10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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 31, 2006

Commission file number: 1-11997

SPHERION CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	36-3536544
(State or other jurisdiction of incorporation or organization)	(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:

Title of each class	Name of each exchange on which registered
COMMON STOCK—$0.01 PAR VALUE	New York Stock Exchange

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

None

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o  No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o  No x

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer x Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o  No x

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 $0.01 per share (“Common Stock”), as of June 30, 2006 on the New York Stock Exchange, was $515,786,224.

Number of shares of Registrant’s Common Stock outstanding on January 26, 2007 was 56,581,466.

Documents Incorporated by Reference:

Certain specified portions of the registrant’s definitive proxy statement to be filed within 120 days after December 31, 2006, are incorporated herein by reference in response to Part III, Items 11, 13 and 14, inclusive, and to certain portions of Part III, Items 10 and 12.

SPHERION CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS

		Page No.
PART I
ITEM 1	Business	1
ITEM 1A	Risk Factors	9
ITEM 1B	Unresolved Staff Comments	13
ITEM 2	Properties	14
ITEM 3	Legal Proceedings	14
ITEM 4	Submission of Matters to a Vote of Security Holders	14
PART II
ITEM 5	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	15
ITEM 6	Selected Financial Data	17
ITEM 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
ITEM 7A	Quantitative and Qualitative Disclosures About Market Risk	35
ITEM 8	Financial Statements and Supplementary Data	37
ITEM 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	70
ITEM 9A	Controls and Procedures	70
ITEM 9B	Other Information	70
PART III
ITEM 10	Directors, Executive Officers and Corporate Governance	72
ITEM 11	Executive Compensation	72
ITEM 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	72
ITEM 13	Certain Relationships and Related Transactions, and Director Independence	72
ITEM 14	Principal Accountant Fees and Services	72
PART IV
ITEM 15	Exhibits and Financial Statement Schedules	73
	Exhibit Index	73
SIGNATURES		79

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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

Spherion Corporation was founded in 1946 and provides temporary staffing services, managed services and permanent placement services. We are headquartered in Fort Lauderdale, Florida, and operate a network of 660 locations within North America. We are incorporated under the laws of the State of Delaware. As of December 31, 2006, we had 486 company-owned offices, 93 licensed locations and 81 franchised locations.

We provide temporary staffing services, managed services and permanent placement services under two basic operating segments—Staffing Services and Professional Services, within the United States of America and Canada. As of December 31, 2006, our Canadian operations represented approximately 5.1% of the Company’s total revenue. Temporary staffing services include personnel in the following skill categories: clerical, light industrial, information technology, finance and accounting, legal, engineering, sales and marketing, human resources and administrative. Managed services include services where we manage certain aspects of a customer function such as: recruiting, 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.

We provide services to a wide variety of customers across most major industries in North America. Our customers range in size from large Fortune 500 companies to small, locally run businesses.

During 2004 and 2005, we sold our operations in the United Kingdom, The Netherlands and in the Asia/Pacific region, as well as our court reporting operation and call center outsourcing business in the United States of America. The businesses were sold due to changes in client demand and was consistent with our strategy to focus on the North American recruiting and staffing markets. The international operations, as well as the court reporting business, were all sold prior to December 31, 2004. The remaining business unit, the call center outsourcing business, was comprised of four call centers, of which three were sold in 2005 and we retained the remaining call center in the first quarter of 2006.

Industry Overview

Spherion Corporation is a diversified staffing company operating in North America. The North American staffing market was estimated to be approximately $108.6 billion in 2006. This market includes temporary staffing, permanent placement and other services similar to those provided by Spherion. The North American staffing market in 2006 is estimated to have grown by approximately 7% to 10% and at a faster rate for high demand skill sets such as finance, accounting, legal, engineering, and information technology specialists.

Up to 50% of the staffing industry is estimated to be concentrated in professional skills, including information technology, finance and accounting, legal, administrative and other skills that are consistent with those offered within Spherion’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 those offered in Spherion’s Staffing Services operating segment.

Business conditions in the staffing industry are economically sensitive. Over the past three years, Spherion and many of its peers benefited from market expansion. Companies have continued to

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experience success in the usage of temporary help, which has facilitated rapid workforce adjustments as economic conditions improve. This practice has increased the demand for temporary help in North America, which as of December 2006 was almost 2.0% of the total workforce, an increase from 1.0% in the early 1990’s. Demographics of the labor force continue to indicate that the overall labor pool may shrink over the next 10 years, creating a shortage of qualified job candidates, especially for certain professional workers. If unemployment continues to decrease, we believe the shortage will increase the need for companies to continue to use the services of Spherion and other companies within the staffing industry. The long-term growth rate for the North American staffing industry is expected to be 5% to 6%.

Operations Overview

The Company is organized around two basic operating segments—Staffing Services and Professional Services. 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:

·Temporary staffing—This is a service where our employees work at customer locations under the supervision of customer personnel. The duration of the assignment can be from a day or less to a period of several months. The number of our temporary employees at any given time is directly related to our customers’ requirements and these employees are generally only paid when on assignment with a customer. We provide temporary employees with clerical, light industrial, information technology, finance and accounting, legal, engineering, marketing and administrative skill sets. We are responsible for all employment related taxes of these temporary employees, workers’ compensation and federal and state unemployment (burden costs). Services are generally billed by the hour for the number of hours worked. Bill rates are often determined as a mark-up over pay or a mark-up over pay plus burden and are estimated prior to the commencement of beginning the work. We typically retain the risk of loss if these estimated mark-ups are not high enough to cover actual losses due to higher than anticipated unemployment, workers’ compensation or other losses.

·Managed services—This is a service where we manage aspects of the operation and management of a customer function such as, recruiting, administrative services, data center or network operations and generally provide that service under long-term contracts. Managed services are provided by our employees who typically manage and staff aspects of the customer function. In certain cases we may only manage the customer function which could be staffed by a combination of Spherion, customer or other third-party employees. We are responsible for the operation of the customer function and generally are required to meet minimum service level agreements and provide customer driven reporting. A growing area of our managed services business is recruitment outsourcing and within this offering we take responsibility for most aspects of a customer’s hiring or recruiting function. Fees are determined based on a combination of headcount, service level provided and/or fixed fee per transaction/unit processed. We are responsible for all employment related taxes of our employees, workers’ compensation and federal and state unemployment. As with temporary staffing, we typically retain the risk of loss for unemployment, workers’ compensation or other losses if our rates are not high enough to recover these costs.

·Permanent placement—This is a service where we identify candidates on behalf of our customers, screen the candidates and assist in the recruitment efforts. If the customer hires the candidate, our billing is generally a percentage of first year compensation for the candidate placed. Billing is contingent upon filling the assigned position and we establish reserves for candidates placed with customers who do not stay through a guarantee period, typically three months.

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The following table represents the fiscal year 2006 revenues derived from each of these services within our operating segments (in thousands):

	Staffing Services					Professional Services
	Amount		% Total			Amount		% Total
Temporary staffing	$	1,231,301		85.5	%	$	440,170		89.3	%
Managed services	187,268			13.0	%	—			—
Permanent placement	21,817			1.5	%	52,503			10.7	%
Total	$	1,440,386		100.0	%	$	492,673		100.0	%

Within the services described above, the Staffing Services operating segment concentrates on temporary staffing and placement of individuals with administrative clerical and light industrial skill sets. Managed services are provided within the Staffing Services operating segment. The Professional Services operating segment concentrates on temporary staffing and placement of professional skill sets in the areas of information technology, finance and accounting, legal, engineering, sales and marketing, human resources and administrative. See Note 16, “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 2006, 2005 and 2004.

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 these locations. For 2006, 87.3% of revenues were derived from company-owned locations, with the remaining derived from franchised and licensed locations.

The following table details the number of locations:

	Fiscal Years
	2006		2005		2004
Company-owned locations		486		478		532
Licensed locations		93		94		95
Franchised locations		81		87		86
Discontinued operations		—		—		3
Total		660		659		716
United States of America		624		627		681
Canada		36		32		32
Discontinued operations		—		—		3
Total		660		659		716

Company-Owned Locations

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. Future new or closed locations are driven by sales success creating the need for new company-owned branches and customer on-premise locations. In 2006, the number of our locations remained flat with the prior year, after a decrease from 2004, primarily as a result of the loss of a large managed service contract.

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Licensed Locations

	Fiscal Years
	2006			2005			2004
Licensee revenues (in thousands)	$	236,195		$	256,411		$	238,140
Licensee commissions as a % of gross profit	72		%	70		%	68		%
Number of licensees	51			52			50
Number of licensee locations	93			94			95

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 provide licensees with our national, regional and cooperative local advertising. We also assist our licensees in obtaining business from our national accounts. 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 in the Staffing Services operating segment.

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 all temporary employees, including those placed from a licensed location. We bill all customers serviced by licensees in our name and collect the remittances as Spherion owns the client contract. 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 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. We share responsibilities in collecting accounts receivable. The licensee is responsible to reimburse us up to 100% of uncollected accounts receivable, but 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 its location and paying its related administrative and operating expenses, such as the rent, utilities and salaries of their sales and service staff. The licensee receives a commission from us, which averaged 72% of the licensed offices’ gross profit for the fiscal year ended December 31, 2006. Our Consolidated Statements of Earnings 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 as 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. The only exception to this financial statement presentation is the circumstance when we are required to consolidate certain licensees. See Note 13, “Variable Interest Entities,” in the accompanying Consolidated Financial Statements for further discussion of these licensees.

From time to time, we may 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 $0.8 million as of December 31, 2006.

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Franchised Locations

	Fiscal Years
	2006			2005			2004
Franchisee royalty revenues (in thousands)	$	8,554		$	8,976		$	8,370
Royalty revenues as a % of franchisee sales	4		%	4		%	4		%
Number of franchisees	17			23			22
Number of franchisee locations	81			87			86

We grant franchises, which give the franchisee 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 franchisees the exclusive right to establish an office to market and provide light industrial and clerical temporary personnel within a designated geographic area. We provide franchisees with our national, regional and local advertising. We also assist our licensees in obtaining business from our national accounts. Most franchise agreements are 10 years in length and renewable every 5 years thereafter. A number of franchisees are second-generation owners and most operate in more than one franchise territory.

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 except to bill activity relating to national accounts. We receive royalty fees from each franchise based upon the franchisee’s revenues.

From time to time, we may 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 $0.8 million as of December 31, 2006.

Acquisitions

We currently have no specific plan to undertake any significant acquisitions. However, from time to time we evaluate various acquisition opportunities and may acquire competitors to accelerate our growth.

We own 85% of our Canadian operation and have a put/call agreement with the minority interest shareholder, whereby the minority interest shareholder can put the remaining 15% interest in the business to us any time or we can call the remaining 15% interest any time after January 1, 2008.

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 franchised or licensed locations.

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 more significant barriers to entry as capital and systems requirements are higher.

The staffing industry is served by thousands of competitors with most having 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. The ability to fund working capital requirements is one of the key success factors for these competitors. Local

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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 a lack of systems or geographic coverage. We compete with local competitors in all of our jurisdictions generally 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 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 pricing as one of the key selection criteria. This has led to intense price competition within the staffing and recruitment industry, particularly within the large account customer segment.

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 660 locations in North America throughout the United States of America and Canada, and believe that our coverage is adequate in the markets we serve. However, our lack of international coverage could put us at a disadvantage compared to our larger competitors in obtaining new business from multinational customers. However, we do not believe our North American focus to be a significant disadvantage in competing for business in our targeted small and mid-sized customer segments. 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 2006.

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 of America and certain other countries. We believe that many of these marks and trade names, including SPHERION®, NORRELL®, ON-PREMISE® and THE MERGIS GROUPSM are important to our business. In addition, we maintain other intangible property rights including registered trademarks on the following: EMERGING WORKFORCE® and SALESFIT®. Our trademark registrations in the United States of America for SPHERION®, NORRELL® and INTERIM® expire October 9, 2011, March 8, 2013 and April 6, 2013, but are renewable for ten-year successive 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, staffing firms are governed by laws regulating the employer/employee relationship such as wage and hour regulations, tax withholding and reporting, social security or retirement, anti-discrimination and workers’ compensation.

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We also have operations in Canada. In this country, there are significant national, provincial or local regulations of staffing services. These laws may require that part-time, temporary and contract workers receive benefits similar to full-time workers, such as vacation, welfare plan contributions, notice prior to termination 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, provincial 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 14 states and is subject to statutory requirements in certain Canadian provinces. Under these laws, we must deliver a uniform franchise offering circular or disclosure document (similar to a prospectus) to prospective franchisees and 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. 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 273,000 people in 2006. On average, approximately 51,000 billable personnel were assigned with our customers 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 in our first quarter revenues compared with fourth quarter revenues. The decrease in first quarter revenues compared with the preceding fourth quarters for 2006, 2005 and 2004 was 7%, 12%, and 0%, respectively. First quarter revenues in 2005 compared with the preceding fourth quarter decreased partially due to first quarter 2005 including thirteen weeks, whereas fourth quarter 2004 included fourteen weeks. First quarter revenues in 2004 compared with the preceding fourth quarter remained stable due to a higher volume of contract-based work in managed services and increased demand experienced from the economic recovery.

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 weaken as our customers reduce temporary workers before terminating their own employees. While we have 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 are:

Name and Age	Position
Roy G. Krause, 60.	President and Chief Executive Officer since October 2004; President and Chief Operating Officer from July 2003 to October 2004; Executive Vice President and Chief Financial Officer from October 1995 to July 2003.
William J. Grubbs, 48	Executive Vice President since February 2007. Senior Vice President and Chief Marketing and Corporate Development Officer from November 2005 to February 2007. From March 2002 to September 2005, Chief Operating Officer, Spring Group plc, a publicly held information technology and professional staffing and recruiting company based in the United Kingdom. From April 2001 to February 2002, CEO Spring Technology Staffing Services, a division of Spring Group plc. From October 2000 to March 2001, CEO Spring ASP, a division of Spring Group plc.
John D. Heins, 47	Senior Vice President and Chief Human Resources Officer since October 2006. From 1995 to 2006, Vice President—Human Resources and Administrative Services for JM Family Enterprises, a privately held $9 billion diversified automotive company.
Lisa G. Iglesias, 41	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.
Mark W. Smith, 44	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.

Availability of Reports and Other Information

Our corporate website is http://www.spherion.com. We make available on this website or in print, 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. Also available on our website, or in print to any shareholder that requests it, are Spherion’s Corporate Governance Principles, Code of Business Conduct and Ethics, as well as charters for the Audit Committee, Compensation Committee, Corporate Governance Committee, Executive Committee and Nominating Committee. In addition, the Commission’s website is http://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.

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Item 1A.RISK FACTORS

We are affected by a wide range of factors which could materially affect future developments and performance. In addition to the factors affecting specific business operations identified in connection with the description of these operations and the financial results of these operations elsewhere in this report, the following are some of the factors that could affect our operations:

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 we are. However, certain of our competitors are larger, have greater marketing, technical and financial resources, and have stronger brand name recognition than we have. 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. In some cases, our large competitors have lower operating expenses and as a result, we may face increased competitive pricing pressures and may not be able to obtain or retain our new or existing customers. Some of our competitors can provide broader geographic coverage than we can and this could limit our ability to service large customers who wish to consolidate services.

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 less demand from customers and lower revenues.

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. Additionally, an economic downturn could result in higher unemployment claims and costs in future periods. Also, as businesses reduce their hiring of permanent employees, revenues 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.

A loss of customers may result in a material impact on the results of our operations.

We may experience a reduction in business from a significant customer or a number of customers, or we may lose such customers. 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. Our customers may experience a deterioration in their current financial condition or future prospects, or may experience a bankruptcy. We are also at a risk of losses from uncollectible account receivables if our customers’ financial positions deteriorate. A significant reduction in demand from our customers may result in an adverse impact on our business and results of operations in future periods.

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

Our business strategy is based on profitable growth in North America. We have implemented steps to continue increasing our growth rates by concentrating in local markets with small and mid-sized customers through relationship selling, focusing on key large accounts with profitable margins, targeting new accounts by providing integrated services, and continuing to improve operating leverage by reducing corporate and field overhead. We also plan to grow within our Professional Services segment by providing more services to existing staffing group segment customers. If we are not successful in achieving these objectives with our customers, our revenues, costs and overall profitability could be negatively affected. If we are unable to execute our business strategy effectively, our productivity and cost competitiveness could be negatively affected.

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, as well as having many short-term contracts, creates uncertain revenue streams. 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. Some 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. Many of our contracts provide for a billing at a set mark-up above the temporary employees pay rate. In estimating these mark-ups we use our best estimates of expected costs for unemployment, workers’ compensation or other costs. If actual costs for these items exceed our estimates, we typically cannot recover these retroactively from customers. Additionally, the actual development of workers’ compensation claims can take many years after the accident or injury develops; such development, if adverse could negatively impact the Company.

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

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. 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.

The disposition of businesses previously sold may create contractual liabilities associated with indemnifications provided.

We have disposed of several business units over the past five years. The disposition of these businesses usually requires that we indemnify the purchaser for liabilities that arose prior to the disposition date. These liabilities are typically related to audits of tax liabilities by local authorities and other pre-existing liabilities such as lease obligations. Additionally, in the contracts we make a number of representations and warranties and from time to time claims are made against us related to these items. During 2006, we recorded $3.3 million as part of discontinued operations for these matters. The fair value of these indemnifications are recorded at the time of the sale. Subsequently if any liabilities become known and are both probable and reasonably estimable, they are recorded as an expense. For some of the dispositions, we have or may have future claims which are not yet probable and reasonably estimable and have not been recorded as an expense. Future earnings from discontinued operations could be materially adversely

10

affected if we are not successful in defending our positions with the purchasers of these discontinued operations. Additionally, if we are required to make cash payments for any of these liabilities, our financial condition could be materially adversely affected.

We may experience business interruptions that could have an adverse affect on our operations.

We could be negatively affected by natural disasters (many of our processing functions are located in a hurricane-prone area), fire, power loss, telecommunications failures, hardware or software malfunctions and break-downs, computer viruses or similar events. Although we have disaster recovery plans in place, we may not be able to adequately execute these plans in a timely fashion. If our critical information systems fail or are otherwise unavailable, this could temporarily impact our ability to pay employees, bill customers, service customers, maintain billing and payroll records reliably and pay taxes, which could adversely affect our revenues, operating expenses, and financial condition. A prolonged outage could seriously impact our ability to service customers or hire temporary workers and could seriously threaten the organization.

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

We file tax returns with various governmental entities within the United States and Canada. The filings include returns with the Federal government, the states and numerous cities, counties and municipalities. Additionally, we have a limited number of filings with foreign governments related to the final wind down of our international operations. When we prepare these tax filings, we are required to follow numerous and complex legal and technical requirements where interpretation of rules and regulations is required. We believe that we have appropriately filed our tax returns and properly reported taxable transactions, but the final tax amounts are subject to regulatory audit and interpretation. We believe we have established adequate reserves with respect to any tax liabilities that may arise in relation to these transactions should our position be successfully challenged by tax authorities, however, an unfavorable settlement could result in higher payments and additional charges to income above the amounts reserved.

We may lose key personnel, and therefore, our business may suffer.

Our operations are dependent on the continued efforts of our officers and executive management. In addition, we are dependent on the performance and productivity of our local managers and field personnel. Our ability to attract and retain business is significantly affected by local relationships and the quality of service rendered. The loss of those key officers and members of executive management who have acquired significant experience in our industry may cause a significant disruption to our business. Moreover, the loss of our key managers and field personnel may jeopardize existing customer relationships with businesses that continue to use our services based upon past relationships with these local managers and field personnel. The loss of such key personnel could materially adversely affect our operations, because it may result in an inability to establish and maintain customer relationships and otherwise operate our business.

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 material. 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 adverse 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.

11

The price of our common stock may fluctuate significantly, which may result in losses for our investors.

The market price for our common stock has been and may continue to be volatile. For example, during the fiscal year ended December 31, 2006, the prices of our common stock as reported on the New York Stock Exchange ranged from a high of $11.41 to a low of $6.76. Our stock price can fluctuate as a result of a variety of factors, including factors listed in these “Risk Factors” and others, many of which are beyond our control. These factors include:

·actual or anticipated variations in our quarterly operating results;

·announcement of new services by us or our competitors;

·announcements relating to strategic relationships or acquisitions;

·changes in financial estimates or other statements by securities analysts; and

·changes in general economic conditions.

Government regulation may significantly increase our costs, including payroll-related costs and unemployment taxes.

In conducting our business, we are required to pay a number of payroll and related 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 may increase in the future if states have raised benefit levels and liberalized allowable claims. Attempts to increase revenue from light industrial customers may expose us to increased workers’ compensation claims and higher costs. Future earnings could be adversely affected if we are not able to increase the fees charged to customers to offset increased costs related to unemployment insurance or workers’ compensation benefits.

We are subject to business risks associated with operations in Canada, which could make this operation significantly more costly.

Operation in this market is subject to risks inherent in international business activities, including,

·fluctuations in currency exchange rates;

·varying economic and political conditions;

·overlapping or differing tax structures; and

·multiple regulations concerning pay rates, benefits, vacation, statutory holiday pay, workers’ compensation, union membership, termination pay and the termination of employment.

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:

·possible claims of discrimination and harassment;

·errors and omissions by the personnel we place, particularly for the acts of temporary professionals (e.g., accountants, attorneys, engineers and information technology consultants);

·misuse or misappropriation of customer funds or proprietary information; and

·payment of workers’ compensation and other similar claims.

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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 and 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.

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 currently exists. We could have difficulty attracting and retaining sufficient numbers of qualified personnel necessary for our business to succeed.

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 indemnifications, 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.

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

Our revolving lines of credit provide for certain affirmative and negative covenants which may limit the total availability under this line of credit 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 subsidiaries and related parties. 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.

Item 1B.UNRESOLVED STAFF COMMENTS

We have not received any written comments regarding our periodic or current reports from the staff of the Securities and Exchange Commission that were issued 180 days or more preceding the end of our fiscal year ended December 31, 2006. As a result, no issues remain unresolved.

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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. 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 or may be 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 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.

On December 13, 2004, and as amended on January 13, 2005 and October 31, 2005, Glidepath Holding B.V. and Jeimon Holdings N.V. filed an action against Spherion Corporation in the U.S. District Court of the Southern District of New York. Glidepath and Jeimon Holdings, investors in the entity that acquired the Cyber Center business of Spherion Technology (UK) Limited, a subsidiary of Spherion Corporation, in 2002, sued Spherion for fraud, negligent misrepresentation, aiding and abetting breach of fiduciary duty and unjust enrichment and seek $32.0 million in damages, and treble for punitive damages, plus attorneys’ fees, expert fees and costs. Glidepath and Jeimon Holdings allege that an individual who was an officer of Spherion Technology (UK) fraudulently induced them to invest in a corporation formed to purchase the Cyber Center business, while he remained in the employ of Spherion Technology (UK) and was to be paid an incentive bonus for the sale by us. They allege that he misled them as to his employment status at the time, as to the prospects for the Cyber Center, and as to whether the newly formed corporation was assuming the indebtedness of Spherion Technology (UK) associated with the Cyber Center business. They allege that in doing so, he was acting as our agent. We intend to vigorously defend this matter. Although this claim is in the preliminary stages, we have a reserve of $0.1 million related to this matter. We do not have insurance coverage for this claim.

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 31, 2006.

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PART II

Item 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market for the Registrant’s Common Equity

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:

2006	High		Low
First Quarter	$	11.41	$	8.94
Second Quarter	10.94		7.81
Third Quarter	9.13		6.80
Fourth Quarter	7.90		6.76

2005	High		Low
First Quarter	$	8.41	$	7.21
Second Quarter	7.66		5.00
Third Quarter	8.23		6.40
Fourth Quarter	10.53		6.62

On January 26, 2007, there were approximately 2,258 holders of record of our common stock.

We did not pay cash dividends in 2006 and 2005, and do not intend to pay cash dividends in the foreseeable future. Our U.S. revolving line of credit provides for certain covenants which restrict our ability to pay cash dividends in the event of default or under 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.

Issuer Purchases of Equity Securities

On February 20, 2007, the Board of Directors authorized the Company to repurchase shares of its common stock as needed to mitigate the dilutive impact of shares issued under our various employee benefit plans. The repurchases are limited to a maximum of 50,000 shares of common stock per week.

Performance Graph

The following graph sets forth the cumulative total stockholder return on our Common Stock, the cumulative total return of the NYSE composite index and the cumulative total return of our Peer Group Index (the “Peer Group Index”), each for the period beginning December 31, 2002 and ending December 31, 2006. The total cumulative return on investment (change in stock price plus reinvested dividends, if any) for us, the NYSE composite index and the Peer Group Index assumes that a $100 investment was made on December 31, 2001. We have not declared any dividends in the period represented in this performance graph.

The Peer Group Index is comprised of the following publicly traded companies: Adecco S.A.; Kelly Services, Inc.; Manpower Inc.; MPS Group, Inc.; and Robert Half International Inc.

The data for this performance graph was compiled for us by Standard and Poor’s. The stock price performance shown on this graph is not necessarily indicative of future price performance of our Common Stock.

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Comparison of Cumulative Five Year Total Return

	Fiscal Years
	2001		2002		2003		2004		2005		2006
Spherion Corporation	$	100.00	$	61.67	$	101.22	$	85.63	$	102.04	$	75.74
NYSE Composite Index	100.00		78.89		101.27		115.36		123.38		145.41
Peer Group	100.00		72.29		112.67		111.46		115.34		152.89

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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. We sold our court reporting business and staffing operations in the United Kingdom, the Asia/Pacific region and The Netherlands during 2004. The remaining business unit, the call center outsourcing business, is comprised of four call centers, of which three were sold in 2005 and the remaining call center was retained in the first quarter of 2006. As a result of our decision to retain this call center, all financial activity related to this call center has been reclassified from discontinued operations to continuing operations within the Staffing Services for all periods presented.

	Fiscal Years
	(in thousands, except per share data and operating locations)
	2006(1)		2005		2004(2)		2003(3)			2002(4)
Statement of Operation Data:
Revenues	$	1,933,059	$	1,980,574	$	2,039,861	$	1,733,761		$	1,771,119
Gross profit	454,908		435,784		425,948		388,128			419,453
Earnings (loss) from continuing operations	22,589		20,213		14,774		(1,585		)	(219,172		)
Net earnings (loss)	54,682		12,029		35,829		(13,913		)	(903,272		)
Earnings (loss) per share—Basic:
Earnings (loss) from continuing operations	$	0.39	$	0.33	$	0.24	$	(0.03	)	$	(3.69	)
Net earnings (loss) per share	0.96		0.20		0.59		(0.23		)	(15.20		)
Earnings (loss) per share—Diluted:
Earnings (loss) from continuing operations	$	0.39	$	0.33	$	0.24	$	(0.03	)	$	(3.69	)
Net earnings (loss) per share	0.95		0.20		0.57		(0.23		)	(15.20		)
Weighted Average Shares:
Basic	57,212		60,938		61,036		59,951			59,417
Diluted	57,784		61,430		62,313		59,951			59,417
Additional Data (end of period):
Total assets	$	693,387	$	742,644	$	830,266	$	864,834		$	863,695
Long-term debt, net of current portion	$	2,377	$	3,735	$	4,766	$	98,073		$	105,250
Working capital	$	207,269	$	129,893	$	119,832	$	225,489		$	280,583
Operating locations	660		659		716		811			822

(1)The 2006 results included net earnings from discontinued operations of $32.1 million.

(2)The 2004 fiscal year contains 53 weeks. All other years contain 52 weeks. The 2004 results included pre-tax restructuring and other charges of $8.4 million and earnings from discontinued operations of $21.1 million.

(3)The 2003 results include the Canadian results of operations from the date of acquisition (April 4, 2003); pre-tax restructuring charges of $4.2 million; and a net loss from discontinued operations of $12.3 million.

(4)The 2002 results include a pre-tax goodwill impairment charge of $230.7 million; pre-tax restructuring, and other charges of $10.4 million; and a pre-tax gain on the retirement of a portion of our convertible subordinated notes of $10.5 million. The 2002 results also include a net loss from discontinued operations of $68.5 million and the cumulative effect of a change in accounting principle to adopt SFAS No. 142, “Goodwill and Other Intangibles” of $615.6 million after-tax.

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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

·Executive Summary

·Operating Results

·Liquidity and Capital Resources

·Contractual Obligations and Commitments

·Off-Balance Sheet Arrangements

·Critical Accounting Policies

·New Accounting Pronouncements

·Inflation

·Seasonality and Cyclical Nature of Business

·Forward-Looking Statements-Safe Harbor

Company Overview

Spherion Corporation provides temporary staffing services, managed services and permanent placement services. Founded in 1946, we are headquartered in Fort Lauderdale, Florida, and has a network of 660 locations within North America. Our locations are company-owned, licensed or franchised. As of December 31, 2006, we had 486 company-owned locations, 93 licensed locations and 81 franchised locations.

The Company is organized around two operating segments—Staffing Services and Professional Services. The Staffing Services segment provides temporary staffing, managed services and permanent placement of employees with primarily clerical and light industrial skills. The Professional Services segment provides temporary staffing and permanent placement of employees with professional-level skill sets, such as information technology, finance and accounting, legal, engineering, sales and marketing, human resources and administrative. See the Operations Overview section of Part I of this Annual Report on Form 10-K for a further description of our operating segments.

Executive Summary

The following is a brief summary of our primary 2006 objectives and accomplishments:

·Achieving growth by expanding the depth and breadth of our services with existing accounts. Overall revenue decreased 2.4% during 2006 compared with the prior year but was higher in the third and fourth quarters than in the prior year. A decrease due to the intentional exit in 2005 of certain staffing clients who did not meet minimum profitability thresholds and the loss of a large contract at the start of the second quarter of 2005 affected year over year comparisons. Demand for permanent placement services remained strong with growth of 13.2% compared with the prior year. Revenues from small to mid-sized accounts (customers that do business with Spherion of $5 million or less,

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS–(Continued)

annually) grew 10.9% year over year in Staffing Services and 15.3% in Professional Services. We continue to focus on providing additional services to existing accounts, particularly for higher value professional and recruitment outsourcing business.

·Targeting new accounts by providing integrated services. During 2006, we continued to acquire new small to mid-sized accounts. The targeted small to mid-sized customer segment comprised 54.0% of our revenue for the twelve months ended December 31, 2006, and grew 12.1% for the twelve months ended December 31, 2006. This customer segment made up 47.0% of total revenue in 2005.

·Continuing to improve operating leverage. Overall, gross profit margin was 23.5%, an increase of 150 basis points compared with the prior year. The increase in gross profit margin is primarily due to (i) the decision in 2005 to reduce certain low priced business, (ii) a shift in product mix from Staffing Services to Professional Services (Professional Services now comprises 25.5% of total revenue in 2006 compared with 22.7% in 2005), (iii) a higher proportion of permanent placement revenue (3.8% of our 2006 revenue, an increase of 50 basis points from the prior year) and (iv) lower employee benefit costs, including workers’ compensation costs. Earnings from continuing operations as a percentage of revenue was 1.8%, an increase of 30 basis points compared with the prior year. The improvements in gross profit were partially offset by increases in selling, general and administrative expenses of $18.4 million from the prior year primarily due to higher costs associated with additional recruiter and sales headcount, stock option expense, and litigation related accruals.

In 2007 we plan to focus on three key operating objectives:

·First, continue to grow small and mid-sized account segment:

-Continue to emphasize addition of new accounts;

-Expand services at existing accounts, particularly Professional Services;

-Maintain premium pricing and margin compared with market; and

-Continue stabilization trend within large accounts.

·Second, emphasize higher margin services:

-Invest in Professional Services segment to increase recruiter and sales staff;

-Exploit market-leading recruitment outsourcing services; and

-Continue to shift overall company revenue mix toward higher margin services.

·Third, continue improving operating leverage:

-Tightly control selling, general and administrative expenses, by limiting growth in selling, general and administrative expenses to our growth in gross profit;

-Reduce capital spending to less than half of the prior year level while we maximize the return from prior years’ investments in systems and infrastructure; and

-Hold Days Sales Outstanding (DSO, a measure of how quickly accounts receivable are collected) stable after a four-day reduction in 2006.

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS–(Continued)

Operating Results

Consolidated Operating Results

Fiscal 2006 compared with 2005

·Revenue in 2006 was $1.93 billion, down 2.4%.

-The intentional exit in 2005 of lower margin staffing clients, the loss of a large contract in early 2005 and some decreases in large national accounts reduced revenues.

-Small to mid-sized accounts grew 12.1% in 2006 and reached 54.9% of total revenues in the fourth quarter. Professional Service revenues increased 9.4% and overall permanent placement grew 13.2%.

-United States of America temporary employment increased 2.6% in 2006 as estimated by the Bureau of Labor Statistics. Revenue gains with targeted customers were more than offset by the noted exits and losses, as such, the Company did not keep pace with the overall market.

·Gross profit in 2006 was $454.9 million, up 4.4% despite a 2.4% revenue decrease. Gross profit margin increased to 23.5% in 2006 compared with 22.0% last year. Gross profit margins increased due to:

-An increase in higher margin services including professional staffing, permanent placement and recruitment outsourcing services in 2006 (80 basis points).

-Better temporary staffing pay/bill spreads due to the increase in small to mid-sized accounts (20 basis points).

-Lower employee benefit costs, including workers’ compensation costs (50 basis points).

·Selling, general and administrative expenses were $422.8 million, up 4.5%; as a percentage of revenues these costs were 21.9%, up from 20.4%. Costs as a percentage of revenues were impacted as follows:

-Within Staffing Services, we allowed personnel costs to grow in order to accelerate the growth of small to mid-sized accounts and to stabilize our large accounts. We also had higher costs for billable recruiters and staff to service increased recruitment outsourcing revenues.

-For Professional Services, expenses increased due to the hiring and training of new sales staff along with higher commissions due to increased permanent placement revenues.

-New accounting regulations required expensing of stock options of $3.5 million.

·Net interest income was $2.1 million, an increase of 141.1% from the prior year due primarily to the retirement of convertible notes in October 2005 and higher cash balances in 2006.

·Restructuring and other charges (credits) were $(0.2) million in 2006 versus $1.8 million in 2005. The charge in 2005 was largely related to staff reductions associated with a contract loss.

·Our effective tax rate from continuing operations was 34.3% and increased moderately from the prior year rate of 33.6%. State and local taxes increased and there is only a partial benefit for 2006 stock option expense; these increases were largely offset by higher employment tax credits as well as the recognition of previously unbenefited tax loss carry forwards.

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS–(Continued)

·Earnings from continuing operations were $0.39 per share for 2006 compared with $0.33 in the prior year. Earnings from continuing operations were impacted by stock option expense for the 2006 period in the amount of $3.2 million, net of tax, or $0.05 per share.

·Discontinued operations had a pre-tax loss of $2.0 million in 2006 as a result of the resolution of certain purchaser claims for previously sold operations in the Asia/Pacific region. Discontinued operations had net earnings of $32.1 million, which includes a tax benefit of $30.9 million related to the resolution of certain international tax matters.

·DSO decreased to 50 days at the end of 2006 compared with 54 days at the end of 2005.

Fiscal 2005 compared with 2004

·Revenue in 2005 was $1.98 billion, down 2.9% or 1.7% after considering the impact of the 53rd week in 2004.

-The loss of a large contract and intentional exit of lower margin staffing clients affected year over year comparisons.

-Permanent placement services grew 18.2%.

-Temporary staffing revenue grew 2.1%, which was slower than the Bureau of Labor Statistics estimated 6.6% increase in the number of temporary employees compared with 2004 due to the noted customer losses.

·Gross profit was $435.8 million, up 2.3% from 2004 despite lower revenues. Gross profit margin increased to 22.0% in 2005 compared with 20.9% in 2004. Gross profit margins increased due to:

-Lower workers’ compensation costs due to improvements in prior year loss estimates (20 basis points) and lower costs for current year losses (20 basis points).

-Higher temporary staffing pay/bill spreads within Staffing Services (40 basis points).

-Lower employee benefits (15 basis points).

-A shift in revenue mix toward permanent placement services (15 basis points).

·Selling, general and administrative expenses were $404.5 million, up 0.7% from 2004. As a percentage of revenues, these costs were 20.4% and 19.7% in 2005 and 2004 and increased due to:

-Higher recruiter headcount and costs in the Professional Services segment and higher advertising expense.

-Partially offsetting cost increases were lower unallocated corporate costs of $6.8 million, due primarily to the completion of the implementation of our enterprise-wide information system late in 2004.

·Net interest income was $0.9 million compared with net interest expense of $1.9 million in 2004. The change was due to the retirement of convertible notes in October 2005 and August 2004 and the increase in cash throughout 2005.

·Restructuring and other charges decreased by $6.6 million to $1.8 million in 2005 versus $8.4 million in 2004. The 2004 costs include the termination of the employment contract of our former chief executive officer.

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS–(Continued)

·Our effective tax rate from continuing operations was 33.6% and was lower than the U.S. Federal Statutory tax rate of 35.0% due primarily to (i) the impact of work opportunity and other employment tax credits, (ii) the recognition of previously unrecognized net operating loss benefits and (iii) the reduction of state tax reserves due to the favorable resolution of several state income tax audits. For 2004, there was a tax benefit of $2.6 million on pre-tax income of $12.2 million or an effective rate of 21.2% as adjustments to state and local tax reserves and employment tax credits more than offset taxes payable on current year income.

·Discontinued operations incurred pre-tax losses of $13.1 million in 2005, which includes losses primarily from call center operations of $5.9 million and an estimated loss on sale of $5.7 million related primarily to indemnifications and other matters associated with the previously sold United Kingdom and Asia/Pacific staffing operations. Discontinued operations resulted in a loss of $0.13 per share compared with earnings of $0.34 per share in the 2004 period which included the favorable resolution of an international tax matter in the amount of $25.3 million.

·DSO decreased to 54 days at the end of 2005 compared with 60 days at the end of 2004.

Discontinued Operations

For the fiscal years ended December 31, 2006, January 1, 2006 and December 31, 2004, discontinued operations through the dates of their disposition, as applicable, had pre-tax operating losses of $2.0 million, $7.4 million and $9.9 million, respectively.

See Note 15, “Discontinued Operations,” in the accompanying Consolidated Financial Statements for further discussion.

Restructuring and Other Charges

The following is a summary of restructuring activities (in thousands):

	Fiscal Years
	2006			2005			2004
Staffing Services	$	363		$	1,840		$	543
Professional Services	106			49			1,537
Corporate	899			341			1,351
Reversal of over accrual	(582		)	(175		)	(672		)
Restructuring	786			2,055			2,759
Other charges (credits)	(963		)	(292		)	5,636
Total restructuring and other charges (credits)	$	(177	)	$	1,763		$	8,395

See Note 14, “Restructuring and Other Charges,” in the accompanying notes to the Consolidated Financial Statements for further discussion.

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 corporate costs, amortization expense, interest expense, interest income, income taxes and restructuring and other charges. All material intercompany revenues and expenses have been eliminated. Additionally, amounts related to discontinued operations have been excluded from the

22

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS–(Continued)

segment information below and are presented as discontinued operations in the Consolidated Statements of Earnings.

During the first quarter of 2006, we decided to retain the remaining call center that was held for sale and have reclassified all financial activity related to this center from discontinued operations to continuing operations in the Staffing Services segment for all periods presented. This call center contributed revenues of $11.1 million, $8.9 million and $7.1 million for 2006, 2005 and 2004, respectively, and segment operating profit (loss) of $1.1 million, $0.9 million and $(0.4) million, respectively. See Note 15, “Discontinued Operations,” in the accompanying notes to the Consolidated Financial Statements for further discussion.

Information on operating segments and a reconciliation to earnings from continuing operations before income taxes and discontinued operations for the periods indicated were as follows (in thousands):

	Fiscal Years
	2006					2005					2004
			% of Total					% of Total					% of Total
Revenue:
Staffing Services	$	1,440,386		74.5	%	$	1,530,395		77.3	%	$	1,630,279		79.9	%
Professional Services	492,673			25.5	%	450,179			22.7	%	409,582			20.1	%
Total	$	1,933,059		100.0	%	$	1,980,574		100.0	%	$	2,039,861		100.0	%

				% of Revenues						% of Revenues						% of Revenues
Gross Profit:
Staffing Services	$	293,366			20.4	%	$	292,641			19.1	%	$	297,484			18.2	%
Professional Services	161,542				32.8	%	143,143				31.8	%	128,464				31.4	%
Total	$	454,908			23.5	%	$	435,784			22.0	%	$	425,948			20.9	%
Segment Operating Profit:
Staffing Services	$	24,565			1.7	%	$	26,342			1.7	%	$	24,792			1.5	%
Professional Services	23,279				4.7	%	19,236				4.3	%	19,769				4.8	%
Total	47,844				2.5	%	45,578				2.3	%	44,561				2.2	%
Unallocated corporate costs	(15,541		)				(13,832		)				(20,637		)
Amortization expense	(201		)				(416		)				(543		)
Interest expense	(1,965		)				(3,205		)				(5,766		)
Interest income	4,055						4,072						3,815
Restructuring, impairment and other	177						(1,763		)				(9,236		)
Earnings from continuing operations before income taxes and discontinued operations	$	34,369					$	30,434					$	12,194

23

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS–(Continued)

Segment Operating Results

Staffing Services

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

	Fiscal Years
	2006						2005						2004
				% of Total						% of Total						% of Total
Revenue by Skill*:
Clerical	$	908,070			63.0	%	$	944,432			61.7	%	$	1,029,797			63.2	%
Light industrial	532,316				37.0	%	585,963				38.3	%	600,482				36.8	%
Segment revenue	$	1,440,386			100.0	%	$	1,530,395			100.0	%	$	1,630,279			100.0	%
Revenue by Service:
Temporary staffing	$	1,231,301			85.5	%	$	1,312,515			85.7	%	$	1,310,755			80.4	%
Managed services*	187,268				13.0	%	200,141				13.1	%	304,773				18.7	%
Permanent placement	21,817				1.5	%	17,739				1.2	%	14,751				0.9	%
Segment revenue	$	1,440,386			100.0	%	$	1,530,395			100.0	%	$	1,630,279			100.0	%
Gross Profit Margin by Service:
(As % of Applicable Revenue)
Temporary staffing	17.3		%				16.8		%				15.7		%
Managed services	31.5		%				27.3		%				25.2		%
Permanent placement	100.0		%				100.0		%				100.0		%
Total Staffing Services	20.4		%				19.1		%				18.2		%

*Managed services revenue and revenue by skill for 2005 and 2004 have not been adjusted for the movement of certain managed services contracts within Staffing Services during the second quarter of 2005 to temporary staffing within Professional Services. The impact of the movement of these customers was $4.0 million and $14.1 million in 2006 and 2005, respectively. Management responsibility for these contracts moved to Professional Services.

Fiscal 2006 Compared with 2005

Revenues—Staffing Services revenue decreased 5.9% to $1.44 billion in 2006 from $1.53 billion in the prior year. The decrease is primarily due to the loss or intentional exit of business for customers that did not meet minimum profitability thresholds, decreases at certain large accounts and the loss of a large managed services contract at the start of the second quarter of 2005. Partially offsetting these decreases was the 10.9% growth in our targeted small to mid-sized customers and growth in our recruitment outsourcing business.

·By skill—Clerical revenue decreased 3.9% and light industrial revenue decreased 9.2% from prior year levels. The decrease in clerical revenue was primarily due to the loss of a large account at the beginning of the second quarter of 2005 partially offset by revenue growth from small to mid-sized accounts. Both clerical revenue and light industrial revenue were impacted by a decrease in revenue from large accounts in the technology, medical and telecommunications industries combined with new accounts starting-up at a slower pace than business that was exited or lost in 2005.

24

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS–(Continued)

·By service—Temporary staffing revenues decreased 6.2% compared with the prior year due to a decrease in revenue from large accounts and the loss of business which did not meet profitability thresholds as described above. Managed services revenue decreased 6.4% from prior year levels due to the loss in 2005 of one large managed service customer and the movement of $4.0 million in revenue for locally based technology services contracts from this operating segment to our Professional Services segment, partially offset by an 88.1% increase in recruitment outsourcing. Permanent placement revenues increased 23.0% over the prior year due to the addition of recruiters, particularly in Canada.

Gross Profit—Gross profit of $293.4 million in the current year increased from $292.6 million in the prior year in spite of the decrease in revenue. The overall gross profit margin was 20.4% in 2006 compared with 19.1% in the prior year. The increase of 130 basis points in the overall gross profit margin was primarily due to growth of permanent placement and recruitment outsourcing services (60 basis points), lower payroll taxes and employee benefit costs, including workers’ compensation and paid time off (60 basis points) and improved pay/bill spreads (10 basis points).

Segment Operating Profit—Staffing Services segment operating profit was $24.6 million compared with $26.3 million in the prior year. The decrease from prior year was due to higher operating expenses of $2.5 million on a slight increase in gross profit dollars. The increased operating expenses were primarily from higher costs associated with an increase in sales staff trained to increase small to mid-sized revenue, stock option expense, higher commissions due to increased permanent placement revenues and an increase in litigation costs. Operating expenses as a percentage of revenue increased to 18.7% compared with 17.4% in the prior year as our revenue growth did not meet our internal goals. During the fourth quarter we undertook actions to reduce spending in the Staffing Services group.

Outlook—Our major focus in 2007 will be profitable revenue growth and increasing our operational effectiveness. We are continuing to focus our resources on small and mid-sized customers where pricing tends to be more favorable and where our sales efforts have shown the most success. In our larger account base we will continue our focus on stabilizing revenues. The market for recruitment outsourcing opportunities appears to be good and we continue to win new business. We are taking steps to improve our efficiency in both the field and administration to reduce our expense structure. Despite these efforts, there is no assurance that revenues or segment operating profit will grow in 2007.

Our workers’ compensation expense has decreased as a percentage of revenues over each of the past three years. This is due to a combination of declines in light industrial staffing, higher management control, legislative changes in some states which have lowered our costs and estimation of lower losses based on actuarial studies. Our workers’ compensation expense for these periods includes actuarial estimates for current year losses as well as favorable adjustments to estimates for prior year losses. While the amount of favorable adjustments for prior year losses has not varied significantly from 2005 to 2006, it is not likely that these adjustments will continue at the same level in 2007. The amount of prior year loss adjustments included in income for 2006 was $8.1 million.

Fiscal 2005 Compared with 2004

Revenues—Staffing Services revenue decreased 6.1% to $1.53 billion in 2005 from $1.63 billion in 2004, or 5.0% after considering the impact of the 53rd week in 2004. Revenue decreases are primarily due to a decrease in managed services of $104.6 million, which includes the loss of one large managed service customer and several smaller contracts primarily as the result of the intentional exit of certain staffing clients that did not meet minimum profitability thresholds, lower outplacement revenues due to a slowdown in corporate downsizing trends, the movement of $14.1 million in revenue for locally based

25

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS–(Continued)

technology services contracts from this segment to our Professional Services segment. In this segment, revenues from our largest customers decreased while revenues from our small to mid-sized customers increased due to our focus in targeted growth with small and mid-sized customers. Customers in the telecommunications, IT, manufacturing, media and pharmaceutical industries represented our largest revenue decrease. This decrease was partially offset by higher growth in the transportation, service, retail and food services industries.

·By skill—Clerical revenue decreased 8.3% and light industrial revenue decreased 2.4% from prior year levels. The decrease in clerical revenues was primarily due to decreases in managed services as discussed below.

·By service—Managed services revenue decreased 34.3% from prior year levels due to the loss of one large managed service customer and several smaller contracts, lower outplacement revenues due to a slowdown in corporate downsizing trends and, the movement of $14.1 million in revenue for locally based technology services contracts from this segment to our Professional Services segment. Permanent placement revenues increased 20.3% over the prior year due to the addition of recruiters. Temporary staffing revenue improved slightly over the prior year despite the impact of the extra week in 2004. During 2005 we focused on pricing discipline and our growth may have been somewhat limited from potential and some existing customers that did not meet minimum pricing thresholds.

Gross Profit—Gross profit decreased 1.6% to $292.6 million from $297.5 million in the prior year. The overall gross profit margin was 19.1% in 2005 compared with 18.2% in the prior year, or an increase of 90 basis points. The increase in the gross profit margin was primarily due to (i) improved pay/bill spreads and recruitment processing outsourcing growth (80 basis points) and (ii) a decrease in employee benefit costs (60 basis points), particularly workers’ compensation due to improvements in prior year loss estimates, improved safety programs, and favorable law changes. These increases were partially offset by a shift in service mix away from the managed services (30 basis points) and higher state unemployment taxes (20 basis points).

Segment Operating Profit—Staffing Services segment operating profit was $26.3 million compared with $24.8 million in 2004. The increase from prior year was due to lower operating expenses of $6.4 million offset by lower gross profits of $4.8 million. Operating expenses decreased 2.3% compared with 2004. Decreases in operating expenses were primarily associated with cost reductions made due to the managed services customer loss and lower outplacement activity. Operating expenses as a percentage of revenue increased to 17.4% compared with 16.7% in the prior year primarily due to revenue volume decreases at a higher rate than cost reductions.

26

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS–(Continued)

Professional Services

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

	Fiscal Years
	2006						2005						2004
				% of Total						% of Total						% of Total
Revenue by Skill*:
Information Technology	$	320,389			65.0	%	$	288,309			64.1	%	$	267,108			65.2	%
Finance & Accounting	104,225				21.2	%	105,001				23.3	%	94,190				23.0	%
Other	68,059				13.8	%	56,869				12.6	%	48,284				11.8	%
Segment Revenues	$	492,673			100.0	%	$	450,179			100.0	%	$	409,582			100.0	%
Revenue by Service:
Temporary Staffing*	$	440,170			89.3	%	$	402,286			89.4	%	$	368,788			90.0	%
Permanent Placement	52,503				10.7	%	47,893				10.6	%	40,794				10.0	%
Segment Revenues	$	492,673			100.0	%	$	450,179			100.0	%	$	409,582			100.0	%
Gross Profit Margin by Service:
(As % of Applicable Revenue)
Temporary Staffing	24.8		%				23.7		%				23.8		%
Permanent Placement	100.0		%				100.0		%				100.0		%
Total Professional Services	32.8		%				31.8		%				31.4		%

*Temporary staffing revenue and revenue by skill for 2005 and 2004 have not been adjusted for the movement of certain managed services contracts during the second quarter of 2005 from within Staffing Services to Professional Services. The impact of the movement of these customers was $4.0 million and $14.1 million in 2006 and 2005, respectively. Management responsibility for these contracts moved to Professional Services.

Fiscal 2006 Compared with 2005

Revenues—Professional Services revenue increased 9.4% to $492.7 million in 2006 from $450.2 million in the prior year as customer demand continued to be strong in 2006. Revenue also increased as a result of continued investments made in 2005 in additional sales and recruiting staff. Most of the increase, $37.9 million, was in temporary staffing revenues and included $4.0 million due to the movement of revenue for locally based managed services contracts from our Staffing Services segment to this operating segment.

·By skill—IT increased 11.1% from the prior year due to increased permanent placement and temporary staffing services and the movement of $4.0 million of locally based technology services contracts from the Staffing Services segment. Revenues from finance and accounting decreased about 1.0% compared with the prior year. Revenues from other skills increased primarily due to increased demand in the human resources, legal and engineering sectors.

·By service—Temporary staffing increased 9.4% primarily due to continued demand for IT personnel, and the movement of $4.0 million of locally based technology services contracts from Staffing Services. Permanent placement revenue increased 9.6% to meet demand for IT skills combined with the 2005 increases in recruiter headcount.

27

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS–(Continued)

Gross Profit—Professional Services gross profit increased 12.9% to $161.5 million from $143.1 million in the prior year. Gross profit margin was 32.8% in 2006 compared with 31.8% in the prior year. This 100 basis point increase in gross profit margin was primarily due to higher temporary staffing pay/bill spreads (70 basis points) and lower employee benefit costs, including workers’ compensation costs (40 basis points). These increases were partially offset by higher state unemployment taxes (10 basis points).

Segment Operating Profit—Professional Services segment operating profit was $23.3 million compared with $19.2 million in the prior year. The increase in operating profit was the result of the increase in gross profits of $18.4 million partially offset by higher operating expenses of $14.4 million. Operating expenses as a percentage of revenues increased to 28.1% from 27.5% in the prior year. The increase in operating expenses was primarily due to increased commissions and incentive compensation as a result of higher volume and earnings, the hiring and training of new sales staff and recruiters, increased candidate advertising expense and higher bad debt expense. The new sales staff and recruiters are expected to become fully productive by the first quarter of 2007.

Outlook—Over the past two years, we have made substantial investments by adding recruiters to capitalize on opportunities in the marketplace and drive revenue and gross profit growth. Many of the new recruiters require training and development for a period of months before they can produce sufficient revenues. If the recruiters do not become productive in a reasonable time period, they are typically replaced and the training and development period begins again. Consequently, we expect new recruiters may not reach targeted productivity for several months and costs may be higher if we are not successful in hiring, training and retaining productive recruiters. Growth in IT for 2007 is expected to continue, however, it will largely depend on our ability to continue penetrating existing client relationships and customer project related spending. There is no assurance that revenues or segment operating profit for the Professional Services segment will continue to grow at the same pace.

Fiscal 2005 Compared with 2004

Revenues—Professional Services revenue increased 9.9%, or $40.6 million, to $450.2 million in 2005 from $409.6 million in the prior year, or 11.7% after considering the impact of the 53rd week in 2004. Customer demand continued to be strong in 2005 and revenue also increased as a result of continued investments in hiring of additional sales and recruiting staff. Most of the increase, $33.5 million, was in temporary staffing revenues and included $14.1 million due to the movement in revenue for locally based technology service contracts from our Staffing Services segment to this segment.

·By skill—Finance and accounting increased 11.5% largely due to continued strong demand, which was primarily due to increased regulatory reporting requirements for US public companies. Information technology (“IT”) increased 2.7% from the prior year (excluding the movement in 2005 of approximately $14.1 million of locally based technology services contracts from Staffing Services) due to increased temporary staffing and permanent placement demand. Revenue from other skills increased primarily due to increased demand for temporary staffing in the legal, human resources, and sales and marketing sectors.

·By service—Temporary staffing increased 9.1% primarily due to continued demand for finance and accounting and IT personnel and the movement of $14.1 million of locally based technology services contracts from Staffing Services. Permanent placement revenue increased 17.4% primarily as a result of an increased focus on IT combined with the addition to the recruiter headcount.

Gross Profit—Professional Services gross profit increased 11.4% to $143.1 million from $128.5 million in the same prior year period. The overall gross profit margin was 31.8% in 2005 compared with 31.4% in

28

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS–(Continued)

the prior year. This 40 basis point increase in gross profit margin is primarily due to lower employee benefits and paid time off costs (90 basis points), and a change in service mix as permanent placement has grown faster than temporary staffing (50 basis points). These increases were partially offset by (i) the impact that a change in customer mix had on overall pay/bill spreads; in 2005, we focused on expanding our penetration within existing accounts which have lower pricing (80 basis points) and (ii) higher state unemployment taxes (20 basis points).

Segment Operating Profit—Professional Services segment operating profit was $19.2 million compared with $19.8 million in the prior year. The decrease in operating profit from the prior year was the result of the increase in gross profits of $14.6 million, described above, being more than offset by an increase in operating expenses of $15.2 million. Operating expenses as a percentage of revenues increased to 27.5% compared with 26.5% in the prior year. The increase in operating expenses is primarily due to (i) increased incentive compensation as a result of higher volume, (ii) higher employee costs as a result of growth in personnel due to increased sales and recruiter headcounts, and the initial investment in staff as they increase their productivity levels, and (iii) increased candidate advertising expense.

Unallocated corporate costs

2006 compared with 2005—Unallocated corporate costs were $15.5 million and $13.8 million in 2006 and 2005, respectively. Unallocated corporate costs in 2005 benefited by $0.8 million from the favorable resolution of litigation matters.

2005 compared with 2004—Unallocated corporate costs decreased $6.8 million to $13.8 million. The decrease is primarily due to lower costs as a result of the impact of our enterprise-wide information system which was completed during 2004.

Liquidity and Capital Resources

Cash Flows

As of December 31, 2006, we had total cash resources available of $54.6 million (an increase of $24.5 million from January 1, 2006). Cash flows from operating, investing and financing activities, as reflected in the accompanying Consolidated Statements of Cash Flows, are summarized as follows (in thousands):

	Fiscal Years
	2006			2005			2004
Cash Provided By (Used In):
Operating activities	$	46,085		$	72,285		$	6,077
Investing activities	7,959			18,740			33,997
Financing activities	(29,470		)	(66,148		)	(56,322		)
Effect of exchange rates	(97		)	132			154
Net increase (decrease) in cash and cash equivalents	$	24,477		$	25,009		$	(16,094	)

Operating cash flows

Operating cash flows for 2006 of $46.1 million were comprised of $54.7 million of earnings, plus non-cash depreciation and amortization of $22.2 million, non-cash deferred income tax expense of $26.9 million and non-cash share-based compensation of $3.7 million partially offset by an increase in working capital items of $61.1 million. The $61.1 million increase in working capital items is due to (i) a reduction in the accrued income taxes of $29.7 million as we recorded a non-cash tax benefit in discontinued operations

29

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS–(Continued)

related to the resolution of certain international tax matters, (ii) a reduction in self-insurance reserves due to payments and better loss experience, (iii) the payment or reversal of litigation and disposition related accruals, (iv) the investment in a mutual fund portfolio of $15.2 million, classified within other assets, to match funds on the company’s non-qualified deferred compensation liability and (v) lower current liabilities. These items were partially offset by lower receivables due to a 4-day improvement in DSO and the receipt of a $4.5 million income tax refund.

Operating cash flows for 2005 of $72.3 million were primarily comprised of earnings of $12.0 million, plus non-cash depreciation and amortization of $21.9 million, non-cash deferred income tax expense of $6.3 million, the accrual for loss on disposal of discontinued operations of $5.7 million and lower working capital items of $21.4 million. Working capital was reduced primarily due to (i) lower accounts receivable as we lowered DSO from 60 days at the end of December 2004 to 54 days as of January 1, 2006 and as we collected accounts receivable from higher revenues in the prior period, and (ii) the receipt of an income tax refund of $7.5 million. Reductions in accounts receivable and tax refunds received were partially offset by increases in payouts for accounts payable and accrued liabilities.

Operating cash flows for 2004 of $6.1 million were primarily comprised of earnings, excluding the gain on disposal of discontinued operations, of $8.8 million plus non-cash expenses for depreciation and amortization of $28.8 million and restructuring and other charges of $10.5 million, offset by working capital usage of $34.0 million and a non-cash deferred income tax benefit of $8.9 million. Working capital was used primarily to fund accounts receivable as DSO increased to 60 days from 55 days in the prior year.

Investing cash flows

Cash provided by investing activities for 2006 of $8.0 million was primarily due to net withdrawals of $29.7 million from insurance deposits with our workers’ compensation insurance carrier due to claim payments made and the receipt of about $15.0 million of cash deposits upon issuance of a letter of credit. Capital expenditures of $22.7 million primarily relate to network upgrades to improve bandwidth within our offices and front and back office software initiatives to improve productivity and enhance our abilities to work with customers and candidates.

Cash provided by investing activities for 2005 of $18.7 million was primarily due to net withdrawals of $19.1 million from our insurance deposits for claim payments, proceeds from a note receivable from the 2004 sale of our Australian subsidiary, proceeds from the dispositions of our call centers of $1.4 million, and collections on franchise notes, partially offset by capital expenditures of $9.7 million. Capital expenditures were primarily for further enhancements to our enterprise-wide information system and for client and candidate facing software improvements.

Cash provided by investing activities for 2004 of $34.0 million was primarily due to proceeds from the sale of discontinued operations of $43.7 million, offset by capital expenditures of $12.1 million. Proceeds from the sale of discontinued operations (net of cash sold) included $2.0 million, $13.7 million, $25.4 million and $2.6 million from the sale of our operations in The Netherlands, Asia/Pacific region, United Kingdom and the court reporting business, respectively. Capital expenditures included the investment in our enterprise-wide information system, which amounted to $5.8 million.

30

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS–(Continued)

The level of our capital expenditures has varied significantly over the past three years. We completed the implementation of our enterprise-wide information system in 2004. During 2005 we had reduced capital expenditures as we concentrated on operating the system efficiently. In 2006, we enhanced the system to improve speed and customer and candidate capabilities. For 2007, we anticipate a reduced capital expenditure level of between $8.0 million and $10.0 million as we focus on maximizing the efficiency of the system. These capital expenditures are expected to be funded through operating cash flow or through borrowings under our existing revolving lines of credit.

Financing cash flows

Financing cash used for 2006 of $29.5 million was primarily due to the repurchase of common stock of $28.3 million.

Financing cash used for 2005 of $66.1 million was primarily due to the repayments of borrowings from lines of credit and notes payable of $45.7 million and the repurchase of common stock of $24.0 million.

Financing cash used for 2004 of $56.3 million was primarily due to the retirement of the remaining 41¤2% convertible subordinated notes in the amount of $89.7 million, partially offset by net borrowings from lines of credit used to fund working capital.

Financing

We believe that a combination of our existing cash balances, other liquid assets, operating cash flows and existing revolving lines of credit, taken together, provide adequate resources to fund ongoing operating requirements. However, our operating cash flow could be impacted by factors outside of our control.

We have a U.S. dollar revolving line of credit in the amount of $250.0 million that is secured by substantially all of our domestic accounts receivable. At our option, the amount available can be increased to $300.0 million. As of December 31, 2006 and January 1, 2006, there were no amounts outstanding under this facility. Our total availability was $159.6 million (calculated as eligible receivables of $204.3 million, less: amounts outstanding, if any, letters of credit of $16.7 million and a one week payroll reserve of $28.0 million). Interest on this line of credit is based upon the duration of the loan, availability under the line and other conditions and would have been approximately 6.9% (LIBOR plus a spread) or approximately 8.0% (prime plus a spread) as of December 31, 2006. We pay an unused line fee in the range of 0.25% to 0.38% per annum that is determined by the unused portion of the revolving line of credit as well as a letter of credit fee of 0.25% per annum. This line of credit expires in 2010.

We also have a Canadian dollar revolving line of credit (secured by Canadian accounts receivable) that matures July 2007. This facility provides up to CAD$13.0 million of financing (approximately $11.2 million at current exchange rates). As of December 31, 2006 and January 1, 2006, there were no borrowings outstanding under this facility. As of December 31, 2006, the interest rate for amounts borrowed on this facility would have approximated 7.0% (Canadian prime plus a spread). A commitment fee of 0.5% per annum is payable based on the unused portion of the revolving line of credit. We guarantee the Canadian dollar revolving line of credit.

Our revolving lines of credit provide for certain affirmative and negative covenants which may limit the total availability under these revolving lines of credit 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 subsidiaries

31

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS–(Continued)

and related parties. 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. At December 31, 2006, we were in compliance with the requirements of these covenants.

During 2004, we retired our remaining U.S. dollar convertible subordinated notes (the “Notes”) and paid a premium of $0.6 million to retire the Notes and wrote-off the remaining bond issuance costs of $0.2 million, both of which are included in “Other loss” in the accompanying Consolidated Statements of Earnings.

We have 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 is not funded, however, we maintained investments of $24.1 million in a portfolio of mutual funds at December 31, 2006, which are included in “Other current assets” and “Other assets” in the accompanying Consolidated Balance Sheets based on expected timing of distribution. The investment balance increased from $12.9 million as of January 1, 2006 and was 100% comprised of company-owned life insurance. The Company terminated these policies and invested cash in order to provide an investment balance equal to the deferred compensation liability. Earnings or losses from these investments offset earnings or losses in participant accounts. These investments could be used to satisfy general corporate purposes. We have insurance deposits in the amount of $49.7 million at December 31, 2006. These deposits are invested in short-term money market funds and are required to be maintained under agreements with our insurance carriers. These funds are not available to satisfy general corporate purposes but are used to pay claims.

Contractual Obligations and Commitments (in thousands)

	Payments due by period
	Total		2007		2008		2009		2010		2011		Thereafter
Debt obligations	$	1,309	$	1,009	$	300	$	—	$	—	$	—		$	—
Capital lease obligation	3,466		1,188		636		636		636		370			—
Operating lease obligations(1)	54,676		21,438		14,333		9,273		5,124		3,208			1,300
Purchase obligations(2)	79,626		25,394		15,715		14,910		14,898		8,694			15
Total	$	139,077	$	49,029	$	30,984	$	24,819	$	20,658	$	12,272		$	1,315

(1)Operating lease obligations for rent and equipment are expected to be offset by future sublease income of $3.1 million in 2007, $3.1 million in 2008, $3.0 million in 2009, $1.0 million in 2010 and $0.6 million in 2011 and thereafter.

(2)Purchase obligations primarily include normal and customary contracts and minimum spend contracts in the ordinary course of business, primarily information technology, outsourcing and maintenance contracts.

Off-Balance Sheet Arrangements

We do not have any significant off-balance sheet arrangements.

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, expenses and the disclosure of contingencies. Due to the

32

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS–(Continued)

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 quarterly basis. We use historical experience in assessing the adequacy of the reserve and this includes reviewing: net write-offs in relation to revenues, the allowance in comparison to the gross accounts receivable balance and comparative agings. Receivables deemed by management to be uncollectible based on historical trends 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 changing economy or a change in our customers’ financial positions, which could result in charges or credits to amounts recorded in selling, general and administrative expenses.

Intangible Assets—As required by Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets,” goodwill and other intangible assets with indefinite lives are not amortized, and are tested for impairment on an annual basis, or earlier if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying amount. Performing an impairment test involves estimating the fair value of a reporting unit, which requires us to make assumptions about future market conditions and our ability to perform as planned. When we are able, we use external data in our assumptions. However, as a practical matter there are times when we have little or no external data and as such, we use the information that is available to us without undue cost and effort in making those assumptions. Spherion performs its annual impairment test of intangible assets as of its November month-end. The 2006, 2005 and 2004 tests did not indicate the existence of impairment. Although these annual impairment tests did not result in impairment, due to the judgment inherent in estimating the fair value of a reporting unit, there could be charges in future years to operations for up to the full value of our goodwill balance, which is currently $49.7 million, if the markets in which we operate decline, if the market values of competitors decrease or we are unable to execute our business strategy.

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 and employment practices liability have been discounted at 4.8% and 4.4% at December 31, 2006 and January 1, 2006, respectively.  Recording reserves for self insured losses involves a considerable amount of judgment.  In developing the reserves we use estimates from external actuaries for most of our accruals where the accruals are sufficiently material, there is an adequate population of claims upon which to prepare actuarial estimates and the claims develop over a longer period of time.  For all other accruals we base our reserves on internal estimates.  Factors that can affect our reserves are as follows:

·The cost of benefits under the workers' compensation programs are regulated under state law and are subject to change.  Legislation can have a significant impact on our ability to control costs related to the amount and frequency of service, the amount of benefits paid if the employee is unable to work and our ability to put the employee back to work.  As legislation changes, our estimated liabilities will change. 

·Loss estimates from actuaries are primarily based on the historical pattern of losses.  Changes in loss patterns must often be consistently exhibited over a period of time before they are fully reflected in the reserves.  Claims can also take a number of years to fully develop until the final loss

33

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS–(Continued)

is known.  Changes to loss estimates reserve levels can occur several years after the loss has occurred. 

·Changes in the cost of health care services, claims processing costs, or increased litigation could affect the adequacy of these estimated liabilities. 

·Prolonged changes in interest rates for risk-free U.S. governmental bonds could also affect the discount rate used in estimating these liabilities.  An increase or decrease of 1.0% in the discount rate would result in a reduction or increase, respectively, to pre-tax expense of approximately $1.0 million. 

Management reviews these assumption 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 significantly 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.

Share-Based Compensation—We recognize compensation expense for all share-based payments by estimating the fair value of options at grant date using the Black-Scholes-Merton option-pricing model. Calculating the fair value of share-based payment awards requires the input of subjective assumptions, including the expected life of the share-based payment awards and stock price volatility. Management bases expected life on historical exercise and post-vesting employment-termination experience, and expected volatility on historical realized volatility trends. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and we use different assumptions, our share-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. If our actual forfeiture rate is materially different from our estimate, the share-based compensation expense could be significantly different from what we have recorded in the current period and could result in subsequent increases or decreases in compensation expense. See Note 2 to the Consolidated Financial Statements for a further discussion on share-based compensation.

Income Taxes—Deferred tax assets and liabilities are determined based on the difference between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  Our provision for income taxes is based on domestic and international statutory income tax rates and tax planning opportunities in the jurisdictions in which we operate.  Significant judgment is required in determining income tax provisions as well as deferred tax asset and liability balances, including the estimation of valuation allowances and the evaluation of tax positions.

At December 31, 2006, we had a net deferred tax asset of $134.3 million, net of a valuation allowance of $29.7 million.  Net deferred tax assets are primarily comprised of net deductible temporary differences, net operating loss carryforwards and tax credit carryforwards that are available to reduce taxable income in future periods.  The net 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.  These objective factors include historical taxable income, normalized for non-recurring income and expense items.  The determination of the amount of valuation allowance to be provided on recorded deferred tax assets involves estimates regarding the timing and amount of the reversal of taxable temporary differences, expected future taxable income and the impact of tax planning strategies.  A valuation allowance is required when it is more likely than not

34

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS–(Continued)

that all or a portion of a deferred tax asset will not be realized.  In assessing a valuation allowance, we consider all positive and negative evidence available at the time, including past operating results, projections of future taxable income and the feasibility of ongoing tax planning strategies.  The current valuation allowance relates primarily to foreign tax credit carryforwards, the benefit on capital loss carryforwards and the benefit on state net operating loss carryforwards that are not expected to be realized.  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 remaining net 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

Our monetary assets, consisting primarily of cash and receivables, are not affected by inflation because they are short-term. Our non-monetary assets, consisting primarily of intangible assets, goodwill and prepaid expenses and other assets, are not affected significantly by inflation. We believe that replacement costs of equipment, furniture and leasehold improvements will not materially affect our operations. However, the rate of inflation affects our cost of service and expenses, such as those for employee compensation, which may not be readily recoverable in the price of services offered by us.

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 may include “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 Item 1A, Risk Factors. If any of those 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 risk factors discussed in Item 1A, Risk Factors.

Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of December 31, 2006, approximately $48.7 million of cash and cash equivalents were invested in money market mutual funds. These financial instruments are not considered to be subject to interest rate risk due to their short duration. Our exposure to interest rate risk related to debt has been minimized since we have no outstanding variable debt as of December 31, 2006 and January 1, 2006.

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

35

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS–(Continued)

offsets. To the extent this is not practicable, exposure areas which are considered for hedging are foreign currency denominated receivables and payables, intercompany loans and firm committed transactions. 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 external sources.

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 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 $49.7 million and $78.0 million as of December 31, 2006 and January 1, 2006, respectively. Company-owned life insurance policies are carried at fair market value which approximated $12.9 million as of January 1, 2006. In January 2006, we surrendered the remaining company-owned life insurance policies of $12.9 million and invested these funds and an additional $10.7 million in a portfolio of mutual funds to fully match the deferred compensation liability of this plan. These assets, which totaled $24.1 million at December 31, 2006, are stated at fair market value.

The fair values of all other financial instruments, including debt, approximate their book values as the instruments are short-term in nature or contain market rates of interest.

36

Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

		Page No.
Management’s Report on Internal Control over Financial Reporting		38
Reports of Independent Registered Public Accounting Firm		39
Consolidated Statements of Earnings		42
Consolidated Balance Sheets		43
Consolidated Statements of Stockholders’ Equity		44
Consolidated Statements of Cash Flows		45
Notes to Consolidated Financial Statements:
Note 1.	Summary of Significant Accounting Policies	46
Note 2.	Share-Based Compensation	51
Note 3.	Income Taxes	54
Note 4.	Short-Term and Long-Term Debt Obligations	56
Note 5.	Financial Instruments and Fair Values	57
Note 6.	Goodwill	57
Note 7.	Property and Equipment	58
Note 8.	Employee Savings and Investment Plans	58
Note 9.	Stockholder Rights Plan	59
Note 10.	Stockholders’ Equity	60
Note 11.	Earnings Per Share	60
Note 12.	Commitments and Contingencies	60
Note 13.	Variable Interest Entities	62
Note 14.	Restructuring and Other Charges	63
Note 15.	Discontinued Operations	64
Note 16.	Segment Information	65
Note 17.	Quarterly Financial Data	67
Consolidated Financial Statement Schedule for the Fiscal Years Ended 2006, 2005 and 2004:
Schedule II—Valuation and Qualifying Accounts		69

37

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for the fair presentation of the Consolidated Financial Statements of Spherion Corporation. Management is also responsible for establishing and maintaining a system of internal controls over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. These internal controls are designed to provide reasonable assurance that the reported financial information is presented fairly, that disclosures are adequate and that the judgments inherent in the preparation of financial statements are reasonable. There are inherent limitations in the effectiveness of any system of internal control, including the possibility of human error and overriding of controls. Consequently, an effective internal control system can only provide reasonable, not absolute assurance, with respect to reporting financial information.

Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control-Integrated Framework, management concluded that our internal control over financial reporting was effective as of December 31, 2006. Management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their attestation report which is included herein.

/s/ ROY G. KRAUSE	/s/ MARK W. SMITH
Roy G. Krause President and Chief Executive Officer	Mark W. Smith Senior Vice President and Chief Financial Officer

38

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
of Spherion Corporation

Fort Lauderdale, Florida

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Spherion Corporation and subsidiaries (the “Company”) maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

39

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2006 of the Company and our report dated February 23, 2007 expressed an unqualified opinion on those financial statements and financial statement schedule.

DELOITTE & TOUCHE LLP

Certified Public Accountants

Fort Lauderdale, Florida
February 23, 2007

40

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
and Stockholders of Spherion Corporation

Fort Lauderdale, Florida

We have audited the accompanying consolidated balance sheets of Spherion Corporation and subsidiaries (the “Company”) as of December 31, 2006 and January 1, 2006, and the related consolidated statements of earnings, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2006. 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 the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 31, 2006 and January 1, 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006, 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.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2007 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

DELOITTE & TOUCHE LLP
Certified Public Accountants

Fort Lauderdale, Florida
February 23, 2007

41

SPHERION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(in thousands, except per share amounts)

	Fiscal Years Ended
	December 31,				January 1,			December 31,
	2006				2006			2004
Revenues		$	1,933,059		$	1,980,574			$	2,039,861
Cost of services		1,478,151			1,544,790				1,613,913
Gross profit		454,908			435,784				425,948
Selling, general and administrative expenses		422,806			404,454				401,608
Interest expense		1,965			3,205				5,766
Interest income		(4,055		)	(4,072		)		(3,815		)
Restructuring and other charges (credits)		(177		)	1,763				8,395
Provision for write-down of assets		—			—				959
Other loss		—			—				841
		420,539			405,350				413,754
Earnings from continuing operations before income taxes and discontinued operations		34,369			30,434				12,194
Income tax (expense) benefit		(11,780		)	(10,221		)		2,580
Earnings from continuing operations before discontinued operations		22,589			20,213				14,774
Earnings (loss) from discontinued operations, net of tax		32,093			(8,184		)		21,055
Net earnings		$	54,682		$	12,029			$	35,829
Earnings per share-Basic*:
Earnings from continuing operations before discontinued operations		$	0.39		$	0.33			$	0.24
Earnings (loss) from discontinued operations		0.56			(0.13		)		0.34
		$	0.96		$	0.20			$	0.59
Earnings per share-Diluted*:
Earnings from continuing operations before discontinued operations		$	0.39		$	0.33			$	0.24
Earnings (loss) from discontinued operations		0.56			(0.13		)		0.34
		$	0.95		$	0.20			$	0.57
Weighted-average shares used in computation of earnings per share:
Basic		57,212			60,938				61,036
Diluted		57,784			61,430				62,313

*Earnings per share amounts are calculated independently for each component and may not add due to rounding.

See Notes to Consolidated Financial Statements.

42

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

	December 31,				January 1,
	2006				2006
Assets
Current Assets:
Cash and cash equivalents		$	54,640		$	30,163
Receivables, less allowance for doubtful accounts of $3,354 and $4,708, respectively		274,185			294,330
Deferred tax asset		11,462			9,155
Insurance deposit		24,501			24,914
Other current assets		16,414			18,906
Total current assets		381,202			377,468
Goodwill		49,703			48,861
Property and equipment, net of accumulated depreciation of $93,723 and $114,038, respectively		87,291			88,562
Deferred tax asset		122,867			152,084
Insurance deposit		25,177			53,115
Other assets		27,147			22,554
		$	693,387		$	742,644
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable and other accrued expenses		$	78,368		$	93,570
Accrued salaries, wages and payroll taxes		59,062			62,619
Accrued insurance reserves		22,368			27,503
Accrued income tax payable		3,512			51,792
Current portion of long-term debt and other short-term borrowings		2,068			3,141
Accrued restructuring and other current liabilities		8,555			8,950
Total current liabilities		173,933			247,575
Long-term debt, net of current portion		2,377			3,735
Accrued insurance reserves		20,292			28,119
Deferred compensation		18,984			16,818
Other long-term liabilities		6,659			7,892
Total liabilities		222,245			304,139
Commitments and contingencies (see Notes 12 and 15)
Stockholders’ Equity:
Preferred stock, par value $0.01 per share; authorized, 2,500,000 shares; none issued or outstanding		—			—
Common stock, par value $0.01 per share; authorized, 200,000,000; issued 65,341,609 shares		653			653
Treasury stock, at cost, 8,777,220 and 6,510,739 shares, respectively		(77,856		)	(56,299		)
Additional paid-in capital		844,735			845,056
Accumulated deficit		(300,060		)	(354,742		)
Accumulated other comprehensive income		3,670			3,837
Total stockholders’ equity		471,142			438,505
		$	693,387		$	742,644

See Notes to Consolidated Financial Statements.

43

SPHERION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For Fiscal Years Ended December 31, 2006, January 1, 2006 and December 31, 2004

(amounts in thousands)

																Accumulated
								Additional								Other
	Common			Treasury				Paid-In				Accumulated				Comprehensive
	Stock			Stock				Capital				Deficit				Income				Total
Balance as of December 26, 2003		$	653		$	(54,971	)		$	852,995			$	(402,600	)		$	15,768		$	411,845
Comprehensive income:
Net income		—			—				—				35,829				—			35,829
Other comprehensive income:
Foreign currency translation adjustments arising during the period		—			—				—				—				1,028			1,028
Foreign currency translation adjustments related to the sale of The Netherlands, Asia/ Pacific and the United Kingdom subsidiaries		—			—				—				—				(13,762		)	(13,762		)
Comprehensive income																				23,095
Proceeds from exercise of employee stock options, including tax benefit		—			10,020				(3,241		)		—				—			6,779
Proceeds from issuance of shares under Employee Stock Purchase Plan		—			1,552				(604		)		—				—			948
Treasury stock reissued and compensation earned in connection with deferred compensation		—			2,969				(1,344		)		—				—			1,625
Balance as of December 31, 2004		653			(40,430		)		847,806				(366,771		)		3,034			444,292
Comprehensive income:
Net income		—			—				—				12,029				—			12,029
Other comprehensive income:
Foreign currency translation adjustments arising during the period		—			—				—				—				803			803
Comprehensive income																				12,832
Proceeds from exercise of employee stock options, including tax benefit		—			5,531				(1,717		)		—				—			3,814
Proceeds from issuance of shares under Employee Stock Purchase Plan		—			1,193				(511		)		—				—			682
Treasury stock reissued and compensation earned in connection with deferred compensation		—			1,426				(522		)		—				—			904
Treasury stock purchases		—			(24,019		)		—				—				—			(24,019		)
Balance as of January 1, 2006		653			(56,299		)		845,056				(354,742		)		3,837			438,505
Comprehensive income:
Net income		—			—				—				54,682				—			54,682
Other comprehensive income:
Foreign currency translation adjustments arising during the period		—			—				—				—				(167		)	(167		)
Comprehensive income																				54,515
Proceeds from exercise of employee stock options, including tax benefit		—			2,728				(456		)		—				—			2,272
Proceeds from issuance of shares under Employee Stock Purchase Plan		—			710				(179		)		—				—			531
Treasury stock reissued and compensation earned in connection with deferred compensation		—			3,340				(3,155		)		—				—			185
Treasury stock purchases		—			(28,335		)		—				—				—			(28,335		)
Share-based compensation expense		—			—				3,469				—				—			3,469
Balance as of December 31, 2006		$	653		$	(77,856	)		$	844,735			$	(300,060	)		$	3,670		$	471,142

See Notes to Consolidated Financial Statements.

44

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

	Fiscal Years Ended
	December 31,				January 1,				December 31,
	2006				2006				2004
Cash flows from operating activities:
Net earnings		$	54,682			$	12,029			$	35,829
Adjustments to reconcile net earnings to net cash provided by operating activities:
Discontinued operations (gain) loss on disposal, net of income tax		(2,438		)		6,665				(27,053		)
Loss on retirement of debt		—				—				841
Depreciation and amortization		22,198				21,906				28,844
Deferred income tax expense (benefit)		26,910				6,313				(8,864		)
Restructuring and other charges		750				1,763				10,508
Share-based compensation		3,654				939				1,018
Other non-cash charges		1,410				1,253				(1,014		)
Changes in assets and liabilities, net of effects of acquisitions:
Receivables, net		20,224				62,767				(69,210		)
Other assets		(6,283		)		2,551				(2,158		)
Income tax receivable		4,613				8,484				17,844
Accounts payable, income taxes payable, accrued liabilities and other liabilities		(79,635		)		(52,385		)		19,492
Net cash provided by operating activities		46,085				72,285				6,077
Cash flows from investing activities:
Proceeds from sale of discontinued operations		1,004				1,376				43,745
Acquisitions, net of cash acquired		(1,186		)		(887		)		(312		)
Capital expenditures, net		(22,677		)		(9,651		)		(12,050		)
Insurance reimbursements		29,713				19,054				3,855
Surrender of company-owned life insurance policies, net		—				4,179				—
Note receivable proceeds from sale of Australian subsidiary		—				3,781				—
Other		1,105				888				(1,241		)
Net cash provided by investing activities		7,959				18,740				33,997
Cash flows from financing activities:
Debt repayments, net		(3,139		)		(5,642		)		(798		)
Retirement of convertible notes		—				(8,000		)		(90,323		)
(Repayments) borrowings of lines of credit, net		—				(32,085		)		29,407
Proceeds from exercise of employee stock options		2,007				3,605				5,654
Purchases of treasury stock and other, net		(28,338		)		(24,026		)		(262		)
Net cash used in financing activities		(29,470		)		(66,148		)		(56,322		)
Effect of exchange rates on cash and cash equivalents		(97		)		132				154
Net increase (decrease) in cash and cash equivalents		24,477				25,009				(16,094		)
Cash and cash equivalents, beginning of period		30,163				5,154				21,248
Cash and cash equivalents, end of period		$	54,640			$	30,163			$	5,154
Supplemental cash flow information:
Cash (received) paid during the year for:
Income taxes		$	(3,248	)		$	(5,072	)		$	(13,157	)
Interest		$	1,316			$	1,935			$	4,926
Non-cash activities:
Accrual of fixed asset purchases		$	900			$	3,209			$	757
Short-term notes payable for purchase of software and related costs		$	709			$	714			$	4,042
Deferred purchase price from the sale of discontinued operations		$	—			$	120			$	3,160

See Notes to Consolidated Financial Statements.

45

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 the United States of America and Canada. Temporary staffing is a service where Spherion’s employees work at customer locations and under the supervision of customer personnel. Temporary staffing services include personnel in the following skill categories: clerical, light industrial, information technology, finance and accounting, legal, engineering, sales and marketing, human resources and administrative. Managed services includes services where Spherion manages aspects of a customer function such as: recruiting, 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 has a network of 660 locations.

Principles of Consolidation—The accompanying Consolidated Financial Statements include the accounts of Spherion Corporation, its wholly-owned subsidiaries and certain other entities it is required to consolidate (“Spherion”). All material intercompany transactions and balances have been eliminated.

In accordance with Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 46 (“FIN 46R”), “Consolidation of Variable Interest Entities,” Spherion consolidates variable interest entities (VIE’s) for which it is the primary beneficiary. VIE’s are generally entities that lack sufficient equity to operate without additional financial support from other parties or are entities whose equity holders do not have adequate decision making authority. The primary beneficiary of a VIE is the party that absorbs the majority of the entity’s expected losses or receives the majority of the residual returns.

Spherion has evaluated the provisions of FIN 46R and determined that it applies to its two forms of franchise agreements for franchisees and licensees. Spherion has determined that these agreements by themselves do not create a VIE, but in some cases Spherion has provided financing under these agreements which does create a VIE. Spherion evaluates all VIE’s to determine if it is the primary beneficiary and consolidates VIE’s when it is the primary beneficiary.

Use of Estimates—The preparation of financial statements in conformity with generally accepted accounting principles 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—Effective in 2005, Spherion changed its fiscal year end by two days from 52 or 53 weeks ending on the last Friday in December to 52 or 53 weeks ending on the last Sunday in December. This change conforms Spherion’s reporting periods to its normal weekly business cycle. This change did not have a material impact on Spherion’s quarterly or annual results of operations, cash flows or financial position. The fiscal years ended in December 31, 2006 (“Fiscal year 2006” or “2006”), January 1, 2006, and December 31, 2004 had 52, 52 and 53 weeks, respectively.

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

46

SPHERION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–(Continued)

based on management’s best estimates based on historical write-off levels and other factors. Recoveries are recognized in the period they are received. The ultimate amount of accounts receivable that become uncollectible could differ from those estimated.

Investments—Spherion maintains investments in mutual funds to offset the cost of providing its non-qualified deferred compensation plans (See Note 8, “Employee Savings and Investment Plans”). These investments are classified as trading securities and are reported at fair value with gains and losses included in earnings during the period incurred. The specific identification method is used to determine the cost of investments sold. These investments are included in “Other current assets” and “Other assets” in the accompanying Consolidated Balance Sheets. Spherion did not have any investments in available-for-sale securities as of December 31, 2006 or January 1, 2006.

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 should be tested for impairment on an annual basis, or more often if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Trade names and other intangible assets are amortized on a straight-line basis over a period of approximately 5 years. See Note 6, “Goodwill,” 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 are 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 at least annually 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 and employment practices liability losses have been discounted at 4.8% and 4.4% at December 31, 2006 and January 1, 2006, respectively, and are based on actuarial estimates. While management believes that the amount recorded for the liabilities is adequate, there can be no assurance that changes to management’s estimates may not

47

SPHERION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–(Continued)

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 partially funds its workers’ compensation liability with an insurance deposit that was $49.7 million and $78.0 million at December 31, 2006 and January 1, 2006, 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 Canadian operation uses the Canadian dollar as its functional currency. Assets and liabilities of this operation are translated at the exchange rates in effect on the balance sheet date. Amounts included in Spherion’s Statements of Earnings 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.

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 revenues and the related labor costs are recorded in the period in which services are performed. Permanent placement revenues are recognized upon candidate start date. 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 Earnings.

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 $8.6 million, $9.0 million, and $8.4 million for the 2006, 2005 and 2004 fiscal years, 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 sales and recruiting services. Accordingly, sales and costs of services generated by the licensed operation are recorded in Spherion’s Consolidated Statements of Earnings. 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 72%, 70% and 68% for the fiscal years ended 2006, 2005 and 2004, 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 sales and service employees.

Except in the circumstance where Spherion is required to consolidate certain licensees’ operations (see Note 13, “Variable Interest Entities,” for further discussion), Spherion’s Consolidated Statements of Earnings reflect the licensee commission as an 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. 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,

48

SPHERION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–(Continued)

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. 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 3, “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, if applicable, 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. During 2004 and 2005, Spherion repaid its convertible subordinated notes and convertible promissory notes, respectively. 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 11, “Earnings 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. Spherion accounts for its derivatives in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended. Gains and losses on contracts that hedge foreign currency commitments are recognized in earnings. Amounts receivable or payable under the agreements are included in “Other current assets” or “Other current liabilities” in the accompanying Consolidated Balance Sheets.

Share-Based Compensation—Effective January 2, 2006, Spherion adopted the provisions of SFAS No. 123 (revised 2004, “SFAS No. 123R”), “Share-Based Payment,” using the modified prospective transition method. Under this transition method, the compensation cost recognized beginning January 2, 2006 includes compensation cost for (i) all share-based payments granted prior to, but not yet vested as of January 2, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS No. 123, “Accounting for Stock Based Compensation,” and (ii) all share-based payments granted subsequent to January 1, 2006 based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123R. Prior period amounts have not been restated to recognize compensation cost in the Consolidated Statements of Earnings. Under SFAS No. 123R, compensation cost is measured at the grant date based on the value of the award and is recognized in the statement of earnings over the vesting period.

Prior to fiscal year 2006, employee stock options were accounted for under the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees,” and its related interpretations, and were granted at market value. Accordingly, compensation expense for stock option awards for prior periods was not recognized in the Consolidated Statements of Earnings. See Note 2, “Share-Based Compensation,” for further discussion.

New Accounting Pronouncements and Interpretations—In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (“SAB 108”), “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” SAB 108 requires that public

49

SPHERION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–(Continued)

companies utilize a dual-approach to assessing the quantitative effects of financial misstatements. This dual approach includes both an income statement focused assessment and a balance sheet focused assessment. Financial statements would require adjustment when a misstatement is material. Correcting prior year financial statements for immaterial errors would not require previously filed reports to be amended. SAB 108 is effective for fiscal years ending after November 15, 2006. The adoption of SAB 108 did not have an effect on Spherion’s financial condition or results of operations.

In September 2006, SFAS No. 157, “Fair Value Measurements,” was issued. SFAS No. 157 addresses the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. SFAS No. 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. The provisions of SFAS No. 157 are effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Spherion does not believe the adoption of SFAS No. 157 will have a material impact on its financial condition or results of operations.

In June 2006, FIN No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes—An Interpretation of FASB Statement No. 109,” was issued. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation requires the recognition of the impact of a tax position in the Consolidated Financial Statements, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The provisions of FIN 48 are effective for Spherion first quarter 2007. Spherion is currently evaluating the impact of adopting FIN 48.

50

SPHERION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–(Continued)

2.SHARE-BASED COMPENSATION

As a result of adopting SFAS No. 123R on January 2, 2006, earnings from continuing operations before income taxes and net earnings as of December 31, 2006 were reduced by $3.5 million pre-tax ($3.0 million after-tax) and earnings per share was reduced by $0.05 per share. This reflects the impact of the expense from stock options and employee stock purchases previously not required to be included in the Consolidated Statements of Earnings. The following table reflects pro forma net loss and loss per share for the fiscal years 2005 and 2004, had the Company applied the fair value approach of SFAS No. 123, as reported in the footnotes to the Company’s Consolidated Financial Statements (in thousands, except per share amounts):

	Fiscal Years
	2005			2004
Net earnings, as reported	$	12,029		$	35,829
Add: Deferred stock unit expense included in reported net earnings, net of related tax effects	572			620
Deduct: Total stock-based employee compensation expense determined under SFAS No. 123 for all awards, net of related tax effects	(2,489		)	(3,577		)
Pro forma net earnings	$	10,112		$	32,872
Earnings per share:
Basic—as reported	$	0.20		$	0.59
Basic—pro forma	$	0.17		$	0.54
Diluted—as reported	$	0.20		$	0.57
Diluted—pro forma	$	0.16		$	0.53

In May 2006, Spherion’s stockholders approved the adoption of the 2006 Stock Incentive Plan, which replaced the 2000 Stock Incentive Plan and the Deferred Stock Plan effective July 1, 2006. Under the 2006 Stock Incentive 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 seven years at a price that is not less than 100% of fair market value on the date of grant. The 2006 Stock Incentive Plan also allows other types of stock-based awards including common stock, performance shares, performance units, restricted stock and stock appreciation rights, although there are limitations on the amount of full value awards that can be granted. All awards of stock options, deferred stock units and other stock-based awards granted on or after July 1, 2006 will be issued under the 2006 Stock Incentive Plan. As of December 31, 2006, Spherion had 5,260,459 shares reserved for future grants under the 2006 Stock Incentive Plan. Additionally, any shares subject to awards under the 2000 Stock Incentive Plan that are cancelled, forfeited or expired will be available for re-grant under the 2006 Stock Incentive Plan. Spherion expects to satisfy option exercises with treasury stock. The Company may from time to time repurchase shares to offset the dilutive impact of shares issued to employees under Spherion’s various employee benefit plans.

Spherion also 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 provisions of SFAS No. 123R require the expense related to Spherion’s Employee Stock Purchase Plan be recorded in the Consolidated Statements of Earnings. The expense related to this plan was not material to the Consolidated Statements of Earnings.

51

SPHERION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–(Continued)

All share-based compensation expense and tax benefits recognized in the Consolidated Statement of Earnings during the year were as follows (in thousands):

	Fiscal Years
	2006			2005			2004
Share-based compensation expense	$	3,654		$	939		$	1,018
Income tax benefit	(494		)	(367		)	(398		)
Share-based compensation expense, net of tax	$	3,160		$	572		$	620

The fair value of each option grant is estimated using the Black-Scholes-Merton option pricing model. The fair value is then amortized over the requisite vesting periods of the awards. Use of this valuation model requires management to make certain assumptions with respect to selected model inputs. Expected volatility was calculated based on the historical volatility of Spherion’s stock. The average expected life was based on the contractual term of the option and expected employee exercise and post-vesting employment termination behavior. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant. Forfeitures are estimated based on historical option forfeitures. Assumptions used in the valuation model were as follows:

	Fiscal Years
	2006			2005			2004
Expected life (in years)	4.2			3.3			3.3
Interest rate	4.6		%	3.6		%	2.7		%
Volatility	49.0		%	52.0		%	55.0		%
Expected dividends	—			—			—
Weighted average per share fair value	$	4.39		$	3.14		$	3.55

The increase in the fair value of the options over the prior year is primarily due to increased exercise prices of options granted, longer expected lives based on the pattern of stock option exercises and higher interest rates on U.S. Government securities.

Changes under these stock option plans for the fiscal year-ended December 31, 2006 were as follows:

						Weighted
			Weighted			Average		Aggregate
			Average			Remaining		Intrinsic
			Exercise			Contractual		Value*
	Shares		Price			Term (in years)		(in thousands)
Outstanding at January 1, 2006	4,270,674			$	9.98
Granted	1,110,700			10.00
Exercised	(309,662	)		7.04
Forfeited	(893,802	)		11.66
Outstanding at December 31, 2006	4,177,910			$	9.85		6.6		$	2,206
Vested and expected to vest at December 31, 2006	3,985,622			$	9.87		6.5		$	2,159
Options exercisable at December 31, 2006	2,696,070			$	10.16		5.4		$	1,846

*The intrinsic value of an option is the excess of the market price at the balance sheet date of the underlying stock over the exercise price.

The total intrinsic value of options exercised as of December 31, 2006, January 1, 2006, and December 31, 2004 was $0.3 million, $0.2 million, and $1.7 million, respectively.

52

SPHERION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–(Continued)

As of December 31, 2006, there was $2.2 million of total unrecognized compensation costs related to nonvested stock options granted under the Plan. That cost is expected to be recognized over a weighted-average period of 0.8 years. The total fair value of stock options vested during the year ended December 31, 2006, January 1, 2006, and December 31, 2004 was $4.2 million, $4.6 million, and $3.8 million, respectively.

Cash received from option exercises was $2.0 million, $3.6 million, and $5.7 million for the fiscal years ended December 31, 2006, January 1, 2006, and December 31, 2004, respectively.

Spherion employees and outside directors are eligible to receive grants of deferred stock units. Deferred stock units entitle the recipient to receive shares of Spherion common stock at a future date after the recipient has met service requirements or Spherion has met financial targets. The majority of the deferred stock units vest based upon attainment of performance criteria; the remainder vest over 1 to 7 years. If performance criteria are not met, the shares do not vest and recognized compensation cost, if any, is reversed to income. The value of the deferred stock units is amortized to compensation expense ratably over the vesting period and was $0.2 million, $0.9 million, and $1.0 million for the fiscal years ended December 31, 2006, January 1, 2006, and December 31, 2004, respectively. The provisions of SFAS No. 123R did not materially change the accounting for the deferred stock units. Changes in nonvested stock (deferred stock units) for the fiscal year ended December 31, 2006 were:

			Weighted
			Average
			Grant-Date
	Shares		Fair Value
Nonvested at beginning of year	698,600			$	9.07
Granted	225,949			9.59
Vested	(286,913	)		10.61
Forfeited	(157,500	)		8.99
Nonvested at end of year	480,136			$	8.42

As of December 31, 2006, total unrecognized compensation related to deferred stock units was $3.2 million; the previously recognized portion was $0.8 million. The unrecognized compensation cost related to deferred stock units that vest solely based on the passage of time is $0.5 million and is being recognized as a selling, general and administrative expense over the vesting period. The unrecognized compensation cost related to deferred stock units that vest solely based on the attainment of performance criteria is $2.7 million of which $1.2 million is estimated to ultimately vest and is being recognized as a selling, general and administrative expense over the vesting period. The remaining $1.5 million related to deferred stock units that vest solely based on the attainment of performance criteria is not being recognized as the performance criteria are not estimated to be achieved. Total unrecognized compensation costs related to deferred stock units are expected to be recognized over a weighted-average period of 2.1 years. The total fair value of deferred stock units vested during the year ended December 31, 2006, January 1, 2006, and December 31, 2004 was $3.0 million, $0.4 million, and $1.5 million, respectively.

53

SPHERION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–(Continued)

3.INCOME TAXES

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

	Fiscal Years
	2006			2005		2004
Income from continuing operations before income taxes:
United States of America	$	32,483		$	28,880	$	11,960
Foreign	1,886			1,554		234
	$	34,369		$	30,434	$	12,194
Current tax (benefit) expense:
Federal	$	(15,878	)	$	426	$	1,724
State	430			1,386		968
Foreign	—			47		44
	(15,448		)	1,859		2,736
Deferred tax (benefit) expense:
Federal	25,336			7,685		355
State	1,607			94		(5,671		)
Foreign	285			583		—
	27,228			8,362		(5,316		)
Total provision (benefit) for income taxes	$	11,780		$	10,221	$	(2,580	)

The following table reconciles the United States federal income tax rate to Spherion’s effective tax rate:

	Fiscal Years
	2006		2005		2004
Statutory rate	35.0	%	35.0	%	35.0	%
Increase (decrease) in rate resulting from:
State and local income taxes, net of federal benefit	2.9		1.8		(43.2	)
Work Opportunity Tax Credit	(6.4	)	(5.8	)	(18.1	)
Foreign income and withholding taxes	(0.8	)	0.8		1.4
Valuation allowance	(2.3	)	—		—
Nondeductible meals and entertainment	1.3		1.4		4.4
Share-based compensation expense	2.4		—		—
Company-owned life insurance	—		(0.4	)	(3.3	)
Other, net	2.2		0.8		2.6
Effective tax rate	34.3	%	33.6	%	(21.2	)%

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SPHERION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–(Continued)

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

	Fiscal Years
	2006			2005
Current deferred tax asset (liability):
Employee compensation and benefit plans	$	2,339		$	3,216
Self-insurance	7,065			2,984
Accrued expenses	2,718			2,846
Other	1,820			1,824
	13,942			10,870
Valuation allowance	(2,480		)	(1,715		)
Net current deferred tax asset	11,462			9,155
Non-current deferred tax asset (liability):
Employee compensation and benefit plans	10,823			11,534
Self-insurance	9,039			16,726
Depreciation	(11,437		)	(11,260		)
Amortization	58,122			69,120
Accrued expenses	2,238			3,957
General business and other credits carryforward	16,891			12,960
Foreign tax credit carryforward	18,813			19,625
Loss carryforwards	45,574			60,367
	150,063			183,029
Valuation allowance	(27,196		)	(30,945		)
Long-term deferred tax asset	122,867			152,084
Total	$	134,329		$	161,239

At December 31, 2006, Spherion had a net deferred tax asset of $134.3 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. These objective factors include historical taxable income, normalized for non-recurring income and expense items. Using an average of this income projected to future years, if the asset can be recovered within the statutory carryforward periods, there is no impairment.

Spherion has a United States federal net operating loss carryforward in the amount of $84.3 million expiring in 2024 and thereafter. Spherion has $214.0 million of state net operating loss carryforwards which expire over the next one to twenty years. Canadian net operating loss carryforwards are available in the amount of $1.9 million, and expire between 2007 and 2013.

Spherion’s valuation allowance decreased by $3.0 million during 2006. The valuation allowance reduces our deferred tax asset to an amount that is more likely than not to be realized, and is based on the uncertainty of the realization of two principal items. As a result of federal tax return filings in 2005, foreign tax credits and capital losses were released for carry forward from the 2001 tax year. The exit from most of our foreign operations makes it unlikely that we will utilize these foreign tax credits in the future. A valuation allowance has been recorded against the full amount of foreign tax credit carryforward of $18.8 million. In addition, we have recorded a valuation allowance against the full amount of the $6.9 million benefit on capital loss carry forward of $19.7 million. The benefits on foreign tax credits expire between 2011 and 2012. The benefits on capital loss carryforwards expire between 2009 and 2011; and,

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SPHERION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–(Continued)

general business credits carried forward will expire between 2021 and 2026. Valuation allowances for state net operating loss carryforwards and other items account for remainder of the total $29.7 million. At December 31, 2006 and January 1, 2006, there were no unremitted foreign earnings.

4.SHORT-TERM AND LONG-TERM DEBT OBLIGATIONS

A summary of short-term and long-term debt obligations is as follows (in thousands):

	Fiscal Years
	2006			2005
Short-term debt obligations:
Other debt, due 2007 and 2006, respectively	$	709		$	1,338
Current portion of long-term debt	1,359			1,803
Total short-term debt obligations	$	2,068		$	3,141
Long-term debt obligations:
Capital lease, due through 2011	$	3,136		$	4,639
Other debt, due through 2008	600			899
Total long-term debt obligations	3,736			5,538
Less current portion of long-term debt	(1,359		)	(1,803		)
Long-term debt, net of current portion	$	2,377		$	3,735

Spherion has a U.S. dollar revolving line of credit in the amount of $250.0 million that is secured by substantially all of its domestic accounts receivable. At Spherion’s option, the amount available can be increased to $300.0 million. As of December 31, 2006 and January 1, 2006, there were no amounts outstanding under this facility. Total availability under this facility was $159.6 million for the fiscal year ending December 31, 2006 and is calculated as eligible receivables of $204.3 million, less: amounts outstanding, letters of credit of $16.7 million and a one week payroll reserve of $28.0 million. Interest on this line of credit is based upon the duration of the loan, availability under the line and other conditions and would have been approximately 6.9% (LIBOR plus a spread) or approximately 8.0% (prime plus a spread) as of December 31, 2006. Spherion pays an unused line fee in the range of 0.25% to 0.38% per annum that is determined by the unused portion of the revolving line of credit as well as a letter of credit fee of 0.25% per annum. This line of credit expires in 2010.

Spherion also has a Canadian dollar revolving line of credit (secured by Canadian accounts receivable) that matures July 2007. This facility provides up to CAD$13.0 million of on-balance sheet financing (approximately $11.1 million at current exchange rates). As of December 31, 2006 and January 1, 2006, there were no borrowings outstanding under this facility. As of December 31, 2006, the interest rate for amounts borrowed on this facility would have approximated 7.0% (Canadian prime plus a spread). A commitment fee of 0.5% per annum is payable based on the unused portion of the revolving line of credit. Spherion guarantees the Canadian dollar revolving line of credit.

Spherion’s lines of credit provide for certain affirmative and negative covenants which may limit the total availability under these revolving lines of credit based upon Spherion’s 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 subsidiaries and related parties. Failure to meet compliance with one of more of these covenants in the future could affect the amount of availability Spherion has to borrow against and as a result, our liquidity

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SPHERION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–(Continued)

and financial condition may be adversely affected. At December 31, 2006, Spherion was in compliance with the requirements of these covenants.

During 2004, Spherion retired its remaining U.S. dollar convertible subordinated notes (the “Notes”) and paid a premium of $0.6 million to retire the Notes and wrote-off the remaining bond issuance costs of $0.2 million, both of which are included in “Other loss” in the accompanying Consolidated Statements of Earnings.

Spherion entered into a seven-year contract with a third party information technology company to outsource its technology infrastructure operations effective as of July 26, 2004. The contract includes the sale at book value (which approximates fair market value) of certain computer hardware to be operated by the outsource provider. Spherion accounted for this portion of the outsourced transaction as a sale-leaseback pursuant to SFAS No. 13, “Accounting for Leases.” Spherion recorded an asset and a capital lease obligation of $6.4 million at the start of the contract. The capital lease obligation and imputed interest remaining at December 31, 2006 was $3.1 million dollars and $0.3 million, respectively.

Aggregate future maturities of long-term debt as of December 31, 2006 are $1.4 million in 2007, $0.8 million in 2008, $0.6 million in 2009, $0.6 million in 2010 and $0.4 million in 2011.

5.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 assets approximates fair value due to the short-term maturities of these instruments. Spherion’s insurance deposits are restricted to the payment of claims and are carried at cost, which approximates fair market value. Company-owned life insurance policies are carried at fair market value; no such policies were carried as of December 31, 2006 and as of January 1, 2006 such policies approximated $12.9 million.

In estimating the fair value of derivative positions, Spherion utilizes quoted market prices, if available, or quotes obtained from outside sources. As of December 31, 2006, Spherion had one outstanding forward contract to sell CAD$3.5 million in March 2007. This derivative had a fair value or cost to unwind that is not material to Spherion’s consolidated results of operations.

The fair values of all other financial instruments, including debt, approximate their book values as the instruments are short-term in nature or contain market rates of interest.

6.GOODWILL

Spherion has five reporting units with goodwill and performs its annual impairment test of goodwill as of its November month-end. The test for potential impairment is at the reporting unit level which is one level below an operating segment. Reporting units are aggregated for purposes of the impairment test only when the aggregation rules under SFAS No. 142, paragraph 30 are met. These rules permit reporting units with similar economic characteristics to be combined for purposes of measuring impairment. The 2006, 2005 and 2004 test results indicated no impairment.

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SPHERION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–(Continued)

The changes in the carrying amount of goodwill by segment are as follows (in thousands):

	Staffing Services			Professional Services				Total
Balance at December 31, 2004	$	39,944			$	8,813		$	48,757
Foreign currency changes and other	645				(96		)	549
Goodwill additions during the period	960				—			960
Net operating loss tax benefit realization	(1,405		)		—			(1,405		)
Balance at January 1, 2006	40,144				8,717			48,861
Foreign currency changes and other	(61		)		—			(61		)
Goodwill additions during the period	541				487			1,028
Net operating loss tax benefit realization	(125		)		—			(125		)
Transfer of business activity*	(6,724		)		6,724			—
Balance at December 31, 2006	$	33,775			$	15,928		$	49,703

*Adjusted for the movement of certain Managed Services contracts from within Staffing Services to Professional Services.

The net operating loss tax benefit realization in both periods related to the utilization of pre-acquisition net operating losses carry-forwards of Spherion’s Canadian operation.

7.PROPERTY AND EQUIPMENT

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

	Life		Fiscal Years
	(in years)		2006			2005
Land		—	$	4,167		$	4,167
Buildings		10-40	21,506			21,478
Equipment		3-8	57,595			78,934
Enterprise-wide information system		5-7	63,283			58,912
Software, primarily third party purchased software		5	26,320			28,613
Leasehold improvements and other		3-7	8,143			10,496
			181,014			202,600
Less: Accumulated depreciation and amortization			(93,723		)	(114,038		)
			$	87,291		$	88,562

Equipment includes capital lease assets of $3.1 million and $4.6 million as of December 31, 2006 and January 1, 2006, respectively. Depreciation and amortization expense of property and equipment including leased assets for the fiscal years 2006, 2005 and 2004 amounted to $21.9 million, $21.3 million and $23.7 million, respectively.

8.EMPLOYEE SAVINGS AND INVESTMENT PLANS

Spherion has a voluntary employee savings plan (the “401(k) Benefit Plan”) covering substantially all eligible employees in the United States of America. This plan has a basic match for those employees eligible to receive the match, which is based on employee contributions. Employer contributions by Spherion under the plan amounted to $0.7 million, $0.7 million and $0.6 million for fiscal years 2006, 2005

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SPHERION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–(Continued)

and 2004, respectively. There were approximately 1,500 participating employees in this plan as of December 31, 2006.

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 is not funded, however, Spherion maintained investments of $24.1 million in a portfolio of mutual funds at December 31, 2006, which are included in “Other current assets” and “Other assets” in the accompanying Consolidated Balance Sheets based on expected timing of distribution. The investment balance increased from $12.9 million as of January 1, 2006 and was 100% comprised of company-owned life insurance. The Company terminated these policies and invested cash in order to provide an investment balance equal to the deferred compensation liability. Earnings or losses from these investments offset earnings or losses in participant accounts. These investments could be used to satisfy general corporate purposes. The deferred compensation liability and accumulated investment earnings or losses are accrued. Such accrual amounted to $24.5 million and $24.3 million at December 31, 2006 and January 1, 2006, respectively, the short-term portion is within “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 “Other long-term liabilities”) as employees may only be paid out in shares of Spherion stock. There were approximately 170 employees participating in this plan as of December 31, 2006.

9.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.

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 public announcement of the intent to commence 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 (currently set at $55), either one-hundredth of a share of a new class of Spherion’s preferred stock or shares of Spherion’s common stock having a market value equal to two times the exercise price of the Right. Following an Unapproved Stock Acquisition, if Spherion is involved in a merger, or 50% or more of Spherion’s assets or earning power are sold, 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 two times 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 Spherion 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.

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SPHERION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–(Continued)

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 plan continues to be in the best interest of Spherion and its stockholders. The committee reviewed the plan in 2006 and determined that the plan should be maintained. The committee intends to review the plan again in 2009.

10.STOCKHOLDERS’ EQUITY

During May 2005, the Board of Directors authorized the repurchase of up to six million shares or approximately 10% of the Company’s outstanding common stock. Share repurchases were made from time to time in open-market transactions or in privately negotiated transactions. During the fiscal years ended December 31, 2006 and January 1, 2006, Spherion purchased 3.0 million and 3.0 million shares for approximately $28.3 million and $24.0 million at an average price per share of $9.54 and $7.87, respectively.

On February 20, 2007, the Board of Directors authorized the Company to repurchase shares of its common stock as needed to mitigate the dilutive impact of shares issued under our various employee benefit plans. The repurchases are limited to a maximum of 50,000 shares of common stock per week.

11.EARNINGS PER SHARE

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

	Fiscal Years
	2006							2005							2004
	Earnings From Continuing Operations			Shares	Per Share Amount			Earnings From Continuing Operations			Shares	Per Share Amount			Earnings From Continuing Operations			Shares	Per Share Amount
Basic EPS		$	22,589	57,212		$	0.39		$	20,213	60,938		$	0.33		$	14,774	61,036		$	0.24
Effect of Dilutive
Securities:
Stock options and other dilutive securities		—		572					—		492					—		877
Convertible notes		—		—					—		—					—		400
Diluted EPS		$	22,589	57,784		$	0.39		$	20,213	61,430		$	0.33		$	14,774	62,313		$	0.24

12.COMMITMENTS AND CONTINGENCIES

Substantially all of Spherion’s operations are conducted in leased premises. Spherion also leases computers and other equipment. Total lease expense for the fiscal years ended 2006, 2005 and 2004 was $22.1 million for each year. Future minimum lease payments under non-cancelable leases as of December 31, 2006 are $21.4 million, $14.3 million, $9.3 million, $5.1 million and $3.2 million in the years 2007 through 2011, respectively, and $1.3 million thereafter which are partially offset by $10.8 million under future non-cancelable subleases. Of these future minimum lease payments, $7.2 million has been

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SPHERION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–(Continued)

accrued as of December 31, 2006, related to facility closures, in amounts of $1.6 million, $2.1 million and $3.5 million which are included as part of “Accrued restructuring and other current liabilities,” “Accounts payable and other accrued expenses” and “Other long-term liabilities” in the accompanying Consolidated Balance Sheets, respectively.

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 disposition of these businesses also usually requires that we indemnify the purchaser for liabilities that arose prior to the disposition date. See Note 15, “Discontinued Operations,” for further discussion.

We own 85% of our Canadian operation and have a put/call agreement with the minority interest shareholder, whereby the minority interest shareholder can put the remaining 15% interest in the business to Spherion any time or Spherion can call the remaining 15% interest any time after January 1, 2008. 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. Based upon these factors, the estimated purchase price using 2006 operating results and net assets as of the end of the year would approximate $4.5 million.

Spherion had outstanding irrevocable letters of credit of approximately $16.5 million and surety bonds outstanding of approximately $0.2 million as of December 31, 2006. These instruments primarily collateralize Spherion’s recorded obligations under 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 can collateralize its workers’ compensation liabilities with either letters of credit or deposits (See Note 5, “Financial Instruments and Fair Values”).

Spherion, in the ordinary course of its business, is or may be 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 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.

Interim HealthCare Inc., Catamaran Acquisition Corp. and Cornerstone Equity Investors IV, L.P. filed an action against Spherion in the Delaware Court of Chancery in 2001 related to the divestiture of Interim HealthCare (the “Healthcare Divestiture”). The same parties also sought damages against Spherion in an action in Delaware Superior Court. The cases went to trial in December 2003 and in February 2005 the court issued its decision requiring Spherion to pay damages on one breach of contract claim in the amount of $1.1 million plus pre- and post-judgment interest and attorneys’ fees. After the parties stipulated to the amount of pre-judgment interest and attorneys’ fees, the judge entered an order of judgment in June 2005 directing Spherion to pay a total of approximately $1.7 million, and in August 2005 this amount was paid to the plaintiffs. The plaintiffs appealed the ruling and in October 2005 the Delaware Supreme Court issued its opinion affirming the trial court’s ruling in all respects.

On December 13, 2004, and as amended on January 13, 2005 and October 31, 2005, Glidepath Holding B.V. and Jeimon Holdings N.V. filed an action against Spherion Corporation in the U.S. District Court of the Southern District of New York. Glidepath and Jeimon Holdings, investors in the entity that acquired the Cyber Center business of Spherion Technology (UK) Limited, a subsidiary of Spherion Corporation, in 2002, sued Spherion for fraud, negligent misrepresentation, aiding and abetting breach of fiduciary duty and unjust enrichment and seek $32.0 million in damages, and treble for punitive damages,

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SPHERION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–(Continued)

plus attorneys’ fees, expert fees and costs. Glidepath and Jeimon Holdings allege that an individual who was an officer of Spherion Technology (UK) fraudulently induced them to invest in a corporation formed to purchase the Cyber Center business, while he remained in the employ of Spherion Technology (UK) and was to be paid an incentive bonus for the sale by Spherion. They allege that he misled them as to his employment status at the time, as to the prospects for the Cyber Center, and as to whether the newly formed corporation was assuming the indebtedness of Spherion Technology (UK) associated with the Cyber Center business. They allege that in doing so, he was acting as Spherion’s agent. Spherion intends to vigorously defend this matter. Although this claim is in the preliminary stages, Spherion has a reserve of $0.1 million related to this matter. Spherion does not have insurance coverage for this claim.

In 2002, Spherion engaged in transactions that generally had the effect of accelerating certain future tax deductions and losses, resulting in an increase in its 2002 tax refund. During 2006, based on events occurring in the year, the Company determined that certain tax positions relating to transactions in prior years were now considered resolved or likely to be sustained, and the balance sheet reserves were reversed. As a result, $31.9 million was reversed to tax benefit in discontinued operations. Additionally, $17.0 million was reversed to income and deferred tax assets were reduced by $16.7 million, with a resulting net impact on income tax expense from continuing operations of $0.3 million. At December 31, 2006, reserves related to deductions taken on prior year tax returns were $2.9 million.

Two states are examining Spherion’s prior year unemployment tax rates. In these states the rate is currently being examined and challenged, the claims raised by the states approximate $3.1 million plus potential interest and penalties. As of December 31, 2006, Spherion had $2.1 million accrued as its best estimate of losses it expects to incur as a result of these challenges.

13.VARIABLE INTEREST ENTITIES

A summary of Spherion’s variable interest entities (VIE’s) follows:

	Fiscal Years
	2006		2005
Number of VIE’s:
Consolidated	8		7
Not consolidated	1		2
Total VIE’s	9		9
Revenues (in thousands):
Consolidated	$	42,226	$	57,343
Not consolidated	$	4,362	$	7,177

Spherion’s consolidated VIE’s (all of which are licensees) provide light industrial and clerical staffing. Spherion consolidated net assets were $1.8 million and $0.7 million at December 31, 2006 and January 1, 2006. Each licensee’s loan is collateralized by their respective business and in the event of default on the loan, Spherion’s retains the right to take over their operations. General creditors of Spherion’s licensees do not have any recourse against Spherion.

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SPHERION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–(Continued)

Spherion’s VIE’s that are not consolidated are franchisees and provide light industrial and clerical staffing. Spherion’s maximum exposure to loss from these VIE’s is limited to its loan and royalty receivable balances of $0.1 million and $0.5 million as of December 31, 2006 and January 1, 2006, respectively. All loan and royalty receivables are included in “Other current assets” and “Other assets” in the accompanying Consolidated Balance Sheets.

14.RESTRUCTURING AND OTHER CHARGES

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

	Fiscal Years
	2006			2005			2004
Staffing Services	$	363		$	1,840		$	543
Professional Services	106			49			1,537
Corporate	899			341			1,351
Reversal of over accrual	(582		)	(175		)	(672		)
Restructuring	786			2,055			2,759
Other charges (credits)	(963		)	(292		)	5,636
Total restructuring and other charges (credits)	$	(177	)	$	1,763		$	8,395

Restructuring Charges

During 2006, Spherion incurred restructuring charges of $1.4 million for lease and severance-related costs. There were reversals of prior year accruals of $0.6 million. The reversal of previously accrued amounts to income was primarily a result of lower lease expense costs than initially anticipated. During the fourth quarter of 2006, Spherion recorded $1.1 million for severance related costs for the elimination of 94 positions.

Restructuring charges for the fiscal year ended January 1, 2006 totaled $2.2 million for severance related costs for the elimination of 112 positions. The restructuring charges were primarily the result of an announced termination of a customer contract and other changes within the managed services portion of the Staffing Services operating segment.

During the second half of 2003, Spherion identified certain cost reduction opportunities primarily related to the realignment of its operating segments and the implementation of its enterprise-wide information system and adopted a restructuring plan (the “2003 Plan”) to eliminate redundancies, reduce excess capacity and centralize business support functions. Restructuring charges relating to this plan totaled $3.4 million for the fiscal year ended December 31, 2004. The charges consisted of severance charges of $2.1 million and facility closure expenses and charges for asset write-offs for property previously vacated of $1.3 million.

These charges were offset by reversals of accruals of $0.2 million and $0.7 million for the fiscal years ended January 1, 2006 and December 31, 2004, respectively, that were unnecessary primarily as the result of the resolution of uncertainties related to facility closures, sublease income exposure, lower broker fees, lower fixed asset write-offs and lower severance costs than initially anticipated, in which these amounts were reversed to income in the period they were identified.

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SPHERION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–(Continued)

Other Charges (Credits)

During the fourth quarter of 2006, Spherion received $1.0 million in proceeds from a favorable legal settlement associated with a previously written-off investment.

During the second quarter of 2005, Spherion identified $0.3 million of prior year accruals for facility closures that were unnecessary and reversed these to income.

During 2004, Spherion incurred other charges of $5.6 million to terminate the employment contract of its former chief executive officer.

As of December 31, 2006, the remaining accruals for facility closures of $1.6 million relate to lease payments on four closed locations that will be paid out through 2013 (net of applicable sublease income). These accruals are included within the Consolidated Balance Sheet in “Other current liabilities” or “Other long-term liabilities” based on the expected timing of the associated future payments.

15.DISCONTINUED OPERATIONS

During 2004, Spherion assessed the profitability of its operations and made decisions to exit five of its business units which included the staffing operations in the United Kingdom, the Asia/Pacific region and the Netherlands, the call center outsourcing business and the court reporting business. Results from discontinued operations in the accompanying Consolidated Statements of Earnings are as follows (in thousands):

	2006											2005											2004
	Professional				Staffing							Professional				Staffing							Professional				Staffing
	Services				Services				Total			Services				Services				Total			Services				Services				Total
Revenues		$				$			$				$	—			$	11,535		$	11,535			$	185,922			$	33,646		$	219,568
Pre-tax loss from operations		$	(1,389	)		$	(657	)	$	(2,046	)		$	(1,008	)		$	(6,367	)	$	(7,375	)		$	(5,172	)		$	(4,724	)	$	(9,896	)
Pre-tax (loss) gain on disposal		1,800				173			1,973				(6,178		)		499			(5,679		)		5,656				(9,049		)	(3,393		)
Income tax benefit		31,978				188			32,166				3,824				1,046			4,870				28,875				5,469			34,344
Net (loss) earnings from discontinued operations		$	32,389			$	(296	)	$	32,093			$	(3,362	)		$	(4,822	)	$	(8,184	)		$	29,359			$	(8,304	)	$	21,055

Results from the call center outsourcing business were previously reported in the Staffing Services segment; the remaining four businesses were previously reported within the Professional Services segment.

Net earnings for the fiscal year ended December 31, 2006 included (i) after-tax restructuring and other charges of $0.5 million or $0.01 per share, (ii) reversal of foreign legal matters of $1.1 million or $0.02 per share, and (iii) a tax benefit from the resolution of certain international tax matters of $29.7 million, or $0.51 per share.

Net loss for the fiscal year ended January 1, 2006 included (i) after-tax restructuring and other charges of $(1.1) million, or $(0.02) per share, (ii) estimated charges of $5.7 million, or $(0.09) per share, to increase or set-up reserves for working capital settlement and indemnification or other matters related to the 2004 disposal of Spherion’s operations in the Asia/Pacific region and the United Kingdom, and (iii) a tax benefit from operating activities of $3.8 million, or $0.06 per share.

Net earnings for the fiscal year ended December 31, 2004 included the recognition of a previously deferred tax benefit of $25.3 million that resulted from a higher tax basis than book basis on the sale of the international operations. Net earnings for the fiscal year ended December 31, 2004 also included a tax

64

SPHERION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–(Continued)

benefit of $3.9 million for the estimated loss on sale of the call centers. As a result of the finalization of the sale of the three call centers, the tax benefit was adjusted by $0.8 million in 2005.

Summarized activity related to each business unit follows:

The Netherlands: Sold in 2004 for cash proceeds of $2.0 million (net of cash sold of $0.5 million) resulting in a pre-tax loss on sale of $1.7 million. Subsequently settled and paid $0.6 million for an employment liability in August 2005. Remaining exposure is for the potential payment of social security taxes which are reserved in the amount of $0.2 million as of December 31, 2006.

The United Kingdom: Sold in 2004 for cash proceeds of $25.4 million (net of cash sold of $3.1 million), resulting in a pre-tax gain on the sale of $9.5 million, (net of a $2.6 million reserve for estimated adjustments to the net proceeds). The reserve was increased by $1.6 million in 2005 for indemnification matters. We subsequently settled and paid the final working capital audit, indemnification matters and administrative costs of $3.1 million in 2006 ($1.1 million less than the accrued liability, and therefore, this amount was reversed to income during the second quarter of 2006). Remaining exposure is for a facility lease which is reserved in the amount of $1.1 million at December 31, 2006.

Court reporting: Sold in 2004 for cash proceeds of $2.6 million resulting in a pre-tax gain of $1.2 million. Subsequently received $1.0 million in final contingent proceeds in February 2006 as the purchaser achieved revenue growth targets.

Call center outsourcing business: Decided in 2004 to sell four call centers and recorded a $9.5 million estimated loss on sale, pre-tax. Sold three call centers in 2005 for cash proceeds of $1.9 million resulting in an additional loss of $0.5 million, pre-tax. During 2006, a decision was made to retain the remaining call center and its activities are reported in continuing operations for all periods presented. There are no known remaining exposures with respect to these transactions.

Asia/Pacific region: Sold in 2004 in two separate transactions to two different purchasers for total cash proceeds of $13.7 million (net of cash sold of $0.2 million) and a deferred purchase price of $3.8 million which we received in 2005. Spherion incurred a loss on sale of $3.4 million in 2004 which included reserves associated with the selling the business of $6.0 million. We paid $4.8 million of these reserves, mostly for severance and transaction costs, in 2004. Both transactions required working capital audits and indemnifications associated with the sale and in 2005 we accrued $3.7 million for these matters, primarily for two tax indemnifications. Payments against the reserves for working capital and administrative costs were $0.8 million in 2005. During 2006 we increased the reserves for a non-tax indemnification matter by $2.0 million. The two tax matters were settled in 2006, one with a payment of $1.6 million and the other matter was settled without cost and the reserve of $1.9 million was released to income. The remaining reserve balance of $2.6 million at December 31, 2006 relates to the non-tax indemnification matter.

16.SEGMENT INFORMATION

Spherion is organized and managed around two operating segments—Staffing Services and Professional Services. Each segment has separate and distinct leadership teams, each with a business unit president that reports directly to Spherion’s Chief Executive Officer. Each segment provides services to customers in different types of skill-sets. The Staffing Services operating segment is concentrated around clerical and light industrial staffing, while the Professional Services operating segment is concentrated around higher level skill-sets, such as information technology, finance and accounting, engineering and administrative. Spherion evaluates the performance of its operating segments and allocates resources based on revenue, gross profit and segment operating profit. Segment operating profit is defined as income

65

SPHERION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–(Continued)

before unallocated corporate costs, amortization expense, interest expense, interest income, income taxes and restructuring and other charges. All material intercompany revenues and expenses have been eliminated. Additionally, amounts related to discontinued operations have been excluded from the segment information below and are presented as discontinued operations in the Consolidated Statements of Earnings.

During the first quarter of 2006, Spherion decided to retain a call center operation previously classified as discontinued operations; results related to this call center operation have been reclassified from discontinued operations to continuing operations in the Staffing Services segment for all periods presented. This call center contributed revenues of $11.1 million, $8.9 million and $7.1 million and segment operating profit (loss) of $1.1 million, $0.9 million and $(0.4) million for the fiscal years of 2006, 2005 and 2004, respectively. See Note 15, “Discontinued Operations,” for further discussion.

Information on operating segments and a reconciliation to earnings from continuing operations before income taxes are as follows (in thousands):

	Fiscal Years
	2006			2005			2004
Revenues:
Staffing Services	$	1,440,386		$	1,530,395		$	1,630,279
Professional Services	492,673			450,179			409,582
Total	$	1,933,059		$	1,980,574		$	2,039,861
Gross Profit:
Staffing Services	$	293,366		$	292,641		$	297,484
Professional Services	161,542			143,143			128,464
Total	$	454,908		$	435,784		$	425,948
Segment Operating Profit:
Staffing Services	$	24,565		$	26,342		$	24,792
Professional Services	23,279			19,236			19,769
Total	47,844			45,578			44,561
Unallocated corporate costs	(15,541		)	(13,832		)	(20,637		)
Amortization expense	(201		)	(416		)	(543		)
Interest expense	(1,965		)	(3,205		)	(5,766		)
Interest income	4,055			4,072			3,815
Restructuring, impairment and other	177			(1,763		)	(9,236		)
Earnings from continuing operations before income taxes and discontinued operations	$	34,369		$	30,434		$	12,194

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SPHERION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–(Continued)

Geographic, services, depreciation expense, and assets information on operating segments for the periods indicated are as follows (in thousands):

	Fiscal Years
	2006		2005		2004
Revenues:
Temporary Staffing	$	1,671,471	$	1,714,801	$	1,679,543
Managed Services	187,268		200,141		304,773
Permanent Placement	74,320		65,632		55,545
Total	$	1,933,059	$	1,980,574	$	2,039,861
Depreciation Expense:
Staffing Services	$	16,213	$	15,228	$	16,699
Professional Services	5,693		6,093		6,990
Total	$	21,906	$	21,321	$	23,689
Total Assets:
Staffing Services	$	236,699	$	253,266	$	323,911
Professional Services	93,132		97,863		102,104
Corporate	363,556		391,515		404,251
Total	$	693,387	$	742,644	$	830,266

Spherion has no single customer representing greater than 10% of revenues. All operations and assets are in North America.

17.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 2006 and 2005 fiscal years:

	2006
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Revenues	$	464,249	$	472,714	$	495,473	$	500,623
Gross profit	104,571		112,798		117,273		120,266
Net earnings	2,903		3,611		8,359		39,809
Basic earnings per share	0.05		0.06		0.15		0.70
Diluted earnings per share	0.05		0.06		0.15		0.70

	2005
	First			Second		Third		Fourth
	Quarter			Quarter		Quarter		Quarter
Revenues	$	507,715		$	479,091	$	494,489	$	499,279
Gross profit	105,463			105,267		110,531		114,523
Net (loss) earnings	(1,228		)	1,755		5,160		6,342
Basic (loss) earnings per share	(0.02		)	0.03		0.08		0.11
Diluted (loss) earnings per share	(0.02		)	0.03		0.08		0.10

Quarterly and year-to-date computations of per share amounts are made independently, therefore, the sum of per share amounts for the quarters may not equal per share amounts for the year.

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SPHERION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS–(Continued)

In the fourth quarter of 2006 an after-tax restructuring credit of $0.3 million was recorded for proceeds from a favorable legal settlement and net of reduction for support staff. The net earnings from discontinued operations includes a tax benefit from the resolution of certain international tax matters of $29.7 million, or $0.52 per share. The net earnings from continuing operations includes a tax benefit related to the approval of the Work Opportunity Tax Credit program of $1.7 million, or $0.03 per share.

In the first quarter of 2005 after-tax restructuring and other charges of $(1.1) million were incurred, or $(0.02) per share. In the fourth quarter of 2005, the net loss from discontinued operations includes estimated charges of $5.7 million, or $(0.09) per share, for working capital and warranty matters related to the 2004 disposal of Spherion’s operations in the United Kingdom and Asia/Pacific region. The net loss from discontinued operations also includes a tax benefit from operating activities of $3.8 million, or $0.07 per share.

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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
			Balance at						Transferred					Balance at
			Beginning of			Charged to			(from) to Other					End of
	Description		Period			Earnings			Accounts		Deductions			Period
Fiscal Year Ended December 31, 2006
Allowance for Doubtful Accounts				$	4,708		$	2,021		$         —		$	3,375		$	3,354
Valuation allowance on deferred tax assets				$	32,660		$	—		$         —		$	2,984		$	29,676
Fiscal Year Ended January 1, 2006
Allowance for Doubtful Accounts				$	7,077		$	4,902		$         —		$	7,271		$	4,708
Valuation allowance on deferred tax assets				$	6,128		$	26,532		$         —		$	—		$	32,660
Fiscal Year Ended December 31, 2004
Allowance for Doubtful Accounts				$	6,671		$	7,238		$         —		$	6,832		$	7,077
Valuation allowance on deferred tax assets				$	5,653		$	475		$         —		$	—		$	6,128

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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

Evaluation of Disclosure 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 defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Annual Report. Based upon that evaluation, our Chief Executive Officer 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.

There has been no change in our internal control over financial reporting during the quarter ended December 31, 2006, 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.

Management’s Report on Internal Control Over Financial Reporting

Management’s Report on Internal Control Over Financial Reporting and the corresponding Report of Independent Registered Public Accounting Firm are included in Item 8., Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Item 9B.OTHER INFORMATION

On February 20, 2007, we entered into an Employment Agreement with John D. Heins. The employment agreement provides for employment at will and, accordingly, may be terminated by either party thereto at any time for any reason. However, the employment agreements provide, among other things, that if we terminate the executive “without cause” (as such term is defined in the agreements), the executive would receive a cash severance payment, payable in a lump sum, in an amount equal to his annual base salary, plus his prorated target annual incentive payment for the year in which termination occurs. Additionally, the employment agreement provides for base salary and annual incentive award targets (currently 60% of base salary) as determined from time to time at the sole discretion of the Compensation Committee. The form of Employment Agreement is filed as Exhibit 10.62 attached hereto.

On February 20, 2007, we amended the Employment Agreement and Change in Control Agreement with William J. Grubbs to reflect his new title of Executive Vice President. The form of Employment Agreement is filed as Exhibit 10.62 attached hereto. The form of Change in Control Agreement is filed as Exhibit 10.58 attached hereto.

On February 19, 2007, the Compensation Committee of our Board of Directors approved the following cash incentive payments in accordance with the 2006 incentive award plans for executive officers, copies of which are filed as Exhibits 10.3 and 10.4 to our Form 10-K for the fiscal year ended January 1, 2006: $468,366 to Roy G. Krause, $164,700 to William J. Grubbs, $125,377 to Lisa G. Iglesias, $159,377 to Mark W. Smith, and $174,291 to Byrne Mulrooney who will depart our company in March. In addition, on the same date the Compensation Committee approved a one-time cash payment of $50,000 to William J. Grubbs, in order to recognize his efforts in assuming responsibility for our Professional Services division after the group’s former president, Eric Archer, left our company in February 2006. The Compensation Committee also approved a one-time cash payment of $80,000 to John D. Heins, in accordance with the terms of his original offer of employment.

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The Compensation Committee also approved the following equity award grants effective February 20, 2007 pursuant to our 2006 Stock Incentive Plan, a copy of which is filed as Appendix C to the Company’s Proxy Statement dated April 7, 2006: 200,000 stock options and 100,000 deferred restricted stock units to Roy G. Krause, 77,000 stock options and 34,000 deferred restricted stock units to William J. Grubbs, 34,000 stock options and 15,000 deferred restricted stock units to John D. Heins, 31,000 stock options and 13,000 deferred restricted stock units to Lisa G. Iglesias, and 63,000 stock options and 27,000 deferred restricted stock units to Mark W. Smith. All stock options have an exercise price equal to the fair market value of our common stock on the date of grant, which was $8.88 per share. The options have a seven-year term and become exercisable in three equal annual installments beginning with the first anniversary of the grant date. The form of Notice of Grant of Stock Options and Option Agreement is filed as Exhibit 99.1 to our Form 8-K filed on September 27, 2006. Deferred restricted stock units vest in three equal annual installments beginning with the first anniversary of the grant date, contingent on the Company meeting certain 2007 earnings per share targets. The form of Deferred Restricted Stock Unit Agreement is filed as Exhibit 10.9 attached hereto, however information regarding the earnings per share targets has been omitted from the exhibit and provided separately to the Securities and Exchange Commission.

On February 19, 2007, the Compensation Committee of the Board of Directors approved the following adjusted annual base salaries for the following executives: $385,000 for William J. Grubbs, $273,000 for John D. Heins, $263,000 for Lisa G. Iglesias, and $340,000 to Mark W. Smith.

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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 31, 2006, we will file and distribute our definitive proxy statement for our 2007 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 31, 2006:

Equity Compensation Plan Information

	(a)		(b)			(c)
						Number of securities
			Weighted-average			remaining available for
	Number of securities to		exercise price of			future issuance under equity
	be issued upon exercise		outstanding			compensation plans
	of outstanding options		options and deferred			(excluding securities
Plan Category	and deferred stock units		stock units			reflected in column (a))
Equity compensation plans approved by security holders		4,246,859		$	9.69		5,260,459
Equity compensation plans not approved by security holders		831,696		—			—
Total		5,078,555		$	8.10		5,260,459

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 31, 2006, we will file and distribute our definitive proxy statement for our 2006 annual meeting of stockholders containing the information required by such Item.

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PART IV

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

(a)Items A through G and Schedule II are presented on the indicated pages of this Form 10-K Annual Report:

(1)Financial Statements for Spherion Corporation and Subsidiaries:

	Page
Management’s Report on Internal Control over Financial Reporting		38
Reports of Independent Registered Public Accounting Firm		39
Consolidated Statements of Earnings		42
Consolidated Balance Sheets		43
Consolidated Statements of Stockholders’ Equity		44
Consolidated Statements of Cash Flows		45
Notes to Consolidated Financial Statements		46

(2)Consolidated Financial Statement Schedule for Fiscal Years Ended 2006, 2005 and 2004:

Schedule II—Valuation and Qualifying Accounts 69

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.

(3)Exhibits Required by Item 601 of Regulation S-K:

Exhibit Number	Exhibit Name
3.1	Restated Certificate of Incorporation of Spherion, as last amended on May 19, 2004, filed as Exhibit 3.1 to Spherion’s Form 10-Q for the quarter ended June 25, 2004, is incorporated herein by reference.
3.2	Restated By-Laws of Spherion, as amended through November 11, 2003, filed as Exhibit 3.2 to Spherion’s Form 10-K for the fiscal year ended December 26, 2003, is incorporated herein by reference.
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.
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.

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4.6	Articles Fourth, Fifth, Seventh, Eighth and Tenth of the Restated Certificate of Incorporation of Spherion, as last amended May 19, 2004, filed as Exhibit 4.6 to Spherion’s Form 10-Q for the quarter ended June 25, 2004, 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.
4.10	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 to Spherion’s Form 10-K for the fiscal year ended December 26, 2003, is incorporated herein by reference.
10.1*†	Spherion Corporation Corporate Executives Management 2007 Variable Pay Plan, filed as Exhibit 10.1 to Spherion’s Form 8-K filed on February 6, 2007, is incorporated herein by reference.
10.2	Form of Indemnification Agreement between Spherion and each director of Spherion, dated August 10, 1999 for all directors except James J. Forese, David R. Parker, Anne Szostak, and Barbara Pellow, filed as Exhibit 10.2 to Spherion’s Form 10-Q for the quarter ended September 24, 1999, is incorporated herein by reference. The Indemnification Agreements for Messrs. Forese and Parker are dated February 25, 2003, Ms. Szostak’s Indemnification Agreement is dated March 21, 2005 and Ms. Pellow’s Indemnification Agreement is dated October 6, 2006.
10.3*†	Spherion Corporation Corporate Executives Management 2006 Variable Pay Plan for the individuals listed on Schedule A attached thereto, filed as Exhibit 10.3 to Spherion’s Form 10-K for the fiscal year ended January 1, 2006 is incorporated herein by reference.
10.4*†	Spherion Corporation Line of Business Executive Management 2006 Variable Pay Plan for the individuals listed on Schedule A attached thereto, filed as Exhibit 10.4 to Spherion’s Form 10-K for the fiscal year ended January 1, 2006 is incorporated herein by reference.
10.6*	Spherion Corporation 2006 Stock Incentive Plan filed as Appendix C to Spherion’s Proxy Statement dated April 7, 2006, is incorporated herein by reference.

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10.7*	Spherion Corporation Director Deferred Restricted Stock Unit Agreement filed as Exhibit 99.1 to Spherion’s Form 8-K filed July 3, 2006, is incorporated herein by reference.
10.8*	Spherion Corporation revised form of Notice of Grant of Stock Options and Option Agreement filed as Exhibit 99.1 to Spherion’s Form 8-K filed September 27, 2006, is incorporated herein by reference.
10.9*†	Spherion Corporation form of Deferred Restricted Stock Unit Agreement based on Corporate EPS Vesting Criteria, filed as Exhibit 10.9 attached hereto.
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*	Spherion Corporation Deferred Compensation Plan amended and restated as of January 1, 2005, filed as Exhibit 99.1 to Spherion’s Form 8-K filed January 5, 2006, is incorporated herein by reference.
10.19*	Spherion Corporation Outside Directors’ Compensation Plan, effective July 1, 2005, filed as Exhibit 10.19 to Spherion’s Form 10-Q for the quarter ended July 3, 2005, 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, as last amended May 19, 2004, filed as Exhibit 10.39 to Spherion’s Form 10-Q for the quarter ended June 25, 2004, is incorporated herein by reference.
10.51*	Separation Agreement dated March 9, 2004, by and between Spherion and Cinda A. Hallman, filed as Exhibit 10.51 to Spherion’s Form 10-Q for the quarter ended March 26, 2004, is incorporated herein by reference.
10.55*	Restated Employment Agreement by and between Spherion and Roy G. Krause, amended through March 9, 2005, filed as Exhibit 10.55 to Spherion’s Form 10-K for the fiscal year ended December 31, 2004, is incorporated herein by reference.
10.56*	Restated Change in Control Agreement by and between Spherion and Roy G. Krause, amended through March 9, 2005, filed as Exhibit 10.56 to Spherion’s Form 10-K for the fiscal year ended December 31, 2004, is incorporated herein by reference.
10.57*	Form of Restated Employment Agreement by and between Spherion and the individuals listed on Schedule A attached thereto, filed as Exhibit 10.57 to Spherion’s Form 10-K for the fiscal year ended January 1, 2006 is incorporated herein by reference.
10.58*	Form of Restated 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 herein by reference.

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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 Form 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 Form 10-Q for the quarter ended September 26, 2003, is incorporated herein by reference.
10.62*	Form of Restated Employment Agreement by and between Spherion and the individuals listed on Schedule A attached thereto, filed as Exhibit 10.62 attached hereto.
10.63	Second Amendment to Credit Agreement dated as of March 30, 2004, made by and among Spherion, as borrower, each subsidiary of Borrower party to the Guaranty Agreement, each of the Lenders signatory hereto and Bank of America, N.A., as agent for the Lenders, filed as Exhibit 10.63 to Spherion’s Form 10-Q for the quarter ended September 24, 2004, is incorporated herein by reference.
10.64	Third Amendment to Credit Agreement dated as of July 12, 2004, made by and among Spherion, as borrower, each subsidiary of Borrower party to the Guaranty Agreement, each of the Lenders signatory hereto and Bank of America, N.A., as agent for the Lenders, filed as Exhibit 10.64 to Spherion’s Form 10-Q for the quarter ended September 24, 2004, is incorporated herein by reference.
10.65*	Spherion Corporation form of 2000 Stock Incentive Plan Stock Option Agreement, filed as Exhibit 10.65 to Spherion’s Form 10-K for the fiscal year ended December 31, 2004, is incorporated herein by reference.
10.66*	Spherion Corporation form of standard Deferred Stock Agreement, filed as Exhibit 10.66 to Spherion’s Form 10-K for the fiscal year ended December 31, 2004, is incorporated herein by reference.
10.67*†	Spherion Corporation form of Deferred Stock Agreement with vesting criteria related to implementation of enterprise resource planning system, filed as Exhibit 10.67 to Spherion’s Form 10-K for the fiscal year ended December 31, 2004, is incorporated herein by reference.
10.68*†	Spherion Corporation form of Deferred Stock Agreement with performance based vesting criteria, filed as Exhibit 10.68 to Spherion’s Form 10-K for the fiscal year ended January 1, 2006, is incorporated herein by reference.
10.69	Fourth Amendment to Credit Agreement dated as of July 29, 2005, made by and among Spherion, as borrower, each subsidiary of Borrower party to the Guaranty Agreement, each of the Lenders signatory hereto and Bank of America, N.A., as agent for the Lenders, filed as Exhibit 99.1 to Spherion’s Form 8-K filed August 3, 2005, is incorporated herein by reference.
10.72*†	Spherion Corporation Corporate Executives Management 2005 Variable Pay Plan for the individuals listed on Schedule A attached thereto, filed as Exhibit 10.72 to Spherion’s Form 10-K for the fiscal year ended December 31, 2004, is incorporated herein by reference.

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10.73*†	Spherion Corporation Line of Business Executive Management 2005 Variable Pay Plan for the individuals listed on Schedule A attached thereto, filed as Exhibit 10.73 to Spherion’s Form 10-K for the fiscal year ended December 31, 2004, is incorporated herein by reference.
10.74*†	Spherion Corporation form of Deferred Stock Agreement with vesting criteria related to EPS targets filed as Exhibit 10.74 to Spherion’s Form 10-K for the fiscal year ended December 31, 2004, is incorporated herein by reference.
11	See “Earnings Per Share” in Note 11 of the Notes to Consolidated Financial Statements included 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	Certification of Roy G. Krause and Mark W. Smith 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 attached hereto.

*This Exhibit is a management contract or compensatory plan or arrangement.

†Portions of this Exhibit have been omitted and filed separately with the Commission pursuant to a request for confidential treatment.

(b)EXHIBITS FILED WITH THIS FORM

Exhibit Number	Exhibit Name
10.9*†	Spherion Corporation form of Deferred Restricted Stock Unit Agreement based on Corporate EPS Vesting Criteria.
10.58*	Form of Restated Change in Control Agreement by and between Spherion and the individuals listed on Schedule A.
10.62*	Form of Restated Employment Agreement by and between Spherion and the individuals listed on Schedule A.
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	Certification of Roy G. Krause and Mark W. Smith pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*This Exhibit is a management contract or compensatory plan or arrangement.

†Portions of this Exhibit have been omitted and filed separately with the Commission pursuant to a request for confidential treatment.

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(c)OTHER FINANCIAL STATEMENTS

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

78

SIGNATURES

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

	SPHERION CORPORATION
February 23, 2007	By	/s/ ROY G. KRAUSE
		Roy G. Krause
		President and Chief Executive Officer

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. ELBAUM		Chairman and Director
Steven S. Elbaum
/s/ WILLIAM F. EVANS		Director
William F. Evans
/s/ JAMES J. FORESE		Director
James J. Forese
/s/ ROY G. KRAUSE		Director
Roy G. Krause
/s/ J. IAN MORRISON		Director
J. Ian Morrison
/s/ DAVID R. PARKER		Director
David R. Parker
/s/ BARBARA PELLOW		Director
Barbara Pellow
/s/ M. ANNE SZOSTAK		Director
M. Anne Szostak
/s/ A. MICHAEL VICTORY		Director
A. Michael Victory

(Signed as to each on February 23, 2007)

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	Signature		Title
/s/ ROY G. KRAUSE		President and Chief Executive Officer
Roy G. Krause
/s/ MARK W. SMITH		Senior Vice President and
Mark W. Smith		Chief Financial Officer (principal financial and accounting officer)

(Signed as to each on February 23, 2007)

80

EX-10.9

Exhibit 10.9

SPHERION CORPORATION
DEFERRED RESTRICTED STOCK UNIT AGREEMENT

This Deferred Restricted Stock Unit Agreement (the “Agreement”) is entered into as of the            day of         , 200   , by and between SPHERION CORPORATION (the “Company”) and                                                                               (“Recipient”).

W I T N E S S E T H:

WHEREAS, the Company has adopted the Spherion Corporation 2006 Stock Incentive Plan (the “Plan”) which is administered by a Committee appointed by the Company’s Board of Directors; and

WHEREAS, the Board has granted to Recipient an award of deferred restricted stock units under the terms of the Plan to encourage Recipient’s continued loyalty and diligence (the “Award”); and

WHEREAS, to comply with the terms of the Plan and to further the interests of the Company and Recipient, the parties hereto have set forth the terms of such award in writing in the Agreement;

NOW, THEREFORE, for and in consideration of the mutual promises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.Stock Award.

(a)General.Subject to the restrictions and other conditions set forth herein, the Company hereby grants to Recipient an award of                          shares of the Common Stock $.01 par value, of the Company.  Such shares are hereinafter referred to as the “Deferred Restricted Stock Units.”

(b)Background.  The Deferred Restricted Stock Units were awarded to Recipient on                           , 200   (the “Grant Date”).

2.Vesting Restrictions.

The Deferred Restricted Stock Units shall vest in accordance with the schedule set forth below, provided that (a) the Recipient remains employed by the Company or its subsidiaries on such dates, and (b) the Company successfully and timely achieves the objectives set forth on Exhibit “A” attached hereto, as determined in the sole discretion of the Company’s Compensation Committee of its Board of Directors (the “Committee”).:

Date	Percent of Shares Vested
[grant date plus 1 year]	33 1/3%
[grant date plus 2 years]	33 1/3%
[grant date plus 3 years]	33 1/3%

3.Forfeiture Upon Termination of Employment or Failure to Meet Objectives.

If Recipient is no longer employed by the Company or any of its subsidiaries for any reason, any Deferred Restricted Stock Units that are not then vested under Section 2 shall be immediately forfeited, and Recipient shall have no rights in such Deferred Restricted Stock Units.  Any Deferred Restricted Stock Units that do not vest and are no longer subject to vesting due to the objectives set forth on Exhibit “A” not being 100% met, shall expire and be

1

Exhibit 10.9

immediately forfeited on [grant date plus 1 year], and Recipient shall have no rights in such Deferred Restricted Stock Units.

4.Delivery of Deferred Restricted Stock Units.

(a)General.  Except as provided in subsection (b) below, the Company shall instruct its transfer agent to issue a stock certificate representing such vested Deferred Restricted Stock Units in the name of Recipient (or issue shares in book form) within a reasonable time after any of the Deferred Restricted Stock Units become vested.

(b)Deferred Delivery.  Recipient may elect to defer the receipt of the Deferred Restricted Stock Units beyond the vesting date.  Such election must be completed no later than the date of this Award by completing an election form which has been approved by the Committee.  In addition, such election must be made in accordance with procedures established by the Committee.  The Recipient acknowledges that neither the Company nor the Committee makes any assurances as to the tax consequences of such election nor that such election will not result in adverse tax consequences under Section 409A of the Internal Revenue Code.

5.Agreement of Recipient.

Recipient acknowledges that certain restrictions under state or federal securities laws may apply with respect to the Deferred Restricted Stock Units granted to Recipient pursuant to the Award.  Specifically, Recipient acknowledges that, to the extent Recipient is an “affiliate” of the Company (as that term is defined by the Securities Act of 1933), the Deferred Restricted Stock Units granted to Recipient as a result of the Award are subject to certain trading restrictions under applicable securities laws (including particularly the Securities and Exchange Commission’s Rule 144). Recipient hereby agrees to execute such documents and take such actions as the Company may reasonably require with respect to state and federal securities laws and any restrictions on the resale of such shares which may pertain under such laws.

6.Withholding.

Recipient shall pay an amount equal to the amount of all applicable federal, state and local or foreign taxes which the Company is required to withhold at any time.  Such payment may be made in cash, by withholding from Recipient’s normal pay, or by delivery of shares of the Company’s common stock (including shares issuable under this Agreement).

7.Plan Provisions.

In addition to the terms and conditions set forth herein, the Award is subject to and governed by the terms and conditions set forth in the Plan, which is hereby incorporated by reference.  Any terms used herein with an initial capital letter shall have the same meaning as provided in the Plan, unless otherwise specified herein.  In the event of any conflict between the provisions of the Agreement and the Plan, the Plan shall control.

8.Miscellaneous.

(a)Limitation of Rights.  The granting of the Award and the execution of the Agreement shall not give Recipient any rights to similar grants in future years or any right to be retained in the employ or service of the Company or any of its subsidiaries or to interfere in any way with the right of the Company or any such Subsidiary to terminate Recipient’s employment or services at any time as permitted by law or the right of Recipient to terminate Recipient’s employment at any time.

(b)Shareholder Rights.  Recipient shall have none of the rights of a shareholder with respect to the Deferred Restricted Stock Units until such shares have been delivered and issued to Recipient pursuant to Section 4.

2

Exhibit 10.9

(c)Severability.  If any term, provision, covenant or restriction contained in the Agreement is held by a court or a federal regulatory agency of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions contained in the Agreement shall remain in full force and effect, and shall in no way be affected, impaired or invalidated.

(d)Controlling Law.  The Agreement is being made in Florida and shall be construed and enforced in accordance with the laws of that state.

(e)Construction.  The Agreement contains the entire understanding between the parties and supersedes any prior understanding and agreements between them representing the subject matter hereof.  There are no representations, agreements, arrangements or understandings, oral or written, between and among the parties hereto relating to the subject matter hereof which are not fully expressed herein.

(f)Headings.  Section and other headings contained in the Agreement are for reference purposes only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of the Agreement or any provision hereof.

IN WITNESS WHEREOF, the parties hereto have executed the Agreement as of day and year first set forth above.

SPHERION CORPORATION

By:

Print Name:

Title:

RECIPIENT

By:

Print Name:

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Exhibit 10.9

Exhibit A

The Committee reserves the right, in its sole discretion, to determine if the objectives below have been met.  In addition the Committee may make adjustments that it deems reasonable, in its sole discretion, to adjust or amend the objectives below to account for items including, but not limited to, mergers, acquisitions or other material changes or events.

The Company’s objectives for vesting the Deferred Restricted Stock Units pursuant to the terms of the Agreement is the achievement of the following goal at or above the minimum Threshold as described below:

Company Earnings Per Share (EPS): Vesting of the Deferred Restricted Stock Units is based on the Company attaining EPS from continuing operations for fiscal year 2007.  In order for a Recipient to have Deferred Restricted Stock Units vest, the Company must attain a minimum Threshold EPS as set forth below.  No Deferred Restricted Stock Units will vest if 2007 EPS from continuing operations is less than the Threshold.  If the EPS Threshold is exceeded, the component payout will increase and be precisely interpolated between Goal Levels as reflected in the chart below:

Goal Level	EPS from continuing operations	% of Deferred Restricted Stock Units subject to vesting in accordance with schedule set forth in grant agreement
Target	*	100	%
Threshold	*	50	%
Below Threshold	*	0	%

* Confidential portions omitted and filed separately with the Commission.

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EX-10.58

Exhibit 10.58

RESTATED CHANGE IN CONTROL AGREEMENT*
(as amended through March 9, 2005)

THIS AGREEMENT, dated as of the [SEE ATTACHED SCHEDULE A], is by and between SPHERION CORPORATION, a Delaware corporation (hereinafter referred to as the “Company”), and [SEE ATTACHED SCHEDULE A] (hereinafter the “Executive”).

RECITALS

A.The Board of Directors of the Company (the “Board”) considers it essential to the best interests of the Company and its stockholders that its key management personnel be encouraged to remain with the Company and its subsidiaries and to continue to devote full attention to the Company’s business in the event that any third person expresses its intention to complete a possible business combination with the Company, or in taking any other action which could result in a “Change in Control” (as defined herein) of the Company. In this connection, the Board recognizes that the possibility of a Change in Control and the uncertainty and questions which it may raise among management may result in the departure or distraction of key management personnel to the detriment of the Company and its stockholders. The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of key members of the Company’s management to their assigned duties without distraction in the face of the potentially disturbing circumstances arising from the possibility of a Change in Control of the Company.

B.The Executive currently serves as the Company’s [SEE ATTACHED SCHEDULE A], and [her/his] services and knowledge are valuable to the Company in connection with the management of its business.

C.The Board believes the Executive has made and is expected to continue to make valuable contributions to the productivity and profitability of the Company and its subsidiaries. Should the Company receive a proposal from a third person concerning a possible business combination or any other action which could result in a Change in Control, in addition to the Executive’s regular duties, the Executive may be called upon to assist in the assessment of such proposal, advise management and the Board as to whether such proposal would be in the best interests of the Company and its stockholders, and to take such other actions as the Board might determine to be necessary or appropriate.

D.Should the Company receive any proposal from a third person concerning a possible business combination or any other action which could result in a change in control of the Company, the Board believes it imperative that the Company and the Board be able to rely upon the Executive to continue in [her/his] position, and that the Company and the Board be able to receive and rely upon [her/his] advice, if so requested, as to the best interests of the Company and its stockholders without concern that [she/he] might be distracted by the personal uncertainties and risks created by such a proposal, and to encourage Executive’s full attention and dedication to the Company.

[E.The Company and the Executive are parties to that certain Change in

Control Agreement dated [SEE ATTACHED SCHEDULE A] (the “Prior CIC Agreement”).

F.The Company and the Executive desire to terminate the Prior CIC Agreement (and any predecessor change in control agreements) and to enter into this Agreement, which supercedes the Prior CIC Agreement, upon the terms and subject to the conditions hereinafter set forth.]

TERMS AND CONDITIONS

NOW, THEREFORE, to assure the Company and its subsidiaries that it will have the continued, undivided attention, dedication and services of the Executive and the availability of the Executive’s advice and counsel notwithstanding the possibility, threat or occurrence of a Change in Control of the Company, and to induce the Executive to remain in the employ of the Company and its subsidiaries, and for other good and valuable consideration, the adequacy and sufficiency of which are hereby acknowledged, the Company and the Executive agree as follows.

1.Change in Control. (Amended March 9, 2005) For purposes of this Agreement, a “Change in Control” of the Company shall be deemed to have occurred upon any of the following events as such are defined in Section 409A of the Internal Revenue Code of 1986, as amended: (i) a change in the ownership of the Company; (ii) a change in effective control of the Company; or (iii) a change in the ownership of a substantial portion of the assets of the Company.”

2.Adjustment of Benefits upon Change in Control

(a)The Company agrees that the Compensation Committee of the Board, or such other committee succeeding to such committee’s responsibilities with respect to executive compensation (collectively, the “Compensation Committee”) may make such equitable adjustments to any performance targets contained in any awards under the Company’s current incentive compensation plans, or any additional or successor plan in which the Executive is a participant (collectively, the “Incentive Plans”), as the Compensation Committee determines may be appropriate to eliminate any negative effects from any transactions relating to a Change in Control (such as costs or expenses associated with the transaction or any related transaction, including, without limitation, any reorganizations, divestitures, recapitalizations or borrowings, or changes in targets or measures to reflect the disruption of the business, etc.), in order to preserve reward opportunities and performance objectives.

(b)In the case of a Change in Control, all restrictions and conditions applicable to any awards of restricted stock or the vesting of stock options or other awards granted to the Executive under the Company’s 2000 Stock Incentive Plan, Deferred Stock Plan, any similar, predecessor or successor plan, or otherwise shall be deemed to have been satisfied as of the date the Change in Control occurs, and this Agreement shall be deemed to amend any agreements evidencing such awards to reflect this provision.

2

3.Termination Following Change in Control

(a)The Executive’s employment may be terminated for any reason by the Company following a Change in Control of the Company. If the Executive’s employment is terminated by the Company for any reason other than for the reasons set forth in subparagraphs (i), (ii), (iii), (iv) or (v) below within two years following a Change in Control, then the Executive shall be entitled to the benefits set forth in this Agreement in lieu of any termination, separation, severance or similar benefits under the Executive’s Employment Agreement, if any, or under the Company’s termination, separation, severance or similar plans or policies, if any. If the Executive’s employment is terminated for any of the reasons set forth in subparagraphs (i), (ii), (iii), (iv) or (v) below, then the Executive shall not be entitled to any termination, separation, severance or similar benefits under this Agreement, and the Executive shall be entitled to benefits under the Executive’s Employment Agreement, if any, or under the Company’s termination, separation, severance or similar plans or policies, if any, only in accordance with the terms of such Employment Agreement, or such plans or policies.

(i)termination by reason of the Executive’s death, provided the Executive has not previously given a “Notice of Termination” pursuant to Section 4;

(ii)termination by reason of the Executive’s “Disability,” provided the Executive has not previously given a “Notice of Termination” pursuant to Section 4;

(iii)termination by reason of “retirement” at or after age 65, provided the Executive has not previously given “Notice of Termination” pursuant to Section 4;

(iv)termination by the Company for “Cause;” or

(v)voluntary termination by the Executive (other than for “Good Reason” as provided in section 3(b) below).

For the purposes of this Agreement, “Disability” shall be defined as the Executive’s inability by reason of illness or other physical or mental disability to perform the principal duties required by the position held by the Executive at the inception of such illness or disability for any consecutive 180-day period. A determination of disability shall be subject to the certification of a qualified medical doctor agreed to by the Company and the Executive or, in the Executive’s incapacity to designate a doctor, the Executive’s legal representative. If the Company and the Executive cannot agree on the designation of a doctor, each party shall nominate a qualified medical doctor and the two doctors shall select a third doctor and the third doctor shall make the determination as to disability.

For purposes of this Agreement, “retirement” shall mean the Company’s termination of the Executive’s employment at or after the date on which the Executive attains age 65.

For purposes of this Agreement, “Cause” shall mean one or more of the following:

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(I)the material violation of any of the terms and conditions of this Agreement or any written agreements the Executive may from time to time have with the Company (after 30 days following written notice from the Board specifying such material violation and Executive’s failure to cure or remedy such material violation within such 30-day period);

(II)inattention to or failure to perform Executive’s assigned duties and responsibilities competently for any reason other than due to Disability (after 30 days following written notice from the Board specifying such inattention or failure, and Executive’s failure to cure or remedy such inattention or failure within such 30-day period);

(III)engaging in activities or conduct injurious to the reputation of the Company or its affiliates including, without limitation, engaging in immoral acts which become public information or repeatedly conveying to one person, or conveying to an assembled public group, negative information concerning the Company or its affiliates;

(IV)commission of an act of dishonesty, including, but not limited to, misappropriation of funds or any property of the Company;

(V)commission by the Executive of an act which constitutes a misdemeanor (involving an act of moral turpitude) or a felony;

(VI)the material violation of any of the written Policies of the Company which are not inconsistent with this Agreement or applicable law (after 30 days following written notice from the Board specifying such failure, and the Executive’s failure to cure or remedy such inattention or failure within such 30-day period);

(VII)refusal to perform the Executive’s assigned duties and responsibilities or other insubordination (after 30 days following written notice from the Board specifying such refusal or insubordination, and the Executive’s failure to cure or remedy such refusal or insubordination within such 30-day period); or

(VIII)unsatisfactory performance of duties by the Executive as a result of alcohol or drug use by the Executive.

(b)The Executive may terminate [her/his] employment with the Company following a Change in Control of the Company for “Good Reason” by giving Notice of Termination at any time within two years after the Change in Control. Any failure by the Executive to give such immediate notice of termination for Good Reason shall not be deemed to constitute a waiver or otherwise to affect adversely the rights of the Executive hereunder, provided the Executive gives notice to receive such benefits prior to the expiration of such two year period. If the Executive terminates [her/his] employment as provided in this Section 3(b), then the Executive shall be entitled to the benefits set forth in this Agreement in lieu of any termination, separation, severance or similar benefits under the Executive’s Employment Agreement, if any, or under the Company’s termination, separation, severance or similar plans or policies, if any.

4

For purposes of this Agreement, “Good Reason” shall mean the occurrence of any one or more of the following events:

(I)The assignment to the Executive of any duties inconsistent in any material adverse respect with [her/his] position, authority or responsibilities with the Company and its subsidiaries immediately prior to the Change in Control, or any other material adverse change in such position, including titles, authority, or responsibilities, as compared with the Executive’s position immediately prior to the Change in Control;

(II)A reduction by the Company in the amount of the Executive’s base salary or annual or long term incentive compensation paid or payable as compared to that which was paid or made available to Executive immediately prior to the Change in Control; or the failure of the Company to increase Executive’s compensation each year by an amount which is substantially the same, on a percentage basis, as the average annual percentage increase in the base salaries of other executives of comparable status with the Company;

(III)The failure by the Company to continue to provide the Executive with substantially similar perquisites or benefits the Executive in the aggregate enjoyed under the Company’s benefit programs, such as any of the Company’s pension, savings, vacation, life insurance, medical, health and accident, or disability plans in which [she/he] was participating at the time of the Change in Control (or, alternatively, if such plans are amended, modified or discontinued, substantially similar equivalent benefits thereto, when considered in the aggregate), or the taking of any action by the Company which would directly or indirectly cause such benefits to be no longer substantially equivalent, when considered in the aggregate, to the benefits in effect at the time of the Change in Control;

(IV)The Company’s requiring the Executive to be based at any office or location more than 50 miles from that location at which [she/he] performed [her/his] services immediately prior to the Change in Control, except for a relocation consented to in writing by the Executive, or travel reasonably required in the performance of the Executive’s responsibilities to the extent substantially consistent with the Executive’s business travel obligations prior to the Change in Control;

(V)Any failure of the Company to obtain the assumption of the obligation to perform this Agreement by any successor as contemplated in Section 11 herein; or

(VI)Any breach by the Company of any of the material provisions of this Agreement or any failure by the Company to carry out any of its obligations hereunder, in either case, for a period of thirty business days after receipt of written notice from the Executive and the failure by the Company to cure such breach or failure during such thirty business day period.

4.Notice of Termination

Any termination of the Executive’s employment following a Change in Control, other than a termination as contemplated by Sections 3(a)(i) or 3(a)(iii) shall be communicated by written “Notice of Termination” by the party affecting the termination to

5

the other party hereto. Any “Notice of Termination” shall set forth (a) the effective date of termination, which shall not be less than 15 or more than 30 days after the date the Notice of Termination is delivered (the “Termination Date”); (b) the specific provision in this Agreement relied upon; and (c) in reasonable detail the facts and circumstances claimed to provide a basis for such termination and the entitlement, or lack of entitlement, to the benefits set forth in this Agreement. Notwithstanding the foregoing, if within fifteen (15) days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a good faith dispute exists concerning the termination, the actual Termination Date shall be the date on which the dispute is finally determined in accordance with the provisions of Section 18 hereof. In the case of any good faith dispute as to the Executive’s entitlement to benefits under this Agreement resulting from any termination by the Company for which the Company does not deliver a Notice of Termination, the actual Termination Date shall be the date on which the dispute is finally determined in accordance with the provisions of Section 18 hereof. Notwithstanding the pendency of any such dispute referred to in the two preceding sentences, the Company shall continue to pay the Executive [her/his] full compensation then in effect and continue the Executive as a participant in all compensation, benefits and perquisites in which [she/he] was then participating, until the dispute is finally resolved, provided the Executive is willing to continue to provide full time services to the Company and its subsidiaries in substantially the same position, if so requested by the Company. Amounts paid under this Section 4 shall be in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement. If a final determination is made, pursuant to Section 18, that Good Reason did not exist in the case of a Notice of Termination by the Executive, the Executive shall have the sole right to nullify and void [her/his] Notice of Termination by delivering written notice of same to the Company within three (3) business days of the date of such final determination. If the parties do not dispute the Executive’s entitlement to benefits hereunder, the Termination Date shall be as set forth in the Notice of Termination.

5.Termination Benefits

(a)Severance Payment. Subject to the conditions set forth in this Agreement, on the Termination Date the Company shall pay the Executive (reduced by any applicable payroll or other taxes required to be withheld) a lump sum severance payment, in cash, equal to two (2) times the sum of Executive’s annual salary for the current year plus [her/his] annual incentive award target for the current year (provided that if the Notice of Termination is given prior to the determination of the Executive’s salary or annual incentive award target for the year in which the Termination Date occurs, the amounts shall be based on the annual salary for the prior year and the greater of the annual incentive award target for the prior year or the actual incentive award earned by the Executive for the prior year). The current year shall be (A) for the purposes of determining annual salary, the year then generally used by the Company for setting salaries for senior-level executives (currently April 1 through the following March 31), and (B) for purposes of determining annual incentive award target, the fiscal year then generally used by the Company for setting annual incentive award targets for senior-level executives, in which the Termination Date occurs, and the prior year shall be the twelve-month period immediately preceding the current year;

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(b)Expenses. Reimbursement for expenses incurred by the Executive in accordance with the Company’s policy but not reimbursed prior to the date of such termination of employment;

(c)Payment of Deferred Compensation. Any compensation that has been earned by the Executive but is unpaid as of the Termination Date, including any compensation that has been earned but deferred pursuant to the Company’s Deferred Compensation Plan or otherwise, shall be paid in full to the Executive on the Termination Date.

(d)Key Employee Exception. (Added March 9, 2005) Notwithstanding anything contained herein to the contrary, to the extent the Executive is deemed a “key employee” for purposes of Section 409A of the Internal Revenue Code of 1986, as amended, and notwithstanding any contrary provision which exists in any of the Company’s deferred compensation plans, any distribution of deferred compensation to the Executive will be delayed for a period of 6 months after the Termination Date as required by Section 409A of the Internal Revenue Code of 1986, as amended.

6.Other Benefits

Subject to the conditions set forth in this Agreement hereof, the following benefits (subject to any applicable payroll or other taxes required to be withheld) shall be paid or provided to the Executive:

(a)Health/Welfare Benefits

(i)During the twenty-four (24) months following the Termination Date (the “Continuation Period”), the Company shall continue to keep in full force and effect all programs of medical, dental, vision, accident, disability, life insurance, including optional term life insurance, and other similar health or welfare programs with respect to the Executive and [her/his] dependents with the same level of coverage, upon the same terms and otherwise to the same extent as such programs shall have been in effect immediately prior to the Termination Date (or, if more favorable to the Executive, immediately prior to the Change in Control), and the Company and the Executive shall share the costs of the continuation of such insurance coverage in the same proportion as such costs were shared immediately prior to the Termination Date (or, if more favorable to the Executive, immediately prior to the Change in Control) or, if the terms of such programs do not permit continued participation by the Executive (or if the Company otherwise determines it advisable to amend, modify or discontinue such programs for employees generally), the Company shall otherwise provide benefits substantially similar to and no less favorable to the Executive in terms of cost or benefits (“Equivalent Benefits”) than [she/he] was entitled to receive at the end of the period of coverage, for the duration of the Continuation Period.

(ii)All benefits which the Company is required by this Section 6(a) to provide, which will not be provided by the Company’s programs described herein, shall be

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provided through the purchase of insurance unless the Executive is uninsurable. If the Executive is uninsurable, the Company will provide the benefits out of its general assets.

(iii)If the Executive obtains other employment during the Continuation Period which provides health or welfare benefits of the type described in Section 6(a)(i) hereof (“Other Coverage”), then Executive shall notify the Company promptly of such other employment and Other Coverage and the Company shall thereafter not provide the Executive and [her/his] dependents the benefits described in Section 6(a)(i) hereof to the extent that such benefits are provided under the Other Coverage. Under such circumstances, the Executive shall make all claims first under the Other Coverage and then, only to the extent not paid or reimbursed by the Other Coverage, under the plans and programs described in Section 6(a)(i) hereof.

(b)Retirement Benefits

(i)For purposes of this Agreement, “Retirement” shall mean the Company’s termination of the Executive’s employment within two years following a Change in Control of the Company and at or after the date on which the Executive attains age 65; provided, however, that any termination for Cause or due to Death or Disability shall not constitute Retirement.

(ii)Subject to Section 6(b)(ii), the Executive shall be deemed to be completely vested under the Company’s 401(k) Plan, Deferred Compensation Plan or other similar or successor plans which are in effect as of the date of the Change in Control (collectively, the “Plans”), regardless of the Executive’s actual vesting service credit thereunder.

(iii)Any part of the foregoing retirement benefits which are otherwise required to be paid by a tax-qualified Plan but which cannot be paid through such Plan by reason of the laws and regulations applicable to such Plan, shall be paid by one or more supplemental non-qualified Plans or by the Company.

(iv)The payments calculated hereunder which are not actually paid by a Plan shall be paid thirty (30) days following the Date of Termination in a single lump sum cash payment (of equivalent actuarial value to the payment calculated hereunder using the same actuarial assumptions as are used in calculating benefits under the Plan but using the discount rate that would be used by the Company on the Date of Termination to determine the actuarial present value of projected benefit obligations).

(c)Executive Outplacement Counseling. During the Continuation Period, unless the Executive shall reach normal retirement age during the Continuation Period, the Executive may request in writing and the Company shall at its expense engage within a reasonable time following such written request an outplacement counseling service to assist the Executive in obtaining employment.

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7.Payment of Certain Costs

Except as otherwise provided in Section 18, if a dispute arises regarding a termination of the Executive or the interpretation or enforcement of this Agreement, subsequent to a Change in Control, all of the reasonable legal fees and expenses incurred by the Executive and all Arbitration Costs (as hereafter defined) in contesting any such termination or obtaining or enforcing all or part of any right or benefit provided for in this Agreement or in otherwise pursuing all or part of [her/his] claim will be paid by the Company, unless prohibited by law. The Company further agrees to pay pre-judgment interest on any money judgment obtained by the Executive calculated at the prime interest rate reported in The Wall Street Journal in effect from time to time from the date that payment to [her/his] should have been made under this Agreement.

8.This section intentionally left blank.

9.Mitigation

The Executive is not required to seek other employment or otherwise mitigate the amount of any payments to be made by the Company pursuant to this Agreement, and employment by the Executive will not reduce or otherwise affect any amounts or benefits due the Executive pursuant to this Agreement, except as otherwise provided in Section 6(a)(iii).

10.Continuing Obligations Regarding Confidential Information

(a)Acknowledgments by the Executive. The Executive hereby recognizes and acknowledges the following:

(i)In connection with the Business, the Company has expended a great deal of time, money and effort to develop and maintain the secrecy and confidentiality of substantial proprietary trade secret information and other confidential business information which, if misused or disclosed, could be very harmful to the Company’s business.

(ii)The Executive desires to become entitled to receive the benefits contemplated by this Agreement but which the Company would not make available to the Executive but for the Executive’s signing and agreeing to abide by the terms of this Section 10.

(iii)The Executive’s position with the Company provides the Executive with access to certain of the Company’s confidential and proprietary trade secret information and other confidential business information.

(iv)The Company compensates its employees to, among other things, develop and preserve business information for the Company’s ownership and use.

(v)If the Executive were to leave the Company, the Company in all fairness would need certain protection in order to ensure that the Executive does not appropriate and misuse any confidential information entrusted to the Executive during the course of the Executive’s employment with the Company.

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(b)Confidential Information

(i)The Executive agrees to keep secret and confidential, and not to use or disclose to any third parties, except as directly required for the Executive to perform the Executive’s employment responsibilities for the Company, or except as required by law, any of the Company’s confidential and proprietary trade secret information or other confidential business information concerning the Company’s business acquired by the Executive during the course of, or in connection with, the Executive’s employment with the Company (and which was not known by the Executive prior to the Executive’s being hired by the Company). Confidential information means information which would constitute material, nonpublic information under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, regardless of whether the Executive’s use or disclosure of such information is in connection with or related to a securities transaction.

(ii)The Executive acknowledges that any and all notes, records, reports, written information or documents of any kind, computer files and diskettes and other documents obtained by or provided to the Executive, or otherwise made, produced or compiled during the course of the Executive’s employment with the Company, regardless of the type of medium in which it is preserved, are the sole and exclusive property of the Company and shall be surrendered to the Company upon the Executive’s termination of employment and on demand at any time by the Company.

(c)Acknowledgment Regarding Restrictions. The Executive recognizes and agrees that the provisions of this Section 10 are reasonable and enforceable because, among other things, (i) the Executive is receiving compensation under this Agreement and (ii)  this Section 10 therefore does not impose any undue hardship on the Executive. The Executive further recognizes and agrees that the provisions of this Section 10 are reasonable and enforceable in view of the Company’s legitimate interests in protecting its confidential information.

(d)Breach. In the event of a breach of Section 10(b), the Company’s sole remedy shall be the discontinuation of the payment, allocation, accrual or provision of any amounts or benefits as provided in Sections 5 or 6. The Executive recognizes and agrees, however, that it is the intent of the parties that neither this Agreement nor any of its provisions shall be construed to adversely affect any rights or remedies that Company would have had, including, without limitation, the amount of any damages for which it could have sought recovery, had this Agreement not been entered into. Accordingly, the parties hereby agree that nothing stated in this Section 10 shall limit or otherwise affect the Company’s right to seek legal or equitable remedies it may otherwise have, or the amount of damages for which it may seek recovery, in connection with matters covered by this Section 10 but which are not based on breach or violation of this Section 10 (including, without limitation, claims based on the breach of fiduciary or other duties of the Executive or any obligations of the Executive arising under any other contracts, agreements or understandings). Without limiting the generality of the foregoing, nothing in this Section 10 or any other provision of this Agreement shall limit or otherwise affect the Company’s right to seek legal or equitable remedies it may otherwise have, or the amount of damages for which it may seek recovery, resulting from or arising out of statutory or common law or any

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Company policies relating to fiduciary duties, confidential information or trade secrets. Further, the Executive acknowledges and agrees that the fact that Section 10(c) is limited to the Continuation Period, and that the sole remedy of the Company hereunder is the discontinuation of benefits, shall not reduce or otherwise alter any other contractual or other legal obligations of the Executive during any period or circumstance, and shall not be construed as establishing a maximum limit on damages for which the Company may seek recovery.

11.Binding Agreement; Successors

(a)This Agreement shall be binding upon and shall inure to the benefit of the Company and its successors and assigns. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. For purposes of this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid.

(b)This Agreement shall be binding upon and shall inure to the benefit of the Executive and the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, beneficiaries, devises and legatees. If the Executive should die while any amounts are payable to [her/his] hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee, beneficiary or other designee or, if there be no such designee, to the Executive’s estate.

12.Notices

For the purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given (i) on the date of delivery if delivered by hand, (ii) on the date of transmission, if delivered by confirmed facsimile, (iii) on the first business day following the date of deposit if delivered by guaranteed overnight delivery service, or (iv) on the third business day following the date delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive:

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If to the Company:

Spherion Corporation
2050 Spectrum Boulevard
Fort Lauderdale, Florida 33309
Attention: General Counsel

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

13.Governing Law

The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Florida, without regard to principles of conflicts of laws.

14.Miscellaneous

No provisions of this Agreement may be amended, modified, waived or discharged unless such amendment, waiver, modification or discharge is agreed to in writing signed by the Executive and the Company. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. Section headings contained herein are for convenience of reference only and shall not affect the interpretation of this Agreement.

15.Counterparts

This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which will constitute one and the same instrument.

16.Non-Assignability

This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, or transfer this Agreement or any rights or obligations hereunder, except as provided in Section 11. Without limiting the foregoing, the Executive’s right to receive payments hereunder shall not be assignable or transferable, whether by pledge, creation of a security interest or otherwise, other than a transfer by his will or trust or by the laws of descent or distribution, and in the event of any attempted assignment or transfer contrary to this paragraph the Company shall have no liability to pay any amount so attempted to be assigned or transferred.

17.Term of Agreement

The term of this Agreement (the “Term”) shall commence on the date hereof and shall continue in effect for a period of three (3) years, unless further extended or sooner terminated as hereinafter provided. At the end of this three year period and on the first day of each one-year anniversary thereafter, the Term shall automatically be extended for one additional year unless either party shall have given notice to the other party, at least six months prior to such anniversary that it does not wish to extend the Term. However, if a Change in Control of the Company shall

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have occurred during the original or any extended term of this Agreement, this Agreement shall continue in effect for a period of twenty-four (24) months beyond the month in which such Change in Control occurred; and, provided further, that if the Company shall become obligated to make any payments or provide any benefits pursuant to Section 5 or 6 hereof, this Agreement shall continue for the period necessary to make such payments or provide such benefits.

18.Resolution of Disputes

(a)The parties hereby agree to submit any claim, demand, dispute, charge or cause of action (in any such case, a “Claim”) arising out of, in connection with, or relating to this Change in Control Agreement to binding arbitration in conformance with the J*A*M*S/ENDISPUTE Streamlined Arbitration Rules and Procedures or the J*A*M*S/ ENDISPUTE Comprehensive Arbitration Rules and Procedures, as applicable, but expressly excluding Rule 28 of the J*A*M*S/ENDISPUTE Streamlined Rules and Rule 33 of the J*A*M*S/ENDISPUTE Comprehensive Rules, as the case may be. All arbitration procedures shall be held in Fort Lauderdale, Florida and shall be subject to the choice of law provisions set forth in Section 13 of this Agreement.

(b)In the event of any dispute arising out of or relating to this Agreement for which any party is seeking injunctive relief, specific performance or other equitable relief, such matter may be resolved by litigation. Accordingly, the parties shall submit such matter to the exclusive jurisdiction of the United States District Court for the Southern District of Florida or, if jurisdiction is not available therein, any other court located in Broward County, Florida, and hereby waive any and all objections to such jurisdiction or venue that they may have. Each party agrees that process may be served upon such party in any manner authorized under the laws of the United States or Florida, and waives any objections that such party may otherwise have to such process.

19.Release and Conditions

Any and all payments and benefits provided by the Company to the Executive under this Agreement shall be conditioned on the following: (i) Executive’s continued compliance with the confidentiality provisions contained herein; (ii) the Executive’s execution of a full release and settlement of any and all claims against the Company; and (iii) the Executive’s execution of a non-disparagement agreement and continued compliance therewith.

20.No Setoff

The Company shall have no right of setoff or counterclaim in respect of any claim, debt or obligation against any payment provided for in this Agreement.

21.Non-Exclusivity of Rights

Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any of its subsidiaries or successors and for which the Executive may qualify, nor shall anything herein limit or reduce such rights as the Executive may have under any other agreements with the Company or any of its subsidiaries or successors, except to the extent payments are made

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pursuant to Section 5, they shall be in lieu of any termination, separation, severance or similar payments pursuant to the Executive’s Employment Agreement, if any, and the Company’s then existing termination, separation, severance or similar plans or policies, if any. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company or any of its subsidiaries shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement.

22.No Guaranteed Employment

The Executive and the Company acknowledge that this Agreement shall not confer upon the Executive any right to continued employment and shall not interfere with the right of the Company to terminate the employment of the Executive at any time.

23.Invalidity of Provisions

In the event that any provision of this Agreement is adjudicated to be invalid or unenforceable under applicable law in any jurisdiction, the validity or enforceability of the remaining provisions thereof shall be unaffected as to such jurisdiction and such adjudication shall not affect the validity or enforceability of such provision in any other jurisdiction. To the extent that any provision of this Agreement, including, without limitation, Section 10 hereof, is adjudicated to be invalid or unenforceable because it is overbroad, that provision shall not be void but rather shall be limited to the extent required by applicable law and enforced as so limited. The parties expressly acknowledge and agree that this Section 23 is reasonable in view of the parties’ respective interests.

24.Non-Waiver of Rights

The failure by the Company or the Executive to enforce at any time any of the provisions of this Agreement or to require at any time performance by the other party of any of the provisions hereof shall in no way be construed to be a waiver of such provisions or to affect either the validity of this Agreement, or any part hereof, or the right of the Company or the Executive thereafter to enforce each and every provision in accordance with the terms of this Agreement.

25.Employment Agreement.

If the Executive has an Employment Agreement with the Company, and if circumstances arise which cause both the Employment Agreement and this Agreement to apply to the Company and the Executive, then, to the extent of any inconsistency between the provisions of this Agreement and the Employment Agreement, the terms of this Agreement alone shall apply. However, if this Agreement does not apply, then the provisions of the Employment Agreement shall control and be unaffected by this Agreement.

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26.Unfunded Plan.

The Company’s obligations under this Agreement shall be entirely unfunded until payments are made hereunder from the general assets of the Company, and no provision shall be made to segregate assets of the Company for payments to be made under this Agreement. The Executive shall have no interest in any particular assets of the Company but rather shall have only the rights of a general unsecured creditor of the Company.

PLEASE NOTE: BY SIGNING THIS AGREEMENT, THE EXECUTIVE IS HEREBY CERTIFYING THAT THE EXECUTIVE (A) HAS RECEIVED A COPY OF THIS AGREEMENT FOR REVIEW AND STUDY BEFORE EXECUTING IT; (B) HAS READ THIS AGREEMENT CAREFULLY BEFORE SIGNING IT; (C) HAS HAD SUFFICIENT OPPORTUNITY BEFORE SIGNING THE AGREEMENT TO ASK ANY QUESTIONS THE EXECUTIVE HAS ABOUT THE AGREEMENT AND HAS RECEIVED SATISFACTORY ANSWERS TO ALL SUCH QUESTIONS; AND (D) UNDERSTANDS THE EXECUTIVE’S RIGHTS AND OBLIGATIONS UNDER THE AGREEMENT.

THIS AGREEMENT IN SECTION 18 CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.

[signatures appear on the following page]

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IN WITNESS WHEREOF, the parties have caused this Change in Control Agreement to be executed and delivered as of the day and year first above set forth.

SPHERION CORPORATION

By:

Name:

Title:

EXECUTIVE

By:

Name:

*This document is a compilation of the original change in control agreement as well as amendments thereto. It is being presented in this format in order to assist the reader.

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SCHEDULE A

Executive’s Name	Date of Executive’s Change in Control Agreement	Executive’s Position	Date of Executive’s Prior Change In Control
William J. Grubbs	February 21, 2006, as amended February 20, 2007	Executive Vice President	Not applicable
John D. Heins	October 2, 2006	Senior Vice President and Chief Human Resources Officer	Not applicable
Lisa G. Iglesias	November 30, 2003, as amended through March 9, 2005	Senior Vice President, General Counsel and Secretary	May 7, 2001, as amended through May 21, 2002
Mark W. Smith	November 30, 2003, as amended through March 9, 2005	Senior Vice President and Chief Financial Officer	May 7, 2001, as amended through May 21, 2002

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EX-10.62

Exhibit 10.62

RESTATED EMPLOYMENT AGREEMENT*
(as amended through March 9, 2005)

THIS AGREEMENT, dated as of [SEE ATTACHED SCHEDULE A], is by and between SPHERION CORPORATION, a Delaware corporation (hereinafter referred to as the “Company”), and [SEE ATTACHED SCHEDULE A] (hereinafter the “Executive”).

RECITALS

A.The Executive currently serves as the Company’s [SEE ATTACHED SCHEDULE A], and [her/his] services and knowledge are valuable to the Company in connection with the management of its business.

B.The Company and the Executive are parties to that certain Employment Agreement dated [SEE ATTACHED SCHEDULE A] (the “Prior Employment Agreement”).

C.The Company and the Executive desire to terminate the Prior Employment Agreement (and any predecessor employment agreements) and to enter into this Agreement upon the terms and subject to the conditions hereinafter set forth.

D.The Company desires to continue to employ the Executive and to enter into this new agreement embodying the terms of such employment which supercedes the Prior Employment Agreement.

E.The Executive desires to continue the Executive’s employment and to enter into a new agreement embodying the terms of such employment.

AGREEMENTS

NOW, THEREFORE, to induce the Executive to remain in the employ of the Company and its subsidiaries, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive agree as follows:

1.Employment.

During the Term of Employment (as defined in Section 2 hereof), the Executive shall serve as [SEE ATTACHED SCHEDULE A]. The Executive shall perform and assume all duties and responsibilities customary to such position and shall devote all of [her/his] business time and energies thereto. In carrying out such duties and responsibilities, the Executive shall report to, and be subject to the direction of, the [SEE ATTACHED SCHEDULE A] and the Board of Directors of the Company (the “Board”).

2.Term.

The Term of Employment under this Agreement shall commence as of the date of this Agreement and shall continue at the will of the Company and the Executive (the “Term of

Employment”). Either party may terminate the Executive’s employment at any time and for any reason.

3.Base Salary.

The Company shall pay the Executive, in accordance with the Company’s regular payroll practices applicable to salaried employees, an annualized base salary at the rate in effect on the date of this Agreement, as the same may from time to time be increased or decreased at the sole discretion of the Compensation Committee of the Board (the “Compensation Committee”).

4.Incentive Awards.

a)The Executive shall participate in the Company’s annual incentive plan for senior-level executives as in effect from time to time, subject to the performance standards set by the Compensation Committee. Payment of any annual incentive award shall be made at the same time that such awards are paid to other senior-level executives of the Company. The Executive’s annual incentive award target shall be set by the Compensation Committee.

b)The Executive shall be eligible to receive grants under the Company’s long-term incentive plans as in effect from time to time; provided, however, that the size, type and other terms and conditions of any such grant to the Executive shall be determined by the Compensation Committee.

5.Benefits, Fringes and Perquisites.

The Executive shall be entitled to participate in all employee pension and welfare benefit, fringe benefit and perquisite plans and programs made available to the Company’s senior-level executives as in effect from time to time.

6.Vacation.

The Executive shall be entitled to vacation in accordance with the Company’s vacation policy applicable to its senior-level executives. Vacations shall be arranged in order that they not materially interfere with the normal functioning of the Company’s business activities or the performance of the Executive’s duties hereunder.

7.Business Expenses.

The Company shall reimburse the Executive for any ordinary, necessary and reasonable business expenses that the Executive incurs in connection with the performance of [her/his] duties under this Agreement, in accordance with the Company’s policy regarding the reimbursement of business expenses.

8.Termination of Employment.

a)Death or Disability. The Executive’s employment shall terminate upon the Executive’s Death, and Company may terminate the Executive’s employment due to Disability

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(as defined herein). If, during the Term of Employment, the Executive’s employment is terminated due to Death or Disability, the Executive (or Executive’s estate or legal representative, as the case may be) shall be entitled to receive:

i)Executive’s base salary through the date of such termination of employment (the “Termination Date”) at the rate in effect at the time thereof;

ii)an amount, payable at the same time that annual incentive awards for the year in which the Executive’s employment so terminates are paid to senior-level executives of the Company, equal to the product of the Executive’s annual incentive award target for such year and a fraction, the numerator of which is the number of days in such year through the date of such termination of employment, and the denominator of which is 365; provided, however, that no such amount shall be paid to the Executive (or to Executive’s estate or legal representative, as the case may be) if annual incentive awards for such year are not paid to senior-level executives of the Company generally;

iii)reimbursement for expenses incurred by the Executive in accordance with the Company’s policy but not reimbursed prior to the date of such termination of employment;

iv)any vested deferred base salary and vested annual incentive awards (including, without limitation, interest or other credits on such vested deferred amounts); and

v)any other compensation or benefits that may be owed or provided to the Executive in accordance with the terms and conditions of any applicable plans and programs of the Company.

For purposes of this Agreement, “Disability” shall mean the Executive’s inability, by reason of illness or other physical or mental disability, to perform the principal duties required by the position held by the Executive at the inception of such illness or disability, for any consecutive 180-day period. A determination of Disability shall be subject to the certification of a qualified medical doctor agreed to by the Company and the Executive or, in the Executive’s incapacity to designate a doctor, the Executive’s legal representative. If the Company and the Executive cannot agree on the designation of a doctor, then each party shall nominate a qualified medical doctor and the two doctors shall select a third doctor, and the third doctor shall make the determination as to Disability.

b)For Cause. The Company may terminate the Executive’s employment for Cause (as defined herein) if the Board determines that Cause exists and serves written notice of such termination to the Executive. If, during the Term of Employment, the Company terminates the Executive’s employment for Cause, all of the Executive’s annual incentive awards, long-term incentive awards, stock options and other stock or long-term incentive grants which are not then vested or not then exercisable shall be canceled as of the date of the Board’s written notice of termination, and the Executive shall be entitled to receive:

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i)Executive’s base salary through the date of such termination of employment at the rate in effect at the time thereof;

ii)reimbursement for expenses incurred by the Executive in accordance with the Company’s policy but not reimbursed prior to the date of such termination of employment;

iii)any vested deferred base salary and vested deferred annual incentive awards (including, without limitation, interest or other credits on such vested deferred amounts but not including unvested annual incentive awards or amounts payable for the year in which the Board’s written notice of termination for Cause is made, or unvested annual incentive awards or amounts payable after the Board’s written notice of termination for Cause is made); and

iv)any other compensation or benefits that may be owed or provided to the Executive in accordance with the terms and conditions of any applicable plans and programs of the Company.

The Executive shall be entitled to receive no other compensation or benefits, whether pursuant to this Agreement or otherwise, except as and to the extent required by law.

For purposes of this Agreement, “Cause” shall mean one or more of the following:

(I)the material violation of any of the terms and conditions of this Agreement or any written agreements the Executive may from time to time have with the Company (after 30 days following written notice from the Board specifying such material violation and Executive’s failure to cure or remedy such material violation within such 30-day period);

(II)inattention to or failure to perform Executive’s assigned duties and responsibilities competently for any reason other than due to Disability (after 30 days following written notice from the Board specifying such inattention or failure, and Executive’s failure to cure or remedy such inattention or failure within such 30-day period);

(III)engaging in activities or conduct injurious to the reputation of the Company or its affiliates including, without limitation, engaging in immoral acts which become public information or repeatedly conveying to one person, or conveying to an assembled public group, negative information concerning the Company or its affiliates;

(IV)commission of an act of dishonesty, including, but not limited to, misappropriation of funds or any property of the Company;

(V)commission by the Executive of an act which constitutes a misdemeanor (involving an act of moral turpitude) or a felony;

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(VI)the material violation of any of the Policies referred to in Section 9 hereof (after 30 days following written notice from the Board specifying such failure, and the Executive’s failure to cure or remedy such inattention or failure within such 30-day period);

(VII)refusal to perform the Executive’s assigned duties and responsibilities or other insubordination (after 30 days following written notice from the Board specifying such refusal or insubordination, and the Executive’s failure to cure or remedy such refusal or insubordination within such 30-day period); or

(VIII)unsatisfactory performance of duties by the Executive as a result of alcohol or drug use by the Executive.

c)Without Cause. The Company may terminate the Executive’s employment without Cause. If, during the Term of Employment, the Company terminates the Executive’s employment without Cause, other than due to Death or Disability, then in lieu of any amount otherwise payable under this Agreement, or as damages for termination of Executive’s employment without Cause, the Executive shall be entitled to receive:

i)(Amended March 9, 2005) A cash severance payment (reduced by any applicable payroll or other taxes required to be withheld) equal to the sum of the Executive’s annual salary for the current year plus the Prorated Bonus Payment (as defined hereafter). The Prorated Bonus Payment shall equal the product of (x) the Executive’s annual incentive award target for the current year and (y) a fraction, the numerator of which is the number of days in such year through the date of such termination of employment, and the denominator of which is 365. The severance payment shall be payable in a lump sum amount beginning within thirty (30) days of the date of the Board’s written notice of termination without Cause. If the notice of termination is given prior to the determination of the Executive’s salary or annual incentive award target for the year in which the notice of termination is given, then the amounts shall be based on the annual salary for the prior year and the greater of the annual incentive award target for the prior year or the actual annual incentive award earned by the Executive for the prior year. The current year shall be (A) for purposes of determining the Executive’s annual salary, the year then generally used by the Company for setting salaries for senior-level executives (currently April 1 through the following March 31), and (B) for purposes of determining annual incentive award targets , the fiscal year then generally used by the Company for setting annual incentive award targets for senior-level executives, in which the Board gives the Executive written notice of termination, and the prior year shall be the twelve-month period immediately preceding the current year;

ii)Reimbursement for expenses incurred by the Executive in accordance with the Company’s policy but not reimbursed prior to the date of such termination of employment;

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iii)Any vested deferred base salary and vested deferred annual incentive awards (including, without limitation, interest or other credits on such vested deferred amounts); and

iv)Any other compensation or benefits that may be owed or provided to the Executive in accordance with the terms and conditions of any applicable plans and programs of the Company.

(Amended March 9, 2005) Employee stock options, restricted stock and deferred stock units (and other stock awards) are governed by the terms of the grant documents and will terminate in accordance therewith and are only exercisable to the extent provided therein. The payment of the severance payment (calculated in Section 8.c.i.) as well as all other payments and benefits provided by the Company to the Executive under this Agreement shall be conditioned on the following: (i) Executive’s continued compliance with the non-competition and confidentiality provisions provided herein; (ii) the Executive’s execution of a full release and settlement of any and all claims against the Company; and (iii) the Executive’s execution of a non-disparagement agreement and continued compliance therewith.

d)Voluntary Termination. If, during the Term of Employment, the Executive terminates [her/his] employment other than due to Retirement, the Executive shall be entitled to receive:

i)Executive’s base salary through the date of such termination of employment at the rate in effect at the time thereof;

ii)reimbursement for expenses incurred by the Executive in accordance with the Company’s policy but not reimbursed prior to the date of such termination of employment;

iii)any vested deferred base salary and vested deferred annual incentive awards (including, without limitation, interest or other credits on such vested deferred amounts); and

iv)no other compensation or benefits except as and to the extent required by law.

e)Ineligibility for Severance Plan Payments. Anything in this Agreement to the contrary notwithstanding, Executive shall not be entitled to any payment under any of the Company’s severance plans, programs or arrangements.

f) (Added March 9, 2005) Payment of Deferred Compensation. Notwithstanding anything contained herein to the contrary, to the extent the Executive is deemed a “key employee” for purposes of Section 409A of the Internal Revenue Code of 1986, as amended, and notwithstanding any contrary provision which exists in any of the Company’s deferred compensation plans, any distribution of deferred compensation to the

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Executive will be delayed for a period of 6 months after the Termination Date as required by Section 409A of the Internal Revenue Code of 1986, as amended.

9.Company Policies.

The Executive shall strictly follow and adhere to all written policies of the Company which are not inconsistent with this Agreement or applicable law including, without limitation, securities laws compliance (including, without limitation, use or disclosure of material nonpublic information, restrictions on purchases and sales of Company stock, and reporting requirements), conflicts of interest (including, without limitation, doing business with the Company or its affiliates without the prior approval of the Board), and employee harassment.

10.Confidentiality.

The Executive will not at any time (whether during or after Executive’s employment with the Company) disclose or use for Executive’s own benefit or purposes, or for the benefit or purpose of any other person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise, any trade secrets, information, data, or other confidential information relating to customers, employees, job applicants, services, development programs, prices, costs, marketing, trading, investment, sales activities, promotion, processes, systems, credit and financial data, financing methods, plans, proprietary computer software, request for proposal documents, or the business and affairs of the Company generally, or of any affiliate of the Company; provided, however, that the foregoing shall not apply to information which is generally known to the industry or the public other than as a result of the Executive’s breach of this covenant. The Executive agrees that upon termination of [her/his] employment with the Company for any reason, [she/he] will return to the Company immediately all memoranda, books, papers, plans, information, letters and other data, and all copies thereof or therefrom (whether in written, printed or electronic form), in any way relating to the business of the Company and its affiliates.

The Executive acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of this Section would be inadequate and, in recognition of this fact, the Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available.

11.Covenant Not to Compete.

a)In General. The Executive agrees that during Executive’s employment with the Company and for a period of one (1) year after the termination of such employment for whatever reason (the “Non-Compete Period”), [she/he] shall not, anywhere in the United States:

i)act as an employee, director, consultant, partner, principal, agent, representative, owner or stockholder (other than as a stockholder of less than a one

7

percent (1%) equity interest) for (1) any public company that derives any revenue from any business line in which the Company derives $25 million or more in annualized revenues as of the Termination Date or from the principal business line in which the Executive was directly involved immediately prior to the Termination Date (collectively, the “Business Lines”) or (2) any private company that derives $25 million or more in annualized revenues from any combination of one or more of the Business Lines;

ii)solicit business from, or perform services for, or induce others to perform services for, any company or other business entity which at any time during the one (1) year period immediately preceding the Termination Date was a client of the Company or its affiliates; or

iii)offer, or cause to be offered, employment with any business, whether in corporate, proprietorship, or partnership form or otherwise, either on a full-time, part-time or consulting basis, to any person who was employed by the Company or its affiliates or for whom the Company or its affiliates performed outplacement services, in either case at any time during the one (1) year period immediately preceding the Termination Date.

iv)For purposes of this Agreement, affiliates of the Company include subsidiaries 50% or more owned by the Company and the Company’s franchisees and licensees.

b)Consideration. The consideration for the foregoing covenant not to compete, the sufficiency of which is hereby acknowledged, is the Company’s agreement to employ the Executive and provide compensation and benefits pursuant to this Agreement.

c)Equitable Relief and Other Remedies. The Executive acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of this Section would be inadequate and, in recognition of this fact, the Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available.

d)Reformation. If the foregoing covenant not to compete would otherwise be determined invalid or unenforceable by a court of competent jurisdiction, such court shall exercise its discretion in reforming the provisions of this Section to the end that the Executive be subject to a covenant not to compete, reasonable under the circumstances, enforceable by the Company.

12.Company Policies, Plans and Programs.

Whenever any rights under this Agreement depend on the terms of a policy, plan or program established or maintained by the Company, any determination of these rights shall be made on the basis of the policy, plan or program in effect at the time as of which the determination is made. No reference in this Agreement to any policy, plan or program

8

established or maintained by the Company shall preclude the Company from prospectively or retroactively changing or amending or terminating that policy, plan or program or adopting a new policy, plan or program in lieu of the then-existing policy, plan or program.

13.Binding Agreement; Successors.

a)This Agreement shall be binding upon and shall inure to the benefit of the Company and its successors and assigns. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. For purposes of this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid.

b)This Agreement shall be binding up and shall inure to the benefit of the Executive and the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, beneficiaries, devises and legatees. If the Executive should die while any amounts are payable to [him/her] hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee, beneficiary or other designee or, if there be no such designee, to the Executive’s estate.

14.Change In Control Agreements.

Simultaneously with the execution and delivery of this Agreement, the Company and the Executive have executed and delivered a Change In Control Agreement (“C-I-C Agreement”), which applies under the circumstances and during the period described therein. If circumstances arise which cause both the C-I-C Agreement and this Agreement to apply to the Company and the Executive, then, to the extent of any inconsistency between the provisions of this Agreement and the C-I-C Agreement, the terms of the C-I-C Agreement alone shall apply. However, if the C-I-C Agreement does not apply (as, for example, if there is no Change in Control as described therein, or the C-I-C Agreement has expired, or the C-I-C Agreement simply does not apply), then the provisions of this Agreement shall control and be unaffected by the C-I-C Agreement.

15.Notices.

For the purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given (i) on the date of delivery if delivered by hand, (ii) on the date of transmission, if delivered by confirmed facsimile, (iii) on the first business day following the date of deposit if delivered by guaranteed overnight delivery service, or (iv) on the third business day following the date delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

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If to the Executive:

If to the Company:

Spherion Corporation
2050 Spectrum Boulevard
Fort Lauderdale, Florida 33309
Attention: General Counsel

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

16.Governing Law.

The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Florida, without regard to principles of conflicts of laws.

17.Entire Agreement; Amendment.

This Agreement and the C-I-C Agreement contain the entire agreement between the parties concerning the subject matter hereof and supersede all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between the parties with respect to the subject matter hereof. No provisions of this Agreement may be amended, modified, waived or discharged unless such amendment, waiver, modification or discharge is agreed to in writing signed by the Executive and the Company. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement.

18.Counterparts.

This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which will constitute one and the same instrument.

19.Non-Assignability.

This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, or transfer this Agreement or any rights or obligations hereunder, except as provided in Section 13. Without limiting the foregoing, the Executive’s right to receive payments hereunder shall not be assignable or transferable, whether by pledge, creation of a security interest or otherwise, other than a transfer by [her/his] will or trust or by the laws of descent or distribution, and in the event of any attempted assignment or transfer contrary to this paragraph the Company shall have no liability to pay any amount so attempted to be assigned or transferred.

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20.Resolution of Disputes.

a)The parties shall submit any claim, demand, dispute, charge or cause of action (in any such case, a “Claim”) arising out of, in connection with, or relating to this Agreement to binding arbitration in conformance with the J*A*M*S/ENDISPUTE Streamlined Arbitration Rules and Procedures or the J*A*M*S/ENDISPUTE Comprehensive Arbitration Rules and Procedures, as applicable, but expressly excluding Rule 28 of the J*A*M*S/ ENDISPUTE Streamlined Rules and Rule 33 of the J*A*M*S/ENDISPUTE Comprehensive Rules, as the case may be. All arbitration procedures shall be held in Fort Lauderdale, Florida and shall be subject to the choice of law provisions set forth in Section 16 of this Agreement.

b)In the event of any dispute arising out of or relating to this Agreement for which any party is seeking injunctive relief, specific performance or other equitable relief, such matter may be resolved by litigation. Accordingly, the parties shall submit such matter to the exclusive jurisdiction of the United States District Court for the Southern District of Florida or, if jurisdiction is not available therein, any other court located in Broward County, Florida, and hereby waive any and all objections to such jurisdiction or venue that they may have. Each party agrees that process may be served upon such party in any manner authorized under the laws of the United States or Florida, and waives any objections that such party may otherwise have to such process.

21.No Setoff.

The Company shall have no right of setoff or counterclaim in respect of any claim, debt or obligation against any payment provided for in this Agreement.

22.Non-Exclusivity of Rights.

Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any of its subsidiaries or successors and for which the Executive may qualify, nor shall anything herein limit or reduce such rights as the Executive may have under any other agreements with the Company or any of its subsidiaries or successors. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company or any of its subsidiaries shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement.

23.Withholding.

The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as are required to be withheld (with respect to amounts payable hereunder or under any benefit plan or arrangement maintained by the Company) pursuant to any applicable law or regulation.

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24.Invalidity of Provisions.

In the event that any provision of this Agreement is adjudicated to be invalid or unenforceable under applicable law in any jurisdiction, the validity or enforceability of the remaining provisions thereof shall be unaffected as to such jurisdiction and such adjudication shall not affect the validity or enforceability of such provision in any other jurisdiction. To the extent that any provision of this Agreement is adjudicated to be invalid or unenforceable because it is overbroad, that provision shall not be void but rather shall be limited to the extent required by applicable law and enforced as so limited. The parties expressly acknowledge and agree that Sections 11 and 24 are reasonable in view of the parties’ respective interests.

25.Non-Waiver of Rights.

The failure by the Company or the Executive to enforce at any time any of the provisions of this Agreement or to require at any time performance by the other party of any of the provisions hereof shall in no way be construed to be a waiver of such provisions or to affect either the validity of this Agreement, or any part hereof, or the right of the Company or the Executive thereafter to enforce each and every provision in accordance with the terms of this Agreement.

PLEASE NOTE: BY SIGNING THIS AGREEMENT, THE EXECUTIVE IS HEREBY CERTIFYING THAT THE EXECUTIVE (A) HAS RECEIVED A COPY OF THIS AGREEMENT FOR REVIEW AND STUDY BEFORE EXECUTING IT; (B) HAS READ THIS AGREEMENT CAREFULLY BEFORE SIGNING IT; (C) HAS HAD SUFFICIENT OPPORTUNITY BEFORE SIGNING THE AGREEMENT TO ASK ANY QUESTIONS THE EXECUTIVE HAS ABOUT THE AGREEMENT AND HAS RECEIVED SATISFACTORY ANSWERS TO ALL SUCH QUESTIONS; AND (D) UNDERSTANDS THE EXECUTIVE’S RIGHTS AND OBLIGATIONS UNDER THE AGREEMENT.

THIS AGREEMENT IN SECTION 20 CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.

[signatures appear on the following page]

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered as of the day and year first above set forth.

SPHERION CORPORATION

By:

Name:

Title:

EXECUTIVE

By:

Name:

*This document is a compilation of the original employment agreement as well as several amendments thereto. It is being presented in this format in order to assist the reader.

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SCHEDULE A

Executive’s Name	Date of Executive’s Employment Agreement	Executive’s Position	Executive Reports to:	Date of Executive’s Prior Employment Agreement
William J. Grubbs	February 21, 2006, as amended February 20, 2007	Executive Vice President	President and Chief Executive Officer	Not applicable
John Heins	February 20, 2007	Senior Vice President and Chief Human Resources Officer	President and Chief Executive Officer	Not applicable

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EX-21

Exhibit 21

SUBSIDIARIES OF SPHERION CORPORATION

Following is a list of the direct and indirect subsidiaries of Spherion Corporation, a Delaware corporation. Certain inactive subsidiaries have been excluded from the list below as such subsidiaries, when considered in the aggregate as one subsidiary, would not constitute a “significant subsidiary.”  All active subsidiaries do business under their corporate name listed below, or close derivatives thereof, except where indicated otherwise:

3736008 Canada Inc.†	Canada
6063721 Canada Inc.	Canada
Comtex Information Systems, Inc.	Delaware
Human Resource Capital Group Inc.	Canada
NorCross Holdings LLC	Delaware
NorCross Teleservices L.P.	Delaware
Norrell Corporation	Delaware
Norrell Services, Ltd	Canada
Spherion Assessment Inc.	North Carolina
Spherion Atlantic Enterprises LLC*	Delaware
Spherion Atlantic Resources LLC*	Delaware
Spherion Atlantic Workforce LLC*†	Delaware
Spherion (Europe) Inc.	Delaware
Spherion Financial Corporation	Delaware
Spherion Government Services LLC	Delaware
Spherion Operations Inc.	Delaware
Spherion Pacific Enterprises LLC*†	Delaware
Spherion Pacific Resources LLC*†	Delaware
Spherion Pacific Workforce LLC*†	Delaware
Spherion Technology (UK) Limited	United Kingdom
Spherion U.S. Inc.	Florida
Spherion Worldwide Holding B.V.	Netherlands

*Also do business as:

Spherion—Staffing Services

Spherion—Professional Services

Spherion—Human Resource Consulting

Norrell

Bossler Hix

†Merged out of existence effective January 1, 2007

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No’s. 333-05873, 033-76120, 333-05959, 033-76122, 333-05957, 333-18935, 333-18883, 333-18885, 333-30841, 333-30211, 333-31901, 333-31895, 333-43757, 333-60365, 333-91995, 333-84751, 333-40914, 333-48116, 333—60862, 333-116421, 333-116423 and 333-135446 on Forms S-8 and Registration Statement No’s. 033-94532, 333-09109, 333-50775, 333-50777 and 333-53351 on Forms S-3 of our reports dated February 23, 2007, relating to the financial statements and financial statement schedule of Spherion Corporation and management’s report on the effectiveness of internal control over financial reporting appearing in this Annual Report on Form 10-K of Spherion Corporation for the year ended December 31, 2006.

DELOITTE & TOUCHE LLP

Fort Lauderdale, Florida

February 23, 2007

EX-31.1

Exhibit 31.1

RULE 13a-14(a) CERTIFICATION IN ACCORDANCE
WITH SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Roy G. Krause, certify that:

1.     I have reviewed this Annual Report on Form 10-K of Spherion Corporation;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 23, 2007

/s/ ROY G. KRAUSE

Roy G. Krause

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

RULE 13a-14(a) CERTIFICATION IN ACCORDANCE
WITH SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mark W. Smith, certify that:

1.     I have reviewed this Annual Report on Form 10-K of Spherion Corporation;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 23, 2007

/s/ MARK W. SMITH

Mark W. Smith

Senior Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Spherion Corporation (the “Company”) on Form 10-K for the period ending December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Roy G. Krause, President and Chief Executive Officer of the Company, and Mark W. Smith, Senior Vice President and Chief Financial Officer, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)   The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ ROY G. KRAUSE

Roy G. Krause

President and Chief Executive Officer

February 23, 2007

/s/ MARK W. SMITH

Mark W. Smith

Senior Vice President and Chief Financial Officer

February 23, 2007