. 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 materially 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 26, 2003, December 27, 2002 and December 28, 2001 contained 52 weeks.

Cash and Cash EquivalentsAll highly liquid investments 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 due to 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 in company-owned life insurance policies are classified as trading securities and are reported at fair
value with gains and losses included in earnings during the period incurred. Investments that are classified as available-for-sale securities are reported at fair value with
unrealized gains and losses reported, net of tax, as a component of stockholders' equity. Unrealized losses on available-for-sale securities 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 the cost of investments sold. Investments in company-owned life insurance
policies are included in "Intangibles and other assets" in the accompanying consolidated balance sheets. Spherion did not have any investments in available-for-sale securities
as of December 26, 2003 or December 27, 2002.

40

---

Goodwill and Other Intangible AssetsGoodwill and other intangible assets are accounted for in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." This statement requires that goodwill and other intangible assets with indefinite lives should not be
amortized, but will be tested for impairment on an annual basis. Upon adoption, Spherion discontinued amortization of all goodwill; however, trade names and other intangible assets continue to be
amortized on a straight-line basis over a period of approximately 5 years. See Note 2, Goodwill and Intangible Assets, for further discussion.

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.

Capitalized Software CostsSoftware which has been developed for internal use is accounted for in accordance with Statement of
Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." Only costs incurred during the application development stage, including
design, coding, installation and testing are capitalized. These capitalized costs include external consulting fees, software license fees and internal labor costs for employees directly associated
with software development. Upgrades or modifications that result in additional functionality are capitalized, while upgrades or modifications that do not result in additional functionality will be
expensed as incurred.

Impairment of Long-Lived AssetsAs required by SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," long-lived assets should be tested for recoverability whenever events or circumstances indicate that their carrying amount may not be recoverable. Spherion
evaluates the recoverability of long-lived assets to determine whether an adjustment to carrying values or a revision to estimated useful lives is appropriate if and/or when an event or
circumstance arises that would require it to do so. 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. The estimated future cash flows of an asset or asset group are calculated on an undiscounted basis.

Accrued Self-Insurance LossesSpherion retains a portion of the risk under its workers' compensation, general
liability/professional liability, employment practices liability 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 4.5% and 5.0% at December 26,
2003 and December 27, 2002, respectively, and are based on actuarial estimates. 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 its workers' compensation liability with an insurance deposit. This deposit was $95.1 million and $88.7 million at
December 26, 2003 and December 27, 2002, respectively, and is included in "Insurance deposit" in the accompanying consolidated balance sheets. The deposit will be used to fund claims and
cannot be used for general corporate purposes.

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. Amounts included in Spherion's Statements of Operations 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 income/(loss).

Revenue RecognitionSpherion records revenues from sales of services by its company-owned and licensed operations and from
royalties earned on sales of services by its franchised operations. Staffing and managed service revenue and the related labor costs and payroll are recorded in the period in which services are
performed. Permanent placement revenues are recognized when services provided are

41

---

substantially
completed. Allowances are established to estimate losses due to placed candidates not remaining employed for Spherion's guarantee period. Spherion follows Emerging Issues Task Force
("EITF") 99-19, "Reporting Revenue Gross as a Principal versus Net as an Agent" in the presentation of revenues and expenses. This guidance requires Spherion to assess whether it acts as a
principal in the transaction or as an agent acting on behalf of others. In situations where Spherion is the principal in the transaction and has the risks and rewards of ownership, the transactions
are recorded gross in the consolidated statements of operations.

Spherion
utilizes two forms of franchising agreements. Under the first form, Spherion records franchise royalties in accordance with SFAS No. 45, "Accounting for Franchise Fee
Revenue" based upon the contractual percentage of franchise sales, in the period in which the franchisee provides the service. Franchise royalties, which are included in revenues, were
$7.3 million, $7.3 million and $5.6 million for the fiscal years ended December 26, 2003, December 27, 2002, and December 28, 2001, respectively. The second
form of franchising agreement is a licensee agreement where Spherion acts as the principal in customer transactions through direct contractual relationships with the customers, owning related customer
receivables and being the legal employer of the temporary employee and the licensee acts as Spherion's agent providing certain sale and recruiting services. Accordingly, sales and costs of services
generated by the licensed operation are recorded gross in Spherion's consolidated statements of operations. Spherion pays the licensee a commission for acting as Spherion's agent and this commission
is based on a percentage of gross profit from the office managed by the licensee and averaged 75%, 70% and 63% for the years ended December 26, 2003, December 27, 2002 and
December 28, 2001, respectively, of the licensed offices' gross profit. The licensee is responsible for establishing their office location and paying related administrative and operating
expenses, such as rent, utilities and salaries of the licensee's full-time office employees. Spherion's consolidated statements of operations currently reflect the licensee commission as
an expense, but do not include the rent, utilities and salaries of the full-time office employees since these expenses are the responsibility of the licensee. Spherion has credit risk for
sales to its customers through licensee arrangements as Spherion pays all direct costs associated with providing temporary services before related accounts receivable are collected. Spherion has
partially mitigated this risk by making the licensee responsible to reimburse Spherion up to 100% of uncollected accounts receivable (bad debts are deducted from commission payments); however,
Spherion bears the loss in cases where the licensee does not have sufficient financial wherewithal to reimburse uncollected amounts.

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 United States income taxes on the unremitted 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. 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. See Note 8, Income Taxes, for further discussion.

Earnings Per ShareBasic earnings (loss) per share is computed by dividing Spherion's earnings (loss) by the weighted average
number of shares outstanding during the period. When the effects of the common stock equivalents 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. See Note 15, Earnings (Loss) Per Share, for further discussion.

Derivative Financial InstrumentsFrom time to time, Spherion enters into foreign exchange forward contracts as part of the
management of its foreign currency exchange rate exposures. These financial instruments are not held for trading purposes and none of the instruments are leveraged. All financial instruments are put
into place to hedge specific exposures. Gains and losses on foreign currency forward contracts offset gains and losses resulting from the underlying transactions. Gains and losses on contracts

42

---

that
hedge specific foreign currency commitments are deferred and recorded in net earnings in the period in which the underlying transaction is recorded. Spherion accounts for its derivatives in
accordance with SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. Spherion initially adopted SFAS No. 133, 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. As of December 26, 2003, Spherion
had one outstanding forward contract to sell 5.0 million Canadian dollars, with a fair value or cost to unwind which is not material to Spherion's consolidated results of operations. Amounts
receivable or payable under the agreements are included in "Other current assets" or "Other current liabilities" in the accompanying consolidated balance sheets. Spherion did not have any derivative
financial instruments outstanding as of December 27, 2002.

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 during the period the compensation is earned and measured using the quoted market price on the effective grant date.

Spherion
has one primary stock option plan, the 2000 Stock Incentive Plan, which is described more fully in Note 10, Stock-Based Compensation Plans. As all options granted under
this plan had exercise prices equal to the market value of the underlying common stock on the date of grant, Spherion has not historically or in the periods presented, recorded stock-based
compensation cost in the determination of net earnings or loss. The following table illustrates the effect on net (loss) earnings
and (loss) earnings per share if Spherion had applied the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," to stock-based employee compensation (in
thousands, except per share data):

Fiscal Years EndedDecember 26,
2003

December 27,
2002

December 28,
2001Net (loss) earnings, as reported

$
(13,913
)
$
(903,272
)
$
106,961Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects


(3,063
)

(3,981
)

(4,686
)Pro forma net (loss) earnings

$
(16,976
)
$
(907,253
)
$
102,275(Loss) earnings per share:Basicas reported

$
(0.23
)
$
(15.20
)
$
1.80Basicpro forma

$
(0.28
)
$
(15.27
)
$
1.72Dilutedas reported

$
(0.23
)
$
(15.20
)
$
1.72Dilutedpro forma

$
(0.28
)
$
(15.27
)
$
1.65


43

---

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:

Fiscal Years EndedDecember 26,
2003

December 27,
2002

December 28,
2001Expected life (in years)


3.2


3.0


3.0Interest rate


2.27
%

2.26
%

4.46
%Volatility


59.00
%

68.00
%

49.00
%Expected dividends








Weighted average per share fair value

$
4.11

$
3.12

$
2.70


New Accounting Pronouncements and InterpretationsIn December 2003, the Financial Accounting
Standards Board ("FASB") revised and re-issued FASB Interpretation ("FIN") No. 46, "Consolidation of Variable Interest Entities, an interpretation of ARB No. 51," which was
originally issued in January 2003. FIN 46 provides guidance on identifying variable interest entities ("VIE") and assessing whether or not a VIE should be consolidated. Variable
interests are contractual, ownership or other monetary interests in an entity that change with changes in the fair value of the entity's net assets exclusive of variable interests. An entity is
considered to be a VIE when its capital is insufficient to permit it to finance its activities without additional subordinated financial support or its equity investors, as a group, lack the
characteristics of having a controlling financial interest. FIN 46 requires the consolidation of entities which are determined to be VIEs when the reporting company
determines that it will absorb a majority of the VIE's expected losses, receive a majority of the VIE's residual returns, or both. The company that is required to consolidate the VIE is called the
primary beneficiary. As revised, the provisions of FIN 46 are to be applied to entities that are not considered to be special-purpose entities no later than the end of the first reporting
period that ends after March 15, 2004. Spherion does not have any relationships with or interests in entities considered to be special-purpose entities. Spherion has two forms of franchising
arrangements, franchises and licenses, as further described above. Spherion has determined that the franchise and/or license arrangement alone, does not create a variable interest, however, Spherion
has provided financing to certain of its franchisees and licensees, which does create a potential variable interest relationship.

As
of December 26, 2003, Spherion had six franchisees with loan balances totaling approximately $3.0 million. After performing the required probability-weighted cash flow
analyses, three of the franchisees were determined not to be VIEs. The remaining three are VIEs, however Spherion is not the primary beneficiary, thus consolidation is not required. These three
franchisees provide light industrial and clerical staffing and their approximate gross revenues for 2003 were $6.8 million. Spherion's maximum exposure to loss is limited to its loan and
royalty receivables balances of $0.6 million. As of December 26, 2003, Spherion had 13 licensees with a total loan balance approximating $1.2 million. Spherion has performed its
preliminary evaluation on these licensee entities and believes that these entities are VIEs and that Spherion will be the primary beneficiary. As such, Spherion will consolidate the operations and
assets and liabilities of these licensees in the first quarter of 2004. Spherion does not believe this will have a material impact on its consolidated results of operations and/or financial position.
All loan and royalty receivables are included in "Receivables" and "Intangibles and other assets" in the accompanying consolidated balance sheets.

In
May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity," which establishes standards
for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within
its scope as a liability (or an asset in some circumstances). SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective
at the beginning of the first interim period beginning after June 15, 2003. This standard did not have an impact on Spherion's consolidated results of operations or financial position.

44

---

In
April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and clarifies
financial accounting and reporting for derivative instruments, including certain derivative instruments embedded into other contracts, and for hedging activities under SFAS No. 133. SFAS
No. 149 is generally effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. This standard did not have
an impact on Spherion's consolidated results of operations or financial position.

In
December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based CompensationTransition and Disclosure." SFAS No. 148 amends SFAS
No. 123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee
compensation, including: (1) prospective method, (2) modified prospective method, and (3) retroactive restatement method. Alternative 1, the prospective method, is only
permitted if a company elects to adopt the provisions of SFAS No. 123 for stock-based employee compensation in a fiscal year beginning before December 15, 2003. Adoption of SFAS
No. 123 in a fiscal year beginning after December 15, 2003 will require the use of alternative 2 or 3 above. Spherion has no current plans to change its accounting policy from the
intrinsic method to the fair value based method of accounting for stock-based employee compensation. SFAS No. 148 also requires companies to include prominent disclosure of the method of
accounting used and the potential effect of the method used on reported results in both annual and interim financial statements, which are shown above.

In
November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (an interpretation of FASB Statements 5, 57 and 107 and rescission of FASB Interpretation No. 34)." FIN 45 requires a guarantor to disclose
its obligations under certain guarantees and to recognize at the inception of a guarantee the fair value of the guarantee obligation. The disclosure requirements of FIN 45 are effective for
financial statements of periods ended after December 15, 2002, and the recognition and measurement provisions are effective for all guarantees issued after December 31, 2002. Disclosure
related to Spherion's guarantees is included in Note 13, Commitments and Contingencies.

In
June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 replaces Emerging Issues Task Force
("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring),"
and requires that the fair value of the liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred, not at the date of an entity's commitment to an
exit or disposal plan. The provisions of SFAS No. 146 are effective for exit or disposal activities initiated after December 31, 2002. Spherion applied the provisions of SFAS
No. 146 to its restructuring activities during the fiscal year ended December 26, 2003.

2.    GOODWILL AND INTANGIBLE ASSETS

Effective at the beginning of 2002, Spherion adopted SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 provides that goodwill and
other intangible assets with indefinite lives should not be amortized, but should be tested for impairment on an annual basis.

Spherion
performed its annual impairment test as of November 2003, which did not result in an indication of impairment. As a result of the initial adoption of SFAS No. 142
during the first quarter of 2002, Spherion had recorded a pre-tax charge to earnings of $691.6 million ($615.6 million after-tax). Additionally, Spherion performed its annual
impairment test as of November 2002, and recorded an additional pre-tax impairment charge of $291.5 million. These charges were determined based primarily on management's
estimated fair value of each reporting unit using both the discounted present value of anticipated future cash flows and the comparable market prices of competitors as of each test date. Management
considered a number of factors, including valuations or appraisals, when determining these fair values.

45

---

The
initial charge recorded in connection with the adoption of SFAS No. 142 was largely a result of the decrease in Spherion's profitability during 2001 and 2000, which negatively
impacted Spherion's cash flow projections. Both the Staffing Services and Professional Services operating segments had grown rapidly through both acquisition and organic growth. With the decline in
economic conditions during 2001 and 2000, the purchase prices paid for the recruitment portion of the Norrell acquisition (in both the United States and the United Kingdom), the Australian acquisition
and various United States professional recruiting acquisitions could not be supported based on a discounted cash flow analysis or based on market comparable information. Additionally, the sharp
decline in the post Year 2000 business environment similarly affected a number of Spherion's United States technology acquisitions (Norrell and Computer Power Group) as well as Spherion's technology
subsidiary in The Netherlands. Pre-tax charges relating to the Staffing Services and Professional Services operating segments were $293.7 million and $397.9 million,
respectively.

A
large part of the goodwill valuation is based upon cash flow projections. Spherion's initial valuation in January of 2002, based upon data available at that time, projected economic
recoveries in its industry beginning in 2002. Revised industry data in November of 2002 predicted a delay in the economic recovery and somewhat lower growth rates, thus resulting in lower cash flow
projections. This along with Spherion's decreased market capitalization for the previous six months resulted in its charge in the fourth quarter of $291.5 million. Pre-tax charges
relating to the Staffing Services and Professional Services operating segments were $221.2 million and $70.3 million, respectively.

The
changes in the carrying amount of goodwill for the twelve months ended December 26, 2003 are as follows (in thousands):

Staffing
Services

Professional
Services

TotalBalance at December 27, 2002

$
19,866

$
11,028

$
30,894Goodwill additions during the period


16,619





16,619Foreign currency changes and other


1,951


513


2,464Balance at December 26, 2003

$
38,436

$
11,541

$
49,977


Goodwill additions during 2003 primarily relate to the acquisition of Spherion's Canadian franchise operations. See Note 5, Acquisitions and Dispositions
for further discussion. Also included in goodwill additions during 2003 is $1.3 million relating to the settlement of pre-acquisition tax matters from prior year acquisitions.

Other
intangible assets, which are amortized, are primarily comprised of trade names, trademarks and non-compete and employment agreements and amounted to
$1.9 million, less accumulated amortization of $0.9 million as of December 26, 2003. Amortization of trade names and other intangibles for the years ended December 26,
2003, December 27, 2002 and December 28, 2001 amounted to $0.4 million, $0.3 million and $1.4 million, respectively. Annual amortization expense of other intangible
assets is expected to be $0.5 million, $0.3 million and $0.2 million for the fiscal years 2004 through 2006 and less than $50,000 for each of the fiscal years ended 2007 and 2008.
The remaining weighted average life of other intangible assets is approximately 3 years.

46

---

The
following table presents comparative operating results had we accounted for goodwill under SFAS No. 142 during 2001. Spherion's net earnings/(loss) and earnings/(loss) per
share from continuing operations would have been as follows (in thousands, except per share amounts):

|                                                                                                                                                      |             | Fiscal Years Ended
|----------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | ------------------
|
|(Loss) earnings from continuing operations before discontinued operations and cumulative effect of changes in accounting principles, as reported      |             | $                 
|Goodwill amortization, after-tax                                                                                                                      |             |                   
|                                                                                                                                                      |             |                   
|(Loss) earnings, as adjusted                                                                                                                          |             | $                 
|                                                                                                                                                      |             |                   
|Basic (loss) earnings per share from continuing operations before discontinued operations and cumulative effect of changes in accounting principles:  |             |                   
|                                                                                                                                                      | As reported |                   
|                                                                                                                                                      |             |                   
|                                                                                                                                                      | As adjusted |                   
|                                                                                                                                                      |             |                   
|Diluted (loss) earnings per share from continuing operations before discontinued operation and cumulative effect of changes in accounting principles: |             |                   
|                                                                                                                                                      | As reported |                   
|                                                                                                                                                      |             |                   
|                                                                                                                                                      | As adjusted |                   
|                                                                                                                                                      |             |                   

3.    DISCONTINUED OPERATIONS

During 2002, Spherion adopted a plan to dispose of its technology consulting subsidiaries in the United Kingdom and The Netherlands and a human capital
measurement business, Saratoga. Spherion disposed of the United Kingdom technology subsidiary prior to December 27, 2002 and completed the disposition of Saratoga and The Netherlands technology
subsidiary during the first half of 2003.

As
a result of Spherion's decision to dispose of these businesses, the operating results for all periods presented of these subsidiaries have been reclassified as discontinued operations
in the accompanying consolidated financial statements in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The technology consulting
subsidiaries in the United Kingdom and The Netherlands were previously reported under the former Technology segment and Saratoga was previously reported under the former Outsourcing segment. Had these
subsidiaries remained a part of Spherion's continuing operations, they would have been reported in the Professional Services operating segment and Staffing Services operating segment, respectively.
The tables that follow group these discontinued operations under these revised segments.

47

---

The estimated fair value of the major classes of assets and liabilities prior to disposal for each held for sale subsidiary as of December 27, 2002 are as follows (in thousands):

Professional
Services

Staffing
Services

TotalReceivables, net

$
3,315

$
455

$
3,770Other current assets


131


429


560Goodwill and other intangible assets, net (1)





3,249


3,249Property and equipment, net


151


140


291Deferred tax asset


3,130





3,130Total assets of discontinued operations

$
6,727

$
4,273

$
11,000Account payable and other accrued expenses

$
6,755

$
903

$
7,658Other liabilities


547


111


658Total liabilities of discontinued operations

$
7,302

$
1,014

$
8,316


---

Revenue
and pre-tax earnings (losses) of these subsidiaries included within (loss) earnings from discontinued operations in the accompanying consolidated statements of
operations for the years ended December 26, 2003, December 27, 2002 and December 28, 2001 are as follows (in thousands):

|                                        |                                                  | December 26, 2003 |        | December 27, 2002 |   | December 28, 2001 |    
|--------------------------------------- | ------------------------------------------------ | ----------------- | ------ | ----------------- | - | ----------------- | ---
|
|Revenue                                 |                                                  | $                 | 4,486  |                   | $ | 484               |    
|                                        |                                                  |                   |        |                   |   |                   |    
|Pre-tax earnings (loss) from operations |                                                  | $                 | 68     |                   | $ | (203              | )  
|Pre-tax (loss) gain on disposal         |                                                  |                   | (1,650 | )                 |   | 423               |    
|Income tax (expense) benefit            |                                                  |                   | (1,503 | )                 |   | (72               | )  
|                                        |                                                  |                   |        |                   |   |                   |    
|                                        | Net (loss) earnings from discontinued operations |                   | $      | (3,085            | ) | $                 | 148
|                                        |                                                  |                   |        |                   |   |                   |    

4.    RESTRUCTURING, ASSET IMPAIRMENTS AND OTHER CHARGES

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

Fiscal Years EndedDecember 26, 2003

December 27, 2002

December 28, 2001Restructuring

$
5,213

$
(7,361
)
$
53,651Write-down of assets (including goodwill of $26.6 million)








42,729Goodwill impairment








33,703Other charges





17,810


7,217$
5,213

$
10,449

$
137,300


2003 Activity

During the second half of 2003, Spherion identified certain cost reduction opportunities primarily related to the realignment of its operating segments and
adopted a restructuring plan (the "2003 Plans") to eliminate redundancies and centralize business support functions by terminating 149 personnel and to

48

---

reduce
excess capacity with the closure of 13 offices, resulting in a restructuring charge of $5.8 million. This charge included $2.9 million relating to the Staffing Services operating
segment, $2.2 million relating to the Professional Services operating segment and the remainder of the charge related to corporate initiatives directed at lowering back office technology costs.

During
2003, as part of Spherion's on-going restructuring monitoring process, accruals of $0.6 million were identified that were unnecessary, primarily as the result
of lower severance costs than
initially anticipated, lower broker fees and lower fixed asset write-offs, and these amounts were reversed to income.

2002 Activity

During 2002, no restructuring activities were undertaken, however $7.4 million of restructuring charges from prior years were determined unnecessary,
primarily as a result of the buyout or sublease of existing lease obligations at better than expected rates and the favorable resolution of severance payouts, and these amounts were reversed to
income.

During
the second quarter of 2002, Spherion recorded other charges (included in "restructuring, asset impairments and other charges" in the attached consolidated statements of
operations) in the amount of $10.0 million for additional anticipated losses associated with the sublease of Norrell's former headquarters building due to the continued deterioration of the
rental market in Atlanta, Georgia. During the fourth quarter of 2002, Spherion recorded asset impairment and other charges in connection with the write-down of assets of approximately
$4.3 million relating to a going-concern software development operating unit, and $3.5 million relating to Spherion's obligations under an employment contract with a former executive.

2001 Activity

Restructuring plans were adopted in 2001 to terminate redundant employees, reduce excess capacity and dispose of certain non-strategic assets (the
"2001 Plans"). Restructuring costs of $53.7 million, in 2001 include employee severance costs of $22.5 million, facility closure costs and asset write-offs of
$31.3 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
$20.2 million in lease termination costs and $11.1 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 1,206 positions and the
closure of 287 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 $23.6 million of revenues and pre-tax losses of $9.3 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 Staffing Services operating 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.

49

---

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

An
analysis of the restructuring plans, along with amounts remaining to be distributed under prior years' restructuring plans, are as follows (in thousands):

Facility
Closures
and Asset
Write-offs

Severance

TotalBalance at December 29, 2000

$
1,592

$
1,066

$
2,6582001 Plan Charges (1)


34,756


24,692


59,448Utilized during fiscal 2001


(9,303
)

(16,030
)

(25,333
)Reversal of over accrual


(1,092
)

(1,864
)

(2,956
)Balance at December 28, 2001


25,953


7,864


33,817Utilized during fiscal 2002


(13,880
)

(5,816
)

(19,696
)Reversal of over accrual


(5,716
)

(1,645
)

(7,361
)Balance at December 27, 2002 before reclass


6,357


403


6,760Reclassified to discontinued operations (2)


(635
)

(187
)

(822
)Balance at December 27, 2002


5,722


216


5,9382003 Plan Charges


1,173


4,647


5,820Utilized during fiscal 2003


(2,899
)

(2,721
)

(5,620
)Reversal of over accrual


(607
)




(607
)Balance at December 26, 2003

$
3,389

$
2,142

$
5,531


---

At
December 26, 2003, the remaining accruals for facility closures and asset write-offs of $3.4 million relate to lease payments on 30 closed locations that
will be paid out through 2006 (net of applicable sublease income), and assets to be disposed of. The remaining severance accruals relate to terminated employees who have extended payout terms and
employees that received notification prior to year-end and will be terminated within 60 days of their notification date. Severance for employees with retention periods that extend
past 60 days are accrued ratably over the retention period.

5.    ACQUISITIONS AND DISPOSITIONS



Spherion has accounted for all acquisitions subsequent to June 30, 2001, in accordance with SFAS No. 141, "Business Combinations," which requires
the use of the purchase method of accounting. As such, any acquired entities' operations are included in the consolidated statements of operations from the respective dates of acquisition.

On
April 4, 2003, in connection with a three-year old agreement, Spherion acquired 85% of its Canadian franchise operation for consideration of $21.6 million,
including $10.9 million of debt assumed. Spherion also entered into a new put/call agreement with the minority interest holder that can be exercised by either party any time after
December 31, 2005, which would require/allow Spherion to purchase the

50

---

remaining
15% interest in this operation. The results of this operation are included in the Staffing Services operating segment and Spherion's consolidated results of operations as of the acquisition
date. The minority interest is recorded in "Deferred compensation and other long-term liabilities" in the accompanying consolidated balance sheet. Spherion recorded goodwill in connection
with the acquisition of $15.3 million, none of which is deductible for tax purposes. Other intangible assets acquired include a customer contract and certain key employment agreements. These
other intangible assets are being amortized over a period of approximately three years.

Pro
forma consolidated results of operations have not been presented as the Canadian results of operations are not material to Spherion's consolidated results of operations.

Also,
Spherion was obligated under an existing agreement to pay $5 million during 2003 to acquire the remaining interest in JobOptions, an internet job board acquired during 2001.
This amount is shown in the accompanying statements of cash flows as an investing cash outflow.

In
2002, Spherion acquired one small recruitment business and a few of Spherion's licensee and franchisee operations. Additionally, Spherion has made payments related to prior year
acquisitions for contingent consideration based on the attainment of specified earnings. 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.
There were no such payments made during 2003. During 2001, Spherion also had other acquisitions totaling $9.8 million, primarily related to acquired license and franchise operations to
eliminate market conflicts.

The
fair value of assets acquired and liabilities assumed (excluding cash acquired) in connection with acquisitions made in 2003, 2002 and 2001 are as follows (in thousands):

December 26,
2003

December 27,
2002

December 28,
2001Receivables

$
10,144

$


$
Goodwill


15,305


3,304


38,109Other intangible assets


272


300


Other assets


1,101


96


350Accounts payable and other accrued expenses


(3,359
)




Debt assumed


(10,889
)




Minority interest


(1,861
)




Net assets acquired

$
10,713

$
3,700

$
38,459




During 2001, Spherion completed the sale of several businesses, the most significant of which was Michael Page Group PLC. Spherion completed the initial public
offering of shares of Michael Page,
disposing of 100% of Spherion's interest in April, 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.

51

---

These
businesses produced revenues of $203.2 million and earnings before interest and taxes of $19.5 million during 2001 and are included in the consolidated statements of
operations and cash flows through the dates of their disposition. Operating results for these businesses were not reclassified as discontinued operations as they were disposed of prior to Spherion
adopting the provisions of SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."

6.    PROPERTY AND EQUIPMENT

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

Fiscal Years EndedLife (in years)

December 26,
2003

December 27,
2002Land



$
4,167

$
4,167Buildings

10-40


21,044


21,479Equipment

3-8


142,360


141,975Enterprise-wide information system

7


51,286


8,510Software, primarily third party purchased software

3-5


24,877


24,659Leasehold improvements and other

3-5


14,197


10,985257,931


211,775Less: Accumulated depreciation and amortization




(124,483
)

(117,255
)$
133,448

$
94,520


The enterprise-wide information system of $51.3 million consists of capitalized consulting fees, labor and license costs. An additional
$9.5 million is included within equipment and software relating to hardware and third-party purchased software necessary to utilize the system.

Depreciation
and amortization of property and equipment for the years ended December 26, 2003, December 27, 2002 and December 28, 2001 amounted to
$28.8 million, $28.1 million, and $31.1 million, respectively.

7.    LONG-TERM DEBT

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

Fiscal Years EndedDecember 26,
2003

December 27,
2002U.S. dollar convertible subordinated notes, due 2005

$
89,748

$
96,715U.S. dollar convertible promissory notes, due 2005


8,000


8,000Software License Note Payable, due 2004 and 2003, respectively


6,775


4,775Foreign debt, due 2004


89


698Other debt, due 2008


400


481Total debt


105,012


110,669Less current portion of long-term debt


(6,939
)

(5,419
)Less U.S. dollar convertible subordinated notes, due 2005


(89,748
)

(96,715
)Long-term debt, net of current portion

$
8,325

$
8,535


52

---

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%. If not repurchased directly from bondholders at the current market value, the Notes are redeemable, in whole or in
part, at the option of Spherion at approximately par value of the Notes.

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 do not restrict Spherion or its subsidiaries from incurring additional Senior Debt or
other indebtedness.

Spherion's
Board of Directors authorized Spherion to repurchase from time to time any of the Notes in such amounts and on such terms as deemed advisable by Spherion if approached by a
bondholder. During 2003, Spherion repurchased an aggregate face value of $7.0 million of the Notes for a purchase price of $6.6 million. During 2002, Spherion repurchased an aggregate
face value of $110.3 million of the Notes for a purchase price of $98.7 million. Spherion recorded a gain, net of bond issuance cost write-offs, of $0.3 million and
$10.5 million, for the fiscal years ending December 26, 2003 and December 27, 2002, respectively, which is included in "Other gains" in the accompanying consolidated statements of
operations, in accordance with SFAS No. 145.

In
July 2003, Spherion cancelled its 364-day U.S. dollar loan facility and entered into a four-year U.S. dollar loan facility (also secured by
substantially all of our domestic accounts receivable). The new loan facility provides $200 million of on-balance sheet financing through July of 2007, with an option (expiring in
July 2006) to increase the facility to a maximum of $250 million. Interest on this facility is based on LIBOR plus a credit spread. Total availability under this facility may be limited
based upon Spherion's ability to meet certain affirmative and/or negative covenants, which include but are not limited to a fixed charge coverage ratio, capital expenditures residing within permitted
levels and limitations on additional debt incurred. As of December 26, 2003, there were no amounts outstanding under this facility and total availability under this facility was approximately
$150 million.

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.

Maturities
of debt outstanding at December 26, 2003 are $6.9 million and $97.8 million in 2004 and 2005, respectively, and less than $0.1 million in 2006,
2007 and 2008.

53

---

8.    INCOME TAXES

(Loss) earnings from continuing operations before income taxes and the components of the income tax (benefit) provision, are as follows (in thousands):

December 26,
2003

December 27,
2002

December 28,
2001(Loss) earnings from continuing operations before income taxes:United States

$
(5,540
)
$
(225,564
)
$
181,875Foreign


(10,952
)

(59,246
)

21,570$
(16,492
)
$
(284,810
)
$
203,445Current tax expense (benefit):Federal

$
4,273

$
(29,093
)
$
66,954State and local


637


1,114


12,198Foreign


(272
)

2,398


11,6194,638


(25,581
)

90,771Deferred tax (benefit) expense:Federal


(7,149
)

14,277


(2,410
)State and local


596


2,647


(202
)Foreign


(3,601
)

(2,833
)

(2
)(10,154
)

14,091


(2,614
)Total (benefit) provision for income taxes

$
(5,516
)
$
(11,490
)
$
88,157


The following table reconciles the United States Federal income tax rate to Spherion's effective tax rate:

December 26,
2003

December 27,
2002

December 28,
2001Statutory rate

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

5.9

1.3

4.3Nondeductible amortization of intangibles



30.4

5.1Wages to work credits

(12.6
)
(0.8
)
(1.7
)Foreign tax deductions and credits

1.7

0.8

(26.7
)Gain on sale of Michael Page





28.2Nondeductible meals and entertainment

4.0

0.3

0.4Other, net

2.6

(1.0
)
(1.3
)(33.4
)%
(4.0
)%
43.3
%


54

---

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

December 26, 2003

December 27, 2002Current deferred tax asset:Employee benefits, primarily deferred compensation

$
2,579

$
3,414Self-insurance and accrued compensation


7,758


944Sale of HealthCare business


1,896


1,869Accrued expenses, including acquisition and restructuring


6,596


11,555Receivables allowances


2,039


2,11520,868


19,897Non-current deferred tax asset (liabilities):Employee benefits, primarily deferred compensation


12,402


11,368Self-insurance


25,816


26,937Fixed assets


(5,467
)

(9,717
)Intangible assets


90,667


102,762General business credit carryforward


3,200


Federal net operating losses


10,312


Unused tax credits and net operating loss benefits


4,014


3,647Foreign net operating loss and other


8,863


3,621149,807


138,618Valuation allowance


(5,653
)

(3,647
)144,154


134,971Net deferred tax asset


165,022


154,868Less current deferred tax asset


20,868


19,897Long-term deferred tax asset

$
144,154

$
134,971


At December 26, 2003, Spherion had a net deferred tax asset of $165.0 million. This deferred tax asset was evaluated under the guidelines of SFAS
No. 109 "Accounting for Income Taxes," and a determination on the basis of objective factors was made that the asset will be realized through future years taxable earnings.

Unremitted
earnings of foreign subsidiaries are considered to be permanently invested and, accordingly, United States income taxes have not been provided on these earnings. At
December 26, 2003 and December 27, 2002, the estimated amount of unremitted earnings of foreign subsidiaries totaled $23.8 million and $19.6 million, respectively.

Spherion
has established a $5.7 million valuation allowance, primarily related to Canadian ($1.7 million) and state ($4.0 million) net operating losses
(NOL's), to reduce its deferred tax asset to an amount that is more likely than not to be realized. The state NOL's expire over the next one to twenty years and the
Canadian NOL's expire between 2004 and 2009. Spherion also has $18.3 million and $4.3 million in foreign NOL carryforwards related to its Australian and United Kingdom operations,
respectively, which have an indefinite carryforward period.

In
2002, Spherion engaged in transactions that generally had the effect of accelerating certain future projected tax deductions and losses, resulting in an increase in the amount of net
operating losses and capital losses available for carry back into prior tax years. As a result of these transactions, Spherion's tax refund for its 2002 filing year was increased by approximately
$60 million. Spherion believes that it has appropriately reported these transactions in its tax returns, and that it has established adequate reserves with respect to any tax liabilities that
may arise in relation to these transactions should its position be

55

---

challenged
by the Internal Revenue Service. However, an unfavorable settlement or adverse resolution of a challenge by the Internal Revenue Service could result in the repayment of some or all of the
refund received.

9.    EMPLOYEE SAVINGS AND INVESTMENT PLANS

Spherion has a voluntary employee savings plan (401(k) benefit plan) covering substantially all eligible United States employees. This plan has a basic match,
which is based on employee contributions, and a discretionary match based on employee contributions and, in the United States, the attainment of certain financial objectives. Employer contributions,
net of forfeitures, by Spherion under the plan amounted to $0.5 million, $0.9 million and $1.3 million for the years ended December 26, 2003, December 27, 2002 and
December 28, 2001, respectively. There were approximately 1,900 participating employees in this plan as of December 26, 2003. Spherion's former subsidiary, Michael Page Group PLC, 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 for the
year ended December 28, 2001.

Spherion
also has a voluntary 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. The plan is not funded, but Spherion has investments in company-owned life insurance policies classified as "Intangibles and
other assets" in the accompanying consolidated balance sheets in the amount of $17.1 million and $15.9 million at December 26, 2003 and December 27, 2002, respectively. 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 or losses,
are accrued. Such accrual amounted to $26.7 million and $24.9 million at December 26, 2003 and December 27, 2002, respectively, the long-term portion of which
was included in "Deferred compensation and other long-term liabilities" and the short-term portion in "Other current liabilities" in the accompanying consolidated balance
sheets. Employee deferrals within this plan represented as deferred stock units of Spherion are included in additional paid-in capital within the stockholders' equity section of the accompanying
consolidated balance sheets (rather than in "Deferred compensation and other long-term liabilities") as employees may only be paid out in shares of Spherion stock. There were approximately 200
employees participating in this plan as of December 26, 2003.

Spherion
has an Employee Stock Purchase Plan that provides substantially all 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 in the value of the stock. There
were 224,320 and 208,407 shares issued in 2003 and 2002, respectively, under this plan. A total of 162,139 shares are available as of December 26, 2003 for purchase under the plan, which
expires on July 1, 2005.

10.    STOCK-BASED COMPENSATION PLANS

Spherion has one primary stock option plan, the 2000 Stock Incentive Plan. Under the plan, options to purchase Spherion's common stock may be granted to employees
and outside directors of Spherion and its subsidiaries 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 26, 2003
and December 27, 2002, Spherion had 2,426,701 and 1,918,676 shares, respectively, reserved for future grants under the plan.

56

---

Changes under these stock option plans for 2003, 2002 and 2001 were as follows:

|                                       |  | December 26, 2003 |   | December 27, 2002 |       | December 28, 2001
|-------------------------------------- |  | ----------------- | - | ----------------- | ----- | -----------------
|
|Outstanding at beginning of year       |  | 7,545,644         |   | $                 | 10.20 |                  
|Granted                                |  | 1,511,780         |   |                   | 9.72  |                  
|Exercised                              |  | (396,990          | ) |                   | 6.59  |                  
|Forfeited                              |  | (2,122,111        | ) |                   | 11.08 |                  
|                                       |  |                   |   |                   |       |                  
|Outstanding at end of year             |  | 6,538,323         |   | $                 | 10.02 |                  
|                                       |  |                   |   |                   |       |                  
|Options exercisable at end of the year |  | 3,472,343         |   | $                 | 11.57 |                  
|                                       |  |                   |   |                   |       |                  

The following table summarizes information about fixed stock options outstanding at December 26, 2003:

|                |  | Options Outstanding |  |      |  |  
|--------------- |  | ------------------- |  | ---- |  | -
|
|
|
|$  0.00-$  7.49 |  | 2,514,370           |  | 8.16 |  | $
|$  7.50-$14.99  |  | 3,333,993           |  | 7.78 |  |  
|$15.00-$24.99   |  | 517,518             |  | 4.37 |  |  
|$25.00-$31.00   |  | 172,442             |  | 3.87 |  |  
|                |  |                     |  |      |  |  
|                |  | 6,538,323           |  | 7.55 |  | $
|                |  |                     |  |      |  |  

In December 2001, Spherion commenced a tender offer for certain stock options held by its United States resident employees. The offer granted holders of
options 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 issued new options in August 2002 to purchase 871,574
shares.

As
discussed in Note 1, Significant Accounting Policies, Spherion accounts for stock-based compensation using the intrinsic value method of accounting as prescribed by APB Opinion
No. 25. As required by SFAS No. 148, the table in Note 1 summarizes the impact had Spherion adopted the fair value based method prescribed by SFAS No. 123, "Accounting for
Stock-Based Compensation" for the fiscal years ended December 26, 2003, December 27, 2002 and December 28, 2001.

Spherion
employees and outside directors are also eligible to receive grants of deferred stock units. Deferred stock units entitle the individual to receive shares of Spherion common
stock at a future date after meeting service requirements or Spherion has met financial targets. During 2003 and 2002, Spherion granted approximately 499,000 and 74,000, respectively, deferred stock
units with market values ranging from $4.40 to $9.99 and $7.60 to $11.60, respectively, to key management employees and outside directors. 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 amortized to compensation expense ratably over the vesting period and totaled $2.5 million,
$2.7 million and $2.6 million, for the years ended December 26, 2003, December 27, 2002 and December 28, 2001, respectively.

57

---

11.    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, as amended during 2003, 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 $55.00, 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, 2014, 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. A committee comprised of Spherion's independent board members shall review the Rights plan at least once in every
three-year period to determine whether the maintenance of the Rights plan continues to be in the interests of Spherion and its stockholders.

12.    FINANCIAL INSTRUMENTS AND FAIR VALUES

The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other
than in a forced or liquidation sale. Fair value estimates are made at a specific point in time, based upon relevant market information about the financial instrument.

The
carrying amount of cash and cash equivalents, trade receivables and other current assets approximates fair value due to the short-term maturities of these instruments.
Spherion's insurance deposits earn a fixed interest rate as determined at the time of funding and are carried at fair value or $95.1 million and $88.7 million as of December 26,
2003 and December 27, 2002, respectively. Company-owned life insurance policies are carried at fair market value, which approximated $17.1 million and $15.9 million as of
December 26, 2003 and December 27, 2002, respectively.

In
estimating the fair value of derivative positions, Spherion utilizes quoted market prices, if available, or quotes obtained from outside sources. As of December 26, 2003,
Spherion had one outstanding forward contract to sell 5.0 million Canadian dollars of which, the fair value or cost to unwind is not material to its consolidated results of operations. There
were no outstanding forward contracts as of December 27, 2002.

58

---

The
fair value of Spherion's fixed-rate convertible subordinated notes as of December 26, 2003 and December 27, 2002 was $88.8 million and
$87.2 million, respectively, with a $89.7 million and $96.7 million carrying value at December 26, 2003 and December 27, 2002, respectively. 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.

13.    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 26, 2003, December 27, 2002 and December 28, 2001 was $30.9 million, $31.0 million and $42.8 million, respectively. Future minimum lease
payments under non-cancelable leases as of December 26, 2003 are $28.9 million, $21.3 million, $14.1 million, $10.1 million and $9.0 million in
the years 2004 through 2008 and $13.2 million thereafter which are partially offset by $8.4 million under future non-cancelable subleases. Of these future minimum lease
payments, $12.9 million have been accrued as of December 26, 2003, related to facility closures and are included as part of "Accrued restructuring", "Accounts payable and other accrued
expenses" and "Deferred compensation and other long-term liabilities" in the accompanying consolidated balance sheets.

In
the normal course of business, Spherion enters into guarantee agreements. Spherion's growth strategy in prior years included acquisitions where a portion of the consideration for some
of these acquisitions included contingent payments based on earnings subsequent to the acquisition. At December 26, 2003 certain acquisitions consummated have the potential for contingent
payments under their respective acquisition agreements. While the amount of these potential payments cannot yet be calculated, such payments are not expected to be material based on the current
operating results of these acquisitions. In connection with the disposition of certain subsidiaries, Spherion, from time to time provides routine indemnifications with respect to equipment and real
estate leases and in certain cases the performance of services. The amount of potential liability for these indemnifications is not significant.

Spherion
had outstanding irrevocable letters of credit and bank guarantees of approximately $6.1 million and surety bonds outstanding of approximately $0.2 million. These
instruments primarily collateralize Spherion's foreign lease obligations and 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.

Spherion,
in the ordinary course of its business, is threatened with or named as a defendant in various lawsuits. 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. Spherion's management does not expect that the outcome of any pending lawsuits relating to such matters,
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 arose 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 alleged breach of contract, fraud, negligence and misrepresentation. Spherion denied the allegations of CFC's complaint and vigorously
defended 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. On July 15, 2002, these actions were consolidated in U.S. District Court, Southern District of Ohio. On October 9, 2002, CFC filed an amended
complaint to add a claim for fraudulent inducement. On August 11, 2003, CFC and Spherion entered into

59

---

a
Confidential Settlement Agreement and Mutual General Release under which (i) neither party admitted fault; (ii) the parties agreed to dismiss both lawsuits; and (iii) CFC agreed
to accept a payment in full satisfaction and settlement of its claims. On August 15, 2003, the Final Order of Dismissal with Prejudice was entered by the Court under which all claims by the
parties were dismissed. Spherion has been released of any and all liability with respect to CFC's claims, and the settlement amount above Spherion's retention of $250,000 was paid in full by
Spherion's insurance carriers to CFC, not by Spherion. Accordingly, the resolution of this matter did not 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. 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") in 1997 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 us 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. Spherion's motion for summary judgment was granted for the reformation claim. The cases went to trial in December 2003. In addition to the claims mentioned
above, the plaintiffs also were permitted to enter evidence in support of a diminution of value claim, for which they are seeking in excess of $25 million in damages. The parties will be filing
post-trial briefs, with a ruling expected sometime in the second half of 2004. Spherion does not have insurance coverage for these claims. Spherion believes the resolution of this matter
will not have a material impact on its consolidated financial position, liquidity or results of operations above the amounts Spherion has already provided for.

14.    SEGMENT INFORMATION

During the fourth quarter of 2003, as a result of management structure changes, Spherion changed its basis of segmentation to include two operating
segmentsStaffing Services and Professional Services. 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 from continuing operations before unallocated central costs, amortization expense, interest expense, interest income, income taxes and special charges (restructuring, asset
impairments and other charges, goodwill impairment, other gains and gain on sale of Michael Page). All material intercompany revenues and expenses have been eliminated. Prior periods have been
restated to conform to Spherion's new operating segments. Under the guidance of SFAS No. 144, operating results related to discontinued operations have been eliminated from the segment
information below.

Operating
results from StratfordGroup, Tutor Recursos Humanos and JobOptions, which were sold during the fourth quarter of 2001, are included in the Professional Services operating
segment through their dates of disposition. Operating results from Michael Page are included through its date of disposition in April 2001. Operating results for these businesses were
not reclassified as discontinued operations as they were disposed of prior to Spherion adopting the provisions of SFAS No. 144.

60

---

Information
on operating segments and a reconciliation to (loss) earnings from continuing operations before income taxes, discontinued operations and the cumulative effect of changes in
accounting principle for the periods indicated are as follows (in thousands):

|                                 |                                                                                                                                                  | Fiscal Years Ended            |       
|-------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------- | ------
|
|Revenues:                        |                                                                                                                                                  |                               |       
|                                 | Staffing Services                                                                                                                                |                               | $     
|                                 | Professional Services                                                                                                                            |                               |       
|                                 |                                                                                                                                                  |                               |       
|                                 |                                                                                                                                                  | Total, excluding Michael Page |       
|                                 | Michael Page                                                                                                                                     |                               |       
|                                 |                                                                                                                                                  |                               |       
|                                 |                                                                                                                                                  | Total                         |       
|                                 |                                                                                                                                                  |                               |       
|Gross Profit:                    |                                                                                                                                                  |                               |       
|                                 | Staffing Services                                                                                                                                |                               | $     
|                                 | Professional Services                                                                                                                            |                               |       
|                                 |                                                                                                                                                  |                               |       
|                                 |                                                                                                                                                  | Total, excluding Michael Page |       
|                                 | Michael Page                                                                                                                                     |                               |       
|                                 |                                                                                                                                                  |                               |       
|                                 |                                                                                                                                                  | Total                         |       
|                                 |                                                                                                                                                  |                               |       
|Segment Operating Profit Margin: |                                                                                                                                                  |                               |       
|                                 | Staffing Services                                                                                                                                |                               | $     
|                                 | Professional Services                                                                                                                            |                               |       
|                                 |                                                                                                                                                  |                               |       
|                                 |                                                                                                                                                  | Total, excluding Michael Page |       
|                                 | Michael Page                                                                                                                                     |                               |       
|                                 |                                                                                                                                                  |                               |       
|                                 |                                                                                                                                                  | Total                         |       
|                                 | Unallocated central costs                                                                                                                        |                               |       
|                                 | Amortization of intangibles                                                                                                                      |                               |       
|                                 | Interest expense                                                                                                                                 |                               |       
|                                 | Interest income                                                                                                                                  |                               |       
|                                 | Restructuring, asset impairments and other charges                                                                                               |                               |       
|                                 | Goodwill impairment                                                                                                                              |                               |       
|                                 | Other gains                                                                                                                                      |                               |       
|                                 | Gain on sale of Michael Page                                                                                                                     |                               |       
|                                 |                                                                                                                                                  |                               |       
|                                 | (Loss) earnings from continuing operations before income taxes, discontinued operations and cumulative effect of changes in accounting principle |                               | $     
|                                 |                                                                                                                                                  |                               |       
|Geographic Information:          |                                                                                                                                                  |                               |       
|Revenues:                        |                                                                                                                                                  |                               |       
|                                 | North America                                                                                                                                    |                               | $     
|                                 | Europe                                                                                                                                           |                               |       
|                                 | Asia/Pacific                                                                                                                                     |                               |       
|                                 |                                                                                                                                                  |                               |       
|                                 |                                                                                                                                                  | Total                         |       
|                                 |                                                                                                                                                  |                               |       
|Services Information:            |                                                                                                                                                  |                               |       
|Revenues:                        |                                                                                                                                                  |                               |       
|                                 | Temporary Staffing                                                                                                                               |                               | $     
|                                 | Managed Services                                                                                                                                 |                               |       
|                                 | Permanent Placement                                                                                                                              |                               |       
|                                 |                                                                                                                                                  |                               |       
|                                 |                                                                                                                                                  | Total, excluding Michael Page |       
|                                 | Michael Page                                                                                                                                     |                               |       
|                                 |                                                                                                                                                  |                               |       
|                                 |                                                                                                                                                  | Total                         |       
|                                 |                                                                                                                                                  |                               |       
|Depreciation Expense:            |                                                                                                                                                  |                               |       
|                                 | Staffing Services                                                                                                                                |                               | $     
|                                 | Professional Services                                                                                                                            |                               |       
|                                 |                                                                                                                                                  |                               |       
|                                 |                                                                                                                                                  | Total, excluding Michael Page |       
|                                 | Michael Page                                                                                                                                     |                               |       
|                                 |                                                                                                                                                  |                               |       
|Total                            |                                                                                                                                                  | $                             | 28,814
|                                 |                                                                                                                                                  |                               |       
|                                 |                                                                                                                                                  |                               |       

61

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|Total Assets:                |                       |       |   |         |         |   |         |         |   |        
|---------------------------- | --------------------- | ----- | - | ------- | ------- | - | ------- | ------- | - | -------
|                             | Staffing Services     |       | $ | 286,298 |         | $ | 242,647 |         | $ | 808,568
|                             | Professional Services |       |   | 162,704 |         |   | 149,624 |         |   | 640,722
|                             | Corporate             |       |   | 415,832 |         |   | 471,424 |         |   | 427,009
|                             |                       |       |   |         |         |   |        
|                             |                       | Total |   | $       | 864,834 |   | $       | 863,695 |   | $      
|                             |                       |       |   |         |         |   |        
|Property and Equipment, Net: |                       |       |   |         |         |   |         |         |   |        
|                             | North America         |       | $ | 123,965 |         | $ | 86,857  |         | $ | 90,717 
|                             | Europe                |       |   | 7,113   |         |   | 3,814   |         |   | 6,179  
|                             | Asia/Pacific          |       |   | 2,370   |         |   | 3,849   |         |   | 4,791  
|                             |                       |       |   |         |         |   |        
|                             |                       | Total |   | $       | 133,448 |   | $       | 94,520  |   | $      
|                             |                       |       |   |         |         |   |        

Spherion has no single customer representing greater than 10% of revenues. Revenues in the United Kingdom were $92.2 million,
$91.5 million and $257.5 million for the years ended December 26, 2003, December 27, 2002 and December 28, 2001, respectively. Property and equipment, net in the
United Kingdom were $6.2 million, $3.1 million and $3.5 million at December 26, 2003, December 27, 2002 and December 28, 2001, respectively.

15.    EARNINGS (LOSS) PER SHARE

Basic (loss) earnings per share are computed by dividing Spherion's (loss) earnings from continuing operations before discontinued operations and cumulative
effect of changes in accounting principle by the weighted average number of shares outstanding during the period.

When
inclusion of common stock equivalents are not anti-dilutive, diluted earnings per share are computed by dividing Spherion's earnings from continuing operations before
discontinued operations and cumulative effect of changes in accounting principle plus after-tax interest on the convertible subordinated notes, by the weighted average number of shares
outstanding and the impact of all dilutive potential common shares, primarily stock options, convertible subordinated 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 subordinated notes is determined by applying the "if converted" method.

The
following table reconciles the numerator (earnings (loss) from continuing operations) and denominator (shares) of the basic and diluted earnings per share computations (amounts in
thousands, except per share amounts):

|                               |                                             | Fiscal Years Ended
|------------------------------ | ------------------------------------------- | ------------------
|
|
|Basic EPS                      |                                             | $                 
|                               |                                             |                   
|Effect of Dilutive Securities: |                                             |                   
|                               | Stock options and other dilutive securities |                   
|                               | Convertible subordinated notes              |                   
|                               |                                             |                   
|Diluted EPS                    |                                             | $                 
|                               |                                             |                   

62

---

16.    QUARTERLY FINANCIAL DATA(unauditedamounts in thousands, except per share data and share price)

The
following is an analysis of certain quarterly results of operations and other data for the fiscal years ended December 26, 2003 and December 27, 2002.

|                                                                                             |      | Quarter Ended |         
|-------------------------------------------------------------------------------------------- | ---- | ------------- | --------
|
|Revenues                                                                                     |      | $             | 555,036 
|Gross profit                                                                                 |      |               | 124,925 
|Net loss                                                                                     |      |               | (688    
|Basic loss per share                                                                         |      |               | (0.01   
|Diluted loss per share                                                                       |      |               | (0.01   
|Share price:                                                                                 |      |               |         
|                                                                                             | High |               |         
|                                                                                             | Low  |               |         
|
|
|Revenues                                                                                     |      | $             | 526,515 
|Gross profit                                                                                 |      |               | 133,059 
|(Loss) earnings before cumulative effect of change in accounting principle                   |      |               | (277,700
|Net (loss) earnings                                                                          |      |               | (277,700
|Basic (loss) earnings per share before cumulative effect of change in accounting principle   |      |               | (4.66   
|Diluted (loss) earnings per share before cumulative effect of change in accounting principle |      |               | (4.66   
|Basic (loss) earnings per share                                                              |      |               | (4.66   
|Diluted (loss) earnings per share                                                            |      |               | (4.66   
|Share price:                                                                                 |      |               |         
|                                                                                             | High |               |         
|                                                                                             | Low  |               |         

The third and fourth quarters of 2003 include after-tax restructuring charges of $1.6 million and $2.1 million,
respectively, or $0.03 per basic and diluted share.

During
the three months ended June 28, 2002, Spherion adopted a plan to dispose of certain subsidiaries. The operating results of these subsidiaries are included in discontinued
operations for all periods disclosed above. The net loss from discontinued operations, including loss on disposal, was $3.5 million, $1.6 million, $7.7 million, and
$1.6 million for the fourth, third, second, and first quarters of 2002, respectively or $0.06, $0.03, $0.13, and $0.03 per basic and diluted share for the same periods.

The
fourth quarter of 2002 includes an after-tax loss of $277.6 million or $4.66 per basic and diluted share on the write-down of goodwill due to the
required annual review of intangible balances in accordance with SFAS No. 142. The first quarter of 2002 includes the cumulative effect of accounting change to adopt SFAS No. 142 of
$615.6 million after-tax.

The
fourth and third quarters of 2002 include an after-tax gain on the repurchase of the 41/2% convertible subordinated notes of $4.0 million and
$2.5 million, respectively or $0.07 and $0.04 per basic and diluted share.

17.    SUBSEQUENT EVENTS

During the first quarter of 2004, Spherion decided to dispose of its operations in the United Kingdom, The Netherlands and in the Asia/Pacific region, as well as
its court reporting operation located in the United States. The decision to dispose of these businesses is consistent with Spherion's stated objective of focusing on North American staffing and
recruiting businesses. The operations are expected to be sold to

63

---

third
parties within the next year. All of these businesses are included within the Professional Services operating segment and the following table presents summary financial information for these
operations as of and for the year ended December 26, 2003 (in thousands):

Revenues

$
302,406Pre-tax losses

$
(7,665
)Total assets

$
79,452Total property and equipment

$
9,747


In connection with the disposition of these operations, Spherion expects to incur a loss of $4 million to $6 million to write the value of these
operations down to their expected realizable values, net of selling costs. The estimated loss is based on management's best estimates available and could change. In accordance with SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the assets, liabilities and results of operations are included in the accompanying financial statements as part of
continuing operations for 2003, but are expected to be reclassified to discontinued operations during the first quarter of 2004.

Additionally,
Spherion announced the retirement of its Chief Executive Officer during the first quarter of 2004. As a result, Spherion expects to incur a first quarter charge of
approximately $6 million. Approximately $1 million of the charge relates to the accelerated vesting of stock options and the remainder is payable over 2 years, in accordance with
the provisions of her separation agreement.

64

---



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

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

Item 9A.    CONTROLS AND PROCEDURES

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal
financial officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report. Based upon that evaluation, our President and Chief
Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report in timely alerting them as to material information
relating to our company (including our consolidated subsidiaries) required to be included in this Annual Report.

There
has been no change in our internal control over financial reporting during the quarter ended December 26, 2003, identified in connection with the evaluation referred to
above, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Beginning
in July 2003, we started the implementation of our new enterprise-wide information system. The full implementation is expected to be completed early in the
third quarter of 2004 and is expected to improve our internal control over financial reporting.

PART III

Items 10, 11, 12, 13 and 14.

Certain information regarding our executive officers is contained in Part I and certain information regarding our stock plans is contained in
Part III, Item 12 below. The remaining information required by Items 10 and 12 and the information required by Items 11, 13 and 14 of this Part III is omitted because, no later than
120 days from December 26, 2003, we will file and distribute our definitive proxy statement for our 2004 annual meeting of stockholders containing the information required by such Items.
Such omitted information is incorporated herein by this reference.

Item 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table summarizes our stock options and deferred stock units to be issued upon exercise and the number of securities available for future issuances
as of December 26, 2003:

Equity Compensation Plan Information

|                                                           |  | (a)       |  | (b) |       | (c)
|---------------------------------------------------------- |  | --------- |  | --- | ----- | ---
|
|Equity compensation plans approved by security holders     |  | 6,538,323 |  | $   | 10.02 |    
|Equity compensation plans not approved by security holders |  | 824,238   |  |     |      |    
|                                                           |  |           |  |     |       |    
|Total                                                      |  | 7,362,561 |  | $   | 8.90  |    
|                                                           |  |           |  |     |       |    

65

---

The
equity compensation plan not approved by security holders is a deferred stock plan which allows grants of deferred stock units to employees and outside directors. Deferred stock
units entitle the individual to receive shares of our common stock at a future date after meeting service requirements or financial targets. The deferred stock units vest between one and seven years
or a shorter period based upon certain performance criteria.

The
information required by Item 403 of Regulation S-K is omitted because, no later than 120 days from December 26, 2003, we will file and distribute our
definitive proxy statement for our 2003 annual meeting of stockholders containing the information required by such Item.

PART IV

Item 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

The
following consolidated financial statements of Spherion Corporation and subsidiaries are filed under Item 8 of Part II of this Report:

PageIndependent Auditors' Report

35Consolidated Statements of Operations

36Consolidated Balance Sheets

37Consolidated Statements of Stockholders' Equity

38Consolidated Statements of Cash Flows

39Notes to Consolidated Financial Statements

40


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 Spherion, as last amended on July 7, 2000, filed as Exhibit 3.1 to Spherion's Report on Form 8-K filed July 7, 2000, is incorporated herein by reference.                                                                                    
|3.2            |  | Restated By-Laws of Spherion, as amended through November 11, 2003, filed as Exhibit 3.2 attached hereto.                                                                                                                                                                             
|4.1            |  | Form of Stock Certificate, filed as Exhibit 4.1 to Spherion'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 Spherion and Boatmen's Trust Company, filed as Exhibit 1.1 to Spherion's Form 8-A filed April 11, 1994, is incorporated herein by reference.                                                                                      
|4.3            |  | Restated Certificate of Designation, Preferences and Rights of Participating Preferred Stock of Spherion as filed with the Secretary of State of the State of Delaware, filed as Exhibit 4.3 to Spherion's Report on Form 8-K filed July 7, 2000, is
incorporated herein by reference.
|               |  |                                                                                                                                                                                                                                                                                       

66

---

|4.4   |  | Amendment No. 1, dated as of June 26, 1996, to Rights Agreement dated March 17, 1994, between Spherion, Boatmen's Trust Company and ChaseMellon Shareholder Services L.L.C., filed as Exhibit 4.1(A) to Spherion'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 Spherion and ChaseMellon Shareholder Services L.L.C., filed as Exhibit 4.1(B) to Spherion'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 Spherion, as last amended July 7, 2000, filed as Exhibit 4.6 to Spherion's Form 10-Q for the quarter ended June 30, 2000, are incorporated herein by
reference.                                                                                                                                      
|4.7   |  | Article I and Article V of the Restated By-Laws of Spherion, as amended through November 11, 2003, filed as Exhibit 4.7 to Spherion's Form 10-Q for the quarter ended June 28, 2002, are incorporated herein by reference.                                                                                                                                                                             
|4.8   |  | Certificate of Increase of Shares Designated as Participating Preferred Stock, filed as Exhibit 2.2 to Spherion'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 Spherion to The Bank of New York with respect to Spherion's 41/2% Convertible Subordinated Notes due 2005, issued or to be issued pursuant to Spherion's
Form S-3 dated April 23, 1998, filed on May 6, 1998, filed as Exhibit 4.9 to Spherion'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 Spherion and ChaseMellon Shareholder Services L.L.C., filed as Exhibit 4.10 to Spherion'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 Spherion, ChaseMellon Shareholder Services L.L.C. and the Bank of New York, filed as Exhibit 4.11 to Spherion'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 Spherion and the Bank of New York, filed as Exhibit 4.12 to Spherion's Form 10-Q for the quarter ended March 30, 2001, is incorporated herein by
reference.                                                                                                                                      
|4.13  |  | Spherion is a party to other agreements for unregistered long-term debt securities, which do not exceed 10% of Spherion's total assets. Spherion agrees to furnish a copy of such agreements to the Commission upon request.                                                                                                                                                                           
|4.14  |  | Amendment No. 6, dated as of December 1, 2003, to Rights Agreement dated March 17, 1994, by and between Spherion and the Bank of New York, filed as Exhibit 4.14 attached hereto.                                                                                                                                                                                                                      
|10.1* |  | Spherion'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 Spherion'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 Spherion and each director of Spherion, filed as Exhibit 10.2 to Spherion's Form 10-Q for the quarter ended September 24, 1999, is incorporated herein by reference.                                                                                                                                                                   
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                        

67

---

|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 Spherion'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 Spherion Corporation, filed as Exhibit 4.1 to Spherion'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 Spherion's Form 10-Q for the quarter ended June 29, 2001, is incorporated herein by reference.                                                                                          
|10.22* |  | Spherion Corporation 2000 Stock Incentive Plan, filed as Exhibit 10.22 to Spherion'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 Spherion'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 Spherion Deferred Compensation Plan, filed as Exhibit 10.44 to Spherion'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 Spherion Deferred Compensation Plan, filed as Exhibit 10.45 to Spherion's Form 10-K for the fiscal year ended December 29, 2000, is incorporated herein by reference.                                                                                   
|10.46* |  | Third Amendment dated August 1, 2000, to the Spherion Deferred Compensation Plan, filed as Exhibit 10.46 to Spherion'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 Spherion and Cinda A. Hallman, filed as Exhibit 10.51 to Spherion's Form 10-Q for the quarter ended March 30, 2001, is incorporated herein by reference.                                                                                    
|10.52* |  | Fourth Amendment to the Spherion Deferred Compensation Plan dated July 7, 2000, filed as Exhibit 10.52 to Spherion's Form 10-Q for the quarter ended June 29, 2001, is incorporated herein by reference.                                                                                             
|10.53* |  | Fifth Amendment to the Spherion Deferred Compensation Plan dated January 1, 2001, filed as Exhibit 10.53 to Spherion's Form 10-Q for the quarter ended June 29, 2001, is incorporated herein by reference.                                                                                           
|10.55* |  | Restated Employment Agreement by and between Spherion and Roy G. Krause, amended through November 30, 2003, filed as Exhibit 10.55 attached hereto.                                                                                                                                                  
|10.56* |  | Restated Change in Control Agreement by and between Spherion and Roy G. Krause, amended through November 30, 2003, filed as Exhibit 10.56 attached hereto.                                                                                                                                           
|10.57* |  | Form of Employment Agreement by and between Spherion and the individuals listed on Schedule A attached thereto, filed as Exhibit 10.57 attached hereto.                                                                                                                                              
|       |  |                                                                                                                                                                                                                                                                                                      

68

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|10.58* |  | Form of Change in Control Agreement by and between Spherion and the individuals listed on Schedule A attached thereto, filed as Exhibit 10.58 attached hereto.                                                                                                                                                                                                                                                                                                                                                                              
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.59* |  | Spherion Corporation Deferred Stock Plan (as amended and restated December 20, 2002) filed as Exhibit 10.59 to Spherion's Form 10-K for the year ended December 27, 2002, is incorporated by reference.                                                                                                                                                                                                                                                                                                                                     
|10.60  |  | Credit Agreement, dated as of July 24, 2003, made by and among the financial institutions from time to time parties thereto (such financial institutions, together with their respective successors and assigns, are referred to thereinafter each
individually as a "Lender" and collectively as the "Lenders"), Bank of America, N.A., as Administrative Agent and Collateral Agent for the Lenders and Spherion, filed as Exhibit 10.60 to Spherion's 10-Q for the quarter ended September 26,
2003, is incorporated herein by reference.
|10.61  |  | First Amendment to Credit Agreement, Security Agreement, Pledge Agreement and Guaranty Agreement dated August 25, 2003 by and among Spherion, as borrower, each subsidiary of Borrower party to the Security Agreement, the Pledge Agreement and the
Guaranty Agreement, each of the Lenders signatory hereto and Bank of America, N.A., as agent to the Lenders, filed as Exhibit 10.61 to Spherion's 10-Q for the quarter ended September 26, 2003, is incorporated herein by reference.                                                  
|10.62* |  | Form of Employment Agreement by and between Spherion and the individuals listed on Schedule A attached thereto, filed as Exhibit 10.62 attached hereto.                                                                                                                                                                                                                                                                                                                                                                                     
|11     |  | See "Earnings (Loss) Per Share" in Note 15 of the Notes to Consolidated Financial Statements included at page 62 herein.                                                                                                                                                                                                                                                                                                                                                                                                                    
|21     |  | Subsidiaries of Spherion, filed as Exhibit 21 attached hereto.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|23.1   |  | Consent of Deloitte & Touche LLP, filed as Exhibit 23.1 attached hereto.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|31.1   |  | Rule 13a-14(a) Certification in Accordance with Section 302 of the Sarbanes-Oxley Act of 2002, filed as Exhibit 31.1 attached hereto.                                                                                                                                                                                                                                                                                                                                                                                                       
|31.2   |  | Rule 13a-14(a) Certification in Accordance with Section 302 of the Sarbanes-Oxley Act of 2002, filed as Exhibit 31.2 attached hereto.                                                                                                                                                                                                                                                                                                                                                                                                       
|32.1   |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished as Exhibit 32.1 attached hereto.                                                                                                                                                                                                                                                                                                                                                                          
|32.2   |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished as Exhibit 32.2 attached hereto.                                                                                                                                                                                                                                                                                                                                                                          

---

On
October 27, 2003, we furnished a Report on Form 8-K regarding a press release announcing our results of operations for the fiscal quarter
ended September 26, 2003. The Report on Form 8-K was furnished pursuant to Item 12 thereof; this listing does not constitute a filing of the information in such Report and
does not incorporate by reference the Report on Form 8-K or its contents into any of our other filings with the Commission.

On
October 28, 2003, we filed a Report on Form 8-K regarding a press release announcing the appointment of Eric Archer as president of our newly formed
professional services organization.

69

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|3.2   |  | Restated By-Laws of Spherion, as amended through November 11, 2003.                                                                       
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------
|4.14  |  | Amendment No. 6, dated as of December 1, 2003, to Rights Agreement dated March 17, 1994, by and between Spherion and the Bank of New York.
|10.55 |  | Form of (Amended and Restated) Employment Agreement by and between Spherion and Roy G. Krause.                                            
|10.56 |  | Form of (Amended and Restated) Change in Control Agreement by and between Spherion and Roy G. Krause.                                     
|10.57 |  | Form of Employment Agreement by and between Spherion and the individuals listed on Schedule A attached thereto.                           
|10.58 |  | Form of Change in Control Agreement by and between Spherion and the individuals listed on Schedule A attached thereto.                    
|10.62 |  | Form of Employment Agreement by and between Spherion and the individuals listed on Schedule A attached thereto.                           
|21    |  | Subsidiaries of Spherion.                                                                                                                 
|23.1  |  | Consent of Deloitte & Touche LLP.                                                                                                         
|31.1  |  | Rule 13a-14(a) Certification in Accordance with Section 302 of the Sarbanes-Oxley Act of 2002.                                            
|31.2  |  | Rule 13a-14(a) Certification in Accordance with Section 302 of the Sarbanes-Oxley Act of 2002.                                            
|32.1  |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                   
|32.2  |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                   

There
were no other financial statements of the type described in subparagraph (d) of Item 15 of Part IV required to be filed herein.

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SIGNATURES

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

|               |  | SPHERION CORPORATION
|-------------- |  | --------------------
|March 10, 2004 |  | 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 Spherion and in the capacities and on the
date indicated.

|Signature                               |  | Title                
|--------------------------------------- |  | ---------------------
|                                        |  |                      
|/s/STEVEN S. ELBAUMSteven S. Elbaum     |  | Chairman and Director
|/s/WILLIAM F. EVANSWilliam F. Evans     |  | Director             
|/s/JAMES J. FORESEJames J. Forese       |  | Director             
|/s/CINDA A. HALLMANCinda A. Hallman     |  | Director             
|/s/J. IAN MORRISONJ. Ian Morrison       |  | Director             
|/s/DAVID R. PARKERDavid R. Parker       |  | Director             
|/s/A. MICHAEL VICTORYA. Michael Victory |  | Director             
|(Signed as to each on March 10, 2004)  
|                                        |  |                      

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|/s/ROY G. KRAUSERoy G. Krause         |  | President and Chief Operating
Officer (principal
executive officer)                           
|------------------------------------- |  | ----------------------------------------------------------------------------------------------
|/s/MARK W. SMITHMark W. Smith         |  | Senior Vice President and
Chief Financial Officer
(principal financial and accounting officer)
|(Signed as to each on March 10, 2004)

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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 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
|                                    |             |          |          |                    |   |          |         |          |      
|Fiscal Year Ended December 27, 2002 |             |          |          |                    |   |          |         |          |      
|Allowance for Doubtful Accounts     |             | $        | (10,261  | )                  | $ | (3,418   | )       | $        |     
|                                    |             |          |          |                    |   |          |         |          |      
|Accumulated Amortization:           |             |          |          |                    |   |          |         |          |      
|                                    | Goodwill    |          | $        | (124,190           | ) | $        |        |          | $    
|                                    | Trade names |          |          | (246               | ) |          | (237    | )        |      
|                                    | Other       |          |          |                   |   |          | (84     | )        |      
|                                    |             |          |          |                    |   |          |         |          |      
|                                    |             | $        | (124,436 | )                  | $ | (321     | )       | $        |     
|                                    |             |          |          |                    |   |          |         |          |      
|Fiscal Year Ended December 26, 2003 |             |          |          |                    |   |          |         |          |      
|Allowance for Doubtful Accounts     |             | $        | (6,760   | )                  | $ | (3,298   | )       | $        |     
|                                    |             |          |          |                    |   |          |         |          |      
|Accumulated Amortization:           |             |          |          |                    |   |          |         |          |      
|                                    | Trade names |          | $        | (364               | ) | $        | (203    | )        | $    
|                                    | Other       |          |          | (84                | ) |          | (245    | )        |      
|                                    |             |          |          |                    |   |          |         |          |      
|                                    |             | $        | (448     | )                  | $ | (448     | )       | $        |     
|                                    |             |          |          |                    |   |          |         |          |      

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