Welcome to the Barrett Business Services fourth quarter conference call. (Operator Instructions) Thank you, Mr. Sherertz you may begin your conference.

Good morning. This is Jim Miller with Bill Sherertz, Mike Elich and Greg Vaughn. Today we will provide you with our comments regarding the company’s operating results for the fourth quarter ended December 31 and our outlook for the first quarter of 2009. At the conclusion of our comments, we will respond to your questions. Our remarks during today’s conference call may include forward-looking statements. These statements, along with other information presented that are not historical facts are subject to a number of risks and uncertainties. Actual results may differ materially from those implied by the forward-looking statements. Please refer to our recent earnings release and to our quarterly and annual reports filed with the Securities and Exchange Commission for more information about the risks and uncertainties that could cause actual results to differ. Page one of yesterday’s earnings release reflecting our operating results summarizes the company’s revenues and cost of revenues on a net revenue basis as required by Generally Accepted Accounting Principles. Most of our comments today, however, will be based upon gross revenues and varies relationships to gross revenues because management believes such information is one, more informative as to the level of our business activity. Two, more useful in managing and analyzing our operations. And three adds more transparency to the trends within our business. Comments related to gross revenues as compared to a net revenue base of reporting have no effect on gross margin dollars, SG&A expenses or net income. Turning now to the fourth quarter results, as reported the company earned $0.21 per diluted share in the fourth quarter as compared to $0.34 for the fourth quarter of 2007. The decline in earnings on a quarter-over-quarter basis was primarily due to a 10.4% decline in gross revenues and a $3.4 million decline in gross…

Well I had to go back and read some of Buffett’s stuff about what makes a good company, and it's reassuring to me as a CEO to know that we're on the right path. We have good people. We have a solid business formula. We continue to sign a lot of new customers and we're riding some very difficult economic conditions as I'm sure all of you well know. Our unemployment rate in the West Coast on average is 9.13%, and a lot of our markets were faced with 10% and 12% unemployment. If you would have told me that we would be down less than 5% and less than 10% and the unemployment rate was 9.3% in the states we're in, I would have thought you were on drugs because I've never experienced such a small downturn in what we're doing. So, you're not going to hear a lot of woe is me out of me today. In fact, I've probably never been more positive with the people and the operations side of the business and our execution. What we need to really rock and roll is going to be a slackening in the decline more than anything else. We're not even hoping for an upturn. All we're hoping for now is that we stop going down. And this has been going on for a couple of years and certainly you all are as much aware of it as I am. It's almost depressing when you watch CNBC and listen to the bullshit stuff that goes on with Congress and their meager attempts to try and fix things. In my opinion, all they'd have to do is get rid of the mark-to-market and we'd go a long way to solving a lot of these issues. However, back to the…

(Operator instructions) Your first question comes from [Josh Vogel]. [Josh Vogel]: My first question is really about the guidance. You guys mentioned that with the shifting mix to more PEO than staffing, but I’m just trying to get a handle on here because if I look at the mix in the first quarter of ‘07, let’s say, the PEO work was about 86% of gross revenue versus 14% for staffing. If the mix is 100 basis points more towards PEO, it just seems like kind of a drastically low guidance. I was wondering if maybe there was something outside of just the payroll costs and the mix shift there in the revenue. Was there a worker’s comp claim that hit up in January or anything of that sort?

No. Comp remains very benign. Remember we’ve got almost a 1% increase in unemployment and that all piles into the first quarter. So in this climate, it would not be smart to try and pass on the cost increases to your customers. So some of that we are just going to have to eat until times get a little better, and over time we’ll make that back, but I would say it’s a two-fold deal. Staffing carries a much higher margin. Staffing, as you know, if you look at the competitors it’s just getting killed out there and the unemployment costs. If you put those two together, it makes a pretty big swing in a hurry in terms of making money. We did an analysis here, if our unemployment costs were the same as last year, even on the down revenues, we would breakeven, we would be the same earnings per share in the first quarters as we did last year. [Josh Vogel]: So obviously, the pricing environment is not in your favor right now, but at what point in the cycle do you think you could start going back and gaining some leverage there?

Again, I think it’s just keep the economy from going down. I would say the first uptick we get in or downtick in unemployment where it’s 7.6% now, the next number is probably 8 something and I think we could live with 7.6% if it would stay there. I’m surprised. I’ll be real frank with you. I’m surprised that we’re doing as well as we are at 7.6%. Just have it stop from going down, I think we are going to gain the upper hand. [Josh Vogel]: Now seeing a lot of companies in this type of environment given where certain stock levels are at and the assets on the books, they are taking a closer look at the balance sheet and goodwill balances and some are taking impairment charges. I was wondering if you were working through that with your auditors right now, and if a goodwill impairment charge was likely?

We’ve just gone through that with our auditors and at least through 12/31 we certainly did not have any kind of issue with any kind of goodwill impairment in our analysis. We don’t anticipate having any issues, at least currently, going forward.

I think we’d have to turn negative for the whole year and then the goodwill impairment would be a certain one of those acquisitions that we made would have to be significantly negative. [Josh Vogel]: Do you know off hand what part of the goodwill’s attributable to the strategic acquisition?

Probably about close to $14 million. [Josh Vogel]: Just lastly, Jim. Do you happen to have the cash flow from operation numbers and CapEx for the full year?

Yes. For the full year, cash flow from operations was approximately $14 million and CapEx was approximately $830,000.

Your next question comes from Tobey Sommer – SunTrust Robinson Humphrey. [Frank] for Tobey Sommer – SunTrust Robinson Humphrey: Hi, this is Frank in for Tobey. Couple of quick questions. Could we get the cash flow and the CapEx for the quarter as well as your thoughts going into 2009?

Cash flow for the quarter was approximately $2.6 million and CapEx for the quarter was just a couple hundred thousand.

We’re not spending a lot of money. [Frank] for Tobey Sommer – SunTrust Robinson Humphrey: Do you expect the year levels to be fairly stable going into 2009 or any color you can provide there would be helpful.

In terms of CapEx or just general? [Frank] for Tobey Sommer – SunTrust Robinson Humphrey: Mainly CapEx.

We don’t have any pressing needs unless we were to make an acquisition, and to be real frank about acquisitions at this point, until I see some stabilization in the economy, I’d be hard pressed to, unless it was a giveaway deal, to make an acquisition. [Frank] for Tobey Sommer – SunTrust Robinson Humphrey: As far as looking out there, are you seeing some valuations come down in terms of multiples, and what are you looking for in terms of stock repurchases and shoring up that balance sheet going into 2009.

I think our balance sheet is pretty solid and we dearly love to buy our stock. We don’t really have any need to raise capital for any reasons that I foresee, at least at the moment. The valuations of the companies out there, they never really change. It’s always been a four to six times EBITDA and really good companies won’t come off that number and really bad companies you don’t want to buy anyway. It’s just too much work. We've got a lot of stuff that we can do internally to augment our growth. So that's what we're focused on at the moment. [Frank] for Tobey Sommer – SunTrust Robinson Humphrey: And last question is a little bit about the captive business. Could you talk about trends there and what you see going into the first quarter?

Really, we have not had any kind of catastrophic claims that would tap into the captive since we formed it. So, it's been a nice adjunct and saved us some pretty good tax dollars. It's doing what it's supposed to do and now we have the new insurance company in Arizona and we picked up another state on self-insurance. So, no the Captive is, which I want it to remain, is a non-issue. It doesn't do anything. That's the good news.

Your next question comes from Ruthanne Roussel – The Robins Group. Ruthanne Roussel – The Robins Group: Bill, I’m glad to hear you sounding so well. I wanted to ask a few questions about the stock buyback in the quarter. Now if you spent just a couple hundred thousand dollars on it I'm going to draw the conclusion that you didn't buy back a whole lot of stock, but could you give us the numbers for it?

Well, the couple hundred thousand that we were talking about, that was purely CapEx and that was more related to a software upgrade that we're currently in the midst of here. As far as the buyback activity for the fourth quarter, first of all for the year it was about $8.5 million spent for the entire year and for the quarter we came in at about $1.5 million. Ruthanne Roussel – The Robins Group: I'm sorry, is that dollars or shares?

Dollars.

I'd love to get 1.5 million shares. Ruthanne Roussel – The Robins Group: I also was thinking, at the time of the strategic acquisition there was some talk about possibly leveraging those offices so that they would eventually begin to offer PEO services as well. I just thought I'd ask if there'd been any progress on that or any evolution of that.

Yes. We started down that road and we've had some limited success. Although, given the economic climate, they're fighting to hang on to their staffing business, but we're down that road. Colorado is starting to do better with the PEO world and we've got one person here from corporate dedicated almost full time to teaching and help develop and train our people over in the mountain states for PEO.

Your next question comes from Timothy Brown – Roth Capital Partners. Timothy Brown – Roth Capital Partners: The one thing that stuck out was the signings in January of 66, and I'm just curious what's driving the new signing in particular in this environment?

I think we're good at what we do. I mean, I know that's kind of a cliché, but it's been so many quarters, Tim, that's we've been doing it, I don't think it's external influences. I think it's just that we get out in the market and we see people and it's a value proposition and you got to remember that we're pretty strict on the credit side of the world and on the safety. So, I think to get the 66 we probably could have signed 156. That would by my guess, that we see a lot more than we sign. And it's a well received product out there. I mean, in service and word of mouth is still extremely strong and all we need's a little help out of the economy to really kind of rock and roll. Timothy Brown – Roth Capital Partners: Then in terms of the number of clients that you lost so far in the year, is that still trending where it was in the fourth quarter or is that lightening up at all?

Well, we haven't seen the same kind of numbers in the first four weeks of January, but until I see a couple quarters of that slackening, I'm not going to make any predictions about it because if the economy continues to decline, then you're probably going to see some continuation of that kind of decline in our customer list. They're like the cat hanging on. They're hanging on by their claws, anything that they can do to try and survive. Timothy Brown – Roth Capital Partners: Yes. It's tough to predict.

Well, I'm sure you see it down around there. Just read the newspapers. What is your guys’ unemployment? It's got to be in the 9.5 range, isn't it? Timothy Brown – Roth Capital Partners: Yes. I think it's getting there. I just wonder when it's going to stop.

Yes. You and me both. I've been through four, five of these recessions and in the past all it took was the lowering of the interest rates. Well, you got interest rates at zero so we can throw that one out. So I'm in a little uncharted waters here about the macroeconomics and what's going to drag us out of this. Timothy Brown – Roth Capital Partners: I actually had a question for Jim, and I don't know if you did this analysis, but it's sort of like Q1's always been the lowest EPS quarter because of the unemployment taxes. Do you expect a good $0.27, $0.28 jump from Q1 to Q2? Or would that even be more given the higher unemployment cost this quarter, this year?

Well, it won't be all of it, Jim, but there will be a big chunk that goes to profitability in the second quarter, Tim, unless our revenues decline significantly.

Yes, and certainly that's the biggest piece of turning from a loss back into being profitable. Timothy Brown – Roth Capital Partners: I’m just wondering in '07 in Q1 to Q2 you were up $0.27, in '08 you were up $0.28. So, all things being equal on the revenue side, should we expect the $0.27 to $0.28 jump from Q1 to Q2?

Tim, you've got a couple things going on. Our seasonal business, which is staffing at higher margin, picks up in that quarter. And then all the unemployment drops off. So, given all things equal, I would anticipate that we certainly would do that.

Yes, we should see a similar trend.

Yes, I don't see anything standing in the way of it. If the staffing picks up and we know that the unemployment will drop off, then there will be no reason why it wouldn't do the similar things that we've done in the past. Timothy Brown – Roth Capital Partners: Just on the staffing, Bill, histrionically, I kind of find your staffing business as a little bit more immune than like a Kelly type services, but what's the status of that in this environment?

Well, our customers have just simply cut back. I mean, they just are not using. We haven't lost a lot of customers, but a lot of the big stuff that we do, excluding the cannery business. The cannery business and the wine packaging and those things that we do should remain relatively similar. So I don't see staffing going to zero. But I'm not so sure about some of my competitors. I happen to own a couple of my competitors in terms of their stock, and I'm not positive they couldn't go to zero. It's pretty rough out there. So, we've done some of the right things. We're a little bit entoleted from – I would hate to be in the high tech staffing arena right now. That's a very difficult proposition.

(Operator Instructions) We do have another question from [Shawn Willard]. [Shawn Willard]: The first question is from me, yes. One thing you and I sort of talked about once before and it's somewhat more timely given that they're passing or trying to pass this stimulus mess, what would happen, or in your opinion you said lowering interest rates to zero, you can't do anything more there. One of the things that's been bandied about is actually putting in a reduction of the payroll taxes so it goes directly through to the employees. One, do you think that would be beneficial and maybe be something that could kick start things. And, two, from an accounting perspective, how would that impact you? And you and I did start a conversation on this once long ago, but we never finished it.

Well, if it's passed through to the employee it would have no affect on us whatsoever. And if it was a company, like the $3,000 tax credit they once proposed, we wouldn't pay any taxes for a couple years probably. I personally don't think that it's meaningful to put money in the hands of employees at such a low level, $300, $500, or $600. I think that helps Wal-Mart and McDonald’s, but I don’t think it’s going to help in the overall economy. Loosening bank credit is going to be and, as you and I have talked about this whole market-to-market stuff, really we see a lot of our customers are suffering as a result of the inability to get loans to continue to operate their businesses. So as you go down the scale of credit worthiness, whereas somebody might have been at 70% and could get money before, they’re out. And, if your business is not liquid enough that you’ve got enough net assets to carry it by itself, what are you going to do? I mean, you’re screwed. You’re out of business. [Shawn Willard]: Especially with them calling credit lines lately, it’s been the big thing that’s really hurt businesses.

Well, what’s going to help us, as we have already heard about it, is our competitors, a lot of them, are going to go out of business. I have a theory that, in general, recessions are a result of too many of everything. Too much competition, too many cars, too many houses, too many of whatever you want to name, and what recessions do, it eliminates a lot of the too manys. And so, when these too manys build up, the margins decrease, the pie stays the same and everybody gets a smaller piece. When recessions hit, a lot of competitors go away. We had somebody just today who wanted to know if we’d PEO their temporary services and the answer was no. So I think over this next year, assuming a non-rapid recovery, that we’re going to get some benefit just out of people going out of business, a lot of competitors, particularly locals and maybe some nationals. [Shawn Willard]: The second question, I know that you, obviously, have most of your business on the West Coast, but you do have Maryland operations and a few other specialty areas. The past couple of recessions have tended to start in California and end first in California. Do you think that might be the case this go-around as well or just no visibility at all what might bring it around at this time?

I thought, back in November, that we may have leveled it out some and I think the country did. But, the last two weeks of December were like somebody through water on a fire. It just went out. Most of the midst in the quarter came in the last two weeks of December and that’s how bad it was. I went shopping for Christmas and you could have shot a bullet through a store and never hit anybody. I think there were a lot of companies that simply shutdown and significantly cut back because there just wasn’t any reason for them to stay open. I’ll let Mike speak to it. Mike and Greg just finished with the Round Robin in Southern California and in Northern. Did you guys do Northern yet?

Yes.

Maybe they can speak a little more because those are the people that are right at ground level. Mike? :

Yes. I think that, again, we kind of thought things were firming up and even at October or November and felt that, overall, that we were holding our own pretty well. And then after Thanksgiving everybody just slowed everything down and then, as you got closer to Christmas and New Year’s, basically companies shutdown. They basically said we’ll pay you half wages and take two weeks off. And then as we came into January, it was a slow go. In fact, the first couple weeks in January it looked a little bit like the last couple of weeks in December. And then as we’ve continued now into February, things are firming up. As far as California leading the charge, California still seems to have, and is still suffering with some of the highest unemployment in the country. So, again, I think it’s where you could before in our business look out a month or two months and have some visibility, today it’s week to week. In our markets, our management strength continues to mature in strengthen our process by which we acquire new business is maturing very well and we’re building width, but everybody that we’re talking to is anywhere from a half to a third as big as they were two or three years ago.

Well, we thank you for your interest and, for those who continue to own stock, rest assured that we’re running a well run company here where there’s no slack. We’re running tight. We’ve got a great business model and hopeful that over the next several months that we’ll see this economic malaise back off and I think you’ll see some really good numbers come out of us. : I mean, I can see where the leverage is and I’m not just blowing smoke about it. I’m really proud of the company and I think that our opportunities, assuming we do not enter a depression, are going to be great. So we’ll talk to you all next quarter. Thank you very much. :

This does conclude today’s conference call. You may now disconnect. :