Good afternoon. My name is Anisa [ph] and I will be your conference operator today. At this time, I would like to welcome everyone to the investor conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. (Operator Instructions) Thank you, Mr. Miller. You may begin your conference.

Thank you. Good morning, this is Jim Miller, with Mike Elich. Today we’ll provide you with our comments regarding the company’s operating results for the recently completed second quarter, ended June 30th and our outlook for the third quarter of 2011. 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 these 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 seven 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 various 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 basis of reporting have no effect on gross margin dollars, SG&A expenses or net income. Turning now to the second quarter results, total gross revenues of 366.9 million increased 69.8 million or 23.5% over the 2010 second quarter. California which comprised approximately 83% of our overall second-quarter gross revenues increased 28.1% from continued growth in new PEO business. PEO gross revenues increased 71.3 million or 26.9% on a quarter-over-quarter basis primarily due to the addition of new customers. Our PEO revenues from existing customers…

Good morning. Overall, I consider it a very good quarter. A few key measurable that we will gather is, one that we are seeing a much more stable base in our existing clients that we continue to build with in our client base which ultimately is supporting our growth. And we are seeing the quality of our new and existing clients continue to improve both as they operate and as they might look coming in from a financial side, can they make payroll, can they their balance sheet, the quality of that from a risk standpoint, the cultural side of their business. In the quarter we added 151 new clients. We lost 33. In the mix that we lost, three of them were due to AR issues; six of them were non-AR issues or were comp or other reasons. 14 of those clients sold, six of them were due to less due to pricing or taking payroll in-house. And four left to competitors. That was a net gain of 118 new clients. Overall, the company continues to run very well. We continue to align our internal organizational structure to support the growth we are seeing. One of the things that we are noticing from our pipelines and where our new growth is coming is that it is much more broad-based than it has been in over the last year. We are seeing more growth coming from all branches and all regions as opposed to being concentrated in specific areas. Client growth, something I look at, and I look at continuously is that our net gain at 118 clients for the quarter and our overall growth year-over-year was 23%, although we only recognized 4% of that from being same-store sales. What that means to me is that the hours and what…

(Operator Instructions). Your first question comes from Josh Vogel with Sidoti & Company. Josh Vogel – Sidoti & Company: Mike, you were just talking about infrastructure a little bit and I was curious about existing capacity right now given the robust growth you’re seeing on the PEO front, are you getting constrained in some markets or regions?

Not really, we feel that we’re staying far enough out in front of that that we recognized that some branches are going where they have not been before and that we have some branches in Southern California in particular that are continuing to set new records. But, we have spent a great deal of energy in the last few months really looking at the alignment of how we do business and how we expand existing operations internally to ensure that we’ve got a degree of scalability within existing branches and it is working very effectively for us. Josh Vogel – Sidoti & Company: Okay, great. Jim, maybe you could help me. Is there any way to quantify maybe over the second half of 2011 for Q3 and 4 the (inaudible) that you expect to see in the payroll tax and benefits line just from higher state unemployment taxes?

Well, as we saw in 2Q, the higher unemployment taxes were about two tens of a percent higher from 7.7 to 7.9% and for Q3 and Q4, that difference may narrow a little bit as the wage ceilings are reached, but likely we will remain a bit higher for 2011 in comparison to last year. Josh Vogel – Sidoti & Company: Okay, great. And what’s the net cash that’s available to shareholders?

In looking at or sort of backing out the cash required for our captive insurance company and then ECOLE, our fully fledged insurance company. You know we are looking at probably in the neighborhood of about 30 to 35 million of totally free cash. Josh Vogel – Sidoti & Company: Okay, great. And lastly, I’m sure you guys continue to get a lot of questions as do I, I was just curious if you had an update on what bills the state was looking to do with the shares?

It continues to be a process that they are working through. We do have an on-going dialogue with Tim and the estate and as we know more we’ll let you know. I know that there has been some shares sold which has not adversely affected us. And we’ll just continue to be there to offer up support any way we can, as we represent you and all the shareholders in that process. But, it’s a slow process and it continues to move forward.

Your next question comes from the line of Jeff Martin with Roth Capital.

Hi, good morning guys. This is (inaudible) calling in for Jeff. Mike, you touched on strength with the pipeline currently. How would you say this compares to three and six months ago?

The one thing I see is that in some markets we’ve reached a bit of a tipping point, we get a lot of our clients from referrals of existing clients and also brokered networks and referral networks that we build. And one of the things that we found is that we’re building as we build and continue to support a wider base of clients, the pipelines are starting to grow and remain more robust based on the fact that we continue to deliver on a good product. And so, I would say that they are stronger than they have been and also to add that we are starting to see where those pipelines are more broad-based. Where we are seeing more markets with strong, I could talk about Southern California all day long, but the real strength is how well are we doing in places like Washington. How well are we doing in Phoenix Arizona where in the past we haven’t been able to lean on those markets for growth? We’re seeing where there is opportunity and our pipelines are starting to broaden more.

Okay. Great. And then has there been any noticeable change in the employment environment within your client base for trends in payroll characteristics from April to June and perhaps July?

Not really. One of the things that I think I mentioned on the last call was that with all the upheaval that was going on and in February that it would be interesting to see how our clients, our employers responded to that as to whether or not they would add people, whether or not they would contract and lay off people. One of the things that we have seen is a pretty strong stability in that overall base which has allowed us to go and add new clients and that’s what’s attributing to majority of our growth. But for the most part, I would say it is stable. We’re working with very well run companies and they are figuring out how to do more with less before they have to add people. And we encourage that.

Okay. And then along those same lines, how would you characterize the outlook for the employment environment just based on what your clients are telling you?

You don’t see anybody saying that they are going to contract and I see companies are continuing to be optimistic about where things are going and at least in their local markets. So I see that in time, there will be enough pent-up demand, they'll be put in a position where they have to hire people. No owner sits out there and said I want to go hire a bunch of people. They are trying to do as much with as little as they can. But the reality of it is that as they become more successful as well as the market continues to consolidate or shakeout, there are fewer suppliers to match the demand of the market and therefore they are being put in a position to add. We are hearing talks with different companies where they see they are going to be expanding and we see one company will be expanding where another company is either flat or maybe pulling back a little bit. And that’s what’s similar to what we see going on right now. And we see a 4% uptick in same-store sales, but nothing that’s blowing the doors off.

Okay. And then what are the recent trends in workers’ compensation and how might these might affect your business near term and longer term?

It is the same old story. We continue to fight what’s going on currently and try to be more effective at that. And then we’re always kind of hit with that tale that continues to roll in. We still continue to runoff the model that we brought in a couple years ago and running off that. One of the things that we are doing is taking some of the charge that we’re taking to us to the increased growth even though we have recognized claims in that area yet. So, if we’re inline, we’re charging ourselves in line with the growth, so a percentage of what we’re making from the new growth will continue to go back into work comp which hopefully will keep us out in front of that curve.

Great. And last question, Mike, in your commentary you mentioned investment in infrastructure. Could you elaborate on this a little bit?

In the quarter one of the things with passing of Bill is that we have had to from a corporate standpoint is shift some responsibilities, obviously and with the growth on top of that we’ve made a conscious effort to look at our structure and figure out how we need to be able to step back enough to see the bigger picture and in that process we have added a director of risk management in the quarter and then also a director of IT, both of which are designed to help us work on that focus being a year to 18 months out so it pulls both Greg Vaughn, Jim Miller and myself back a little bit so we can be looking at a little further up than that.

(Operator Instructions). Your next question comes from the line of Michael Prouting with 10K Capital. Michael Prouting – 10K Capital: I apologize if this question was earlier asked. I missed a couple of minutes of the call, but the weakness that you saw in the staffing business, do you see that coming back at some point or is this is what you’re thinking there?

Oh, I think it will come back. I think that what we have seen is we do a large amount of work in the food processing and that is all supported by agriculture and one of the things with the weather in the northwest in particular in June is that everything got pushed off roughly a month. We know a couple markets where the crops that normally we would be supporting today and would have been supporting in June has been pushed out as far as five months. Now we don’t know what that will look like when it finally comes through if it'll get the same volume that we might have got if it was on time. But at the same time, we know that those customers aren’t going anywhere, they will be around next year, we have been working with many of them for many, many, many years. But it's just been a weird season from that standpoint. And the other side of it is we saw a little bit of softness in our Salt Lake market and Salt Lake is a very robust, very adaptive market where we had some concentration in a certain sector of business clients and they just took a hit in the last six months and we felt bad a little bit. Michael Prouting – 10K Capital: Okay. On the Salt Lake side are you seeing any of that come back in the comp quarter?

Yes, I think we are finding some stability now. The one thing about staffing can be up, can be down and one thing that we like about the PEO blended with staffing is that it creates stability for us and we are starting to build on the PEO front in the Salt Lake market which will help us a great deal. But on staffing side we have a very strong presence there. We have a lot of great width in our client base and at the same time, like I said it's been a very adaptive market. It will come back. Michael Prouting – 10K Capital: Okay, and then I’m just wondering given what you said about the agricultural side of things, I’m just wondering what your guidance for the third quarter assumes on either side staffing concerned or as far as the mix between staffing and the PEO business?

When we guide we really don’t look at it that way. We roll it up and we look at where our trend is week to week. I would say at worst, it will be flat from where we are at today. Michael Prouting – 10K Capital: So you don’t assuming it initially then any kind of recapture of that timing difference on the staffing side in the third quarter, it sounds like at least as far as your guidance is concerned?

Not from a guidance standpoint. I would say that it would be too early to tell. I would assume that we would recapture some of it and it’s really an anomalous year. I’ve been working around that sector for about 15 years and I have not seen it be this much delayed. So it’s always hard to tell when it’s delayed this much, how much of it will come back. Michael Prouting – 10K Capital: So, that’s helpful. I just wanted to essentially understand what was the assumption as far as the guidance was concerned. And then just turning to the cash balance. It’s a little frustrating given how well you guys are executing against admittedly a pretty challenging macro backdrop. It continues to be somewhat frustrating that the valuation is where it is. And then frankly the market capital has no doubt hold lot more than the cash and receivables on the balance sheet, and given that this is a recurring revenue business, it’s disappointing that the market is putting on the company at this point. It sounds like you did buyback some stock in the quarter, which you anticipate putting some more resources behind that going forward from this point?

Yeas one of the things we are doing is, the last six months has been a, we’ll call it a significant transition I would say we’ve executed extremely well, maybe even off the charts. We’re continuing to step back and build the infrastructure for a much larger, for a successful company. We’re continuing to play off a great legacy that was left for us as well. And those pieces take time. Today though we are engaged with a company that’s helping us take a more proactive look at investor relations and also how our story is told to the market, which I think, will help us. We continue to be in the market to buy back shares, as it might be necessary. And we continue to look to our cash and as a tool to help us expand our market once we know that what we have in place is working and running very well. Michael Prouting – 10K Capital: Okay. Going back a couple of quarters here, it sounds like there were some potential acquisitions that you had been looking at, and maybe to some extent they got put on hold in part, because of some of the transitional issues you mentioned. Just wanting to get an update on that front.

I wouldn’t say that they really were ever put on hold. One of the things that we discovered in our model is that for the opportunity of acquisition, we could go out by company today. But I am really not interested in buying something that’s broken. I’m more interested in looking at may be larger organizations that have the infrastructure. And we continue to foster and build relationships with those organizations. And when it makes sense, we will possibly put something together. Michael Prouting – 10K Capital: Okay. Okay. And then to state the obvious, I mean, it's good that you have the cash but if the valuation of the stock more at least in our view adequately reflected the value of the business that would give you another currency with which to make acquisitions.

We recognize that one as well. Michael Prouting – 10K Capital: Okay. And I know this question was asked, but to ask in a slightly different way and then I will get off the call. Any thoughts on the timing as far as the trust making its decision in terms of what it’s going to do with its stock or how much they are going to sell, how much they are going to keep, etcetera, etcetera?

As I mentioned, it’s an ongoing process and there is a lot of variables involved in the process. And as the trust is able to sort out their most optimum options we’ll be available to do what we can do to support the process, but it comes down to the trust being able to sort out what is going to be long-term in the best interest of the trust. And we’re trying to be there to support anyway we can.

Your next question comes from the line of Bill Nasgovitz with Heartland Funds. Bill Nasgovitz – Heartland Funds: So congratulations on a successful transition and a terrific first half.

Thank you. Bill Nasgovitz – Heartland Funds: How much stock did you repurchase during the quarter?

We repurchased about 61,000 shares during the second quarter. Bill Nasgovitz – Heartland Funds: Okay. And what’s your policy, what’s your program going forward?

Well, from a pricing standpoint, what we’re currently looking at is, we’re in the market when the price drops below 14.50. Bill Nasgovitz – Heartland Funds: Now, what is the authorization?

Any authorization remaining is about a little less than 1.5 million, so we’ve got quite a bit of room. Bill Nasgovitz – Heartland Funds: Okay. And where did you come up with a 14.50 price? I don’t know if you should be telling the market place that, by the way, but how did you come up with a price?

Bill that was at the beginning when we went into our quite period we had to file a plan and then that will be updated as now we’ve released earnings because we were locked down to some degree. Bill Nasgovitz – Heartland Funds: But how did you come up with a 14.50 price?

I can’t remember at the time where we were at. Bill Nasgovitz – Heartland Funds: Okay. Well, in today’s low interest rate environment, net of cash, it seems to be a pretty favorable alternative for all holders, for all investors who remain with the company. On the downside, what are you most concerned with, going forward here?

It’s a good question, Bill. I think in the last six months my biggest concern has been that we would become distracted by the noise of stuff. On a go forward basis, I think we’ve got running a well-run company and one of the things that Bill Sherertz was always about was building a well-run company and if you run a well-run company eventually the value will be there. And we’ve got to maintain our focus there. I think from an organizational standpoint we’re very solid. I think we’re out in front of the curve far enough. I think that our product is being well received by the client market, so that’s where our growth is coming from. But we can’t become distracted and I think that if we can keep our eye on the ball and that starts with me, and then it rolls down into the organization, we’ll do well and continue to have the support of the board which has been a very, very key element through the transition.

And we have a follow-up question from the line of Michael Prouting with 10K Capital. Michael Prouting – 10K Capital: Yes, sorry I lied and one other minor question. Just in terms of cash flow from operations, if we wanted to normalize the number from the first quarter, I’m wondering did you just take out the 10 million growth in insurance proceeds or should we tax adjust that in some kind of way?

Yes, you would pretty much just take out the 10 million in total as given our projected taxable income for the entire year being what it is the 10 million should be totally tax-free. Michael Prouting – 10K Capital: Okay, all right, great. And I don’t suppose it’d be possible in the future to release the cash flow statement when you announce your earnings, by any chance, would it?

Well usually at the time of the earnings release we are still working through the actual formal cash flow statement.

(Operator Instructions) Your next question or comment comes from Shawn Willard with Orca Investment Management. Shawn Willard – Orca Investment Management: I just wanted to follow-up on a couple questions. When I was taking notes, I wanted to make sure I got this right. Mike, one of the comments you made when one of the people asked about the staffing revenue and his question was, do you see that being roughly flat or up. Part of the way through there, I wasn’t sure were you talking about quarter-to-quarter or year-over-year, sort of the worst case being flat? Because last year in the fourth quarter or in the third quarter you did just under 34 million and obviously in the June quarter you did obviously 30.5 million. So there’s a…

I would say probably quarter-to-quarter at this point Shawn. Shawn Willard – Orca Investment Management: Yes for those that aren’t here in the Northwest, we haven’t been much over 60 yet this summer. So I sympathize with trying to do that business than you normally have here.

Well, one good example is let’s just take cherries. Typically, cherries are harvested, and the run starts June 4th and it’s done by June 28. This year it was ramping on July 7, so five weeks late. And so what you don’t know is what will really come out of that. And that’s just one example of the ripple effect into a number of different industries. So we don’t know what the potato market, the apple market, all those other sectors are going to look like, which really won’t come on board until mid-August, typically. Shawn Willard – Orca Investment Management: Right, yes. I feel bad for people like Bill that are that are in the Midwest in 100 degrees and we’re trying to break 70 here. One of the questions that was asked on the last conference call that I thought was pretty good, I was just curious for a follow-up on it. Was, there had been some manager turnover. I think you said you had three or four branches that you were looking to replace people. You thought you were pretty close to filling some of those positions. Normal term over type events, but where do you sit on that today? Have those been filled? Are you still looking? And what sort of your net position on openings at the branch level?

Actually our base has been very stable. So, from a net turnover basis if I go back to where we were last quarter, we had opened Portland, Idaho Falls, and Denver. Today, Idaho Falls and Portland are filled and then we had two managers have to leave just for personal reasons that have been around for a while, one move back to the East Coast to follow her husband and that was Medford, she left July 1 that’s already been backfilled. That person starts on Monday and then we had another person in northern California that had some personal reasons that he had to leave after taking a family leave act or family leave and then he finally decided to leave. But we’re in the process there. But other than that, once that one's backfilled we’re still working on Denver. And Denver has just been one I haven’t been able to find a person that’s better than we have in place. Shawn Willard – Orca Investment Management: Okay. One of the other things that I noted, your SG&A as a percentage revenue hit an all-time low this quarter 2.5%. Historically that was normally well above 3 even if you go back to ‘06, ‘07 timeframe when everything was running well in the economy. Well, let me not put words in your mouth, how much of that drop in SG&A as a percentage of revenue is cost controlled and how much of it is a revenue shift more heavily skewed towards PEO as a larger makeup of the mix?

Well, we’re always trying to be fiscally responsible, but one of the things that get balance and try not to do is, is start of off growth. So we’re starting to make investments back into our infrastructure. I would say the majority of it to be the latter, would be the dilution based on the increase in PEO revenue. Shawn Willard – Orca Investment Management: Okay. And then my last question is and this goes back to ‘06, ‘07 timeframe. Particularly in California you had a lot of exposure both directly and indirectly to the residential and commercial building market places. Has that pretty much all been replaced at this point? I mean, I think that’s sort of lost in the big picture of everything that’s been going on is that I know a lot of that business went away and yet you are able to replace it with new business all the way along. Is that process pretty much finished at this point? And so the net new additions of clients and revenue should continue to start to accelerate the growth? Or is there still a legacy business there that’s large enough and flat enough that it's going to continue to have an impact?

No, I would say if we went back to those years you mentioned, ‘06, ‘07, we probably had and we’ll just talk about PEO for a minute, we had roughly thousand clients that we were working with at the time. Today and if you figure may be a 30 to 40% of that was wiped out during the recession and the shakeout from 2006 to 2009. So they might have brought us down to 600 or so. Today we’re sitting on over 1,700 clients. And so I would say that with the mix looks like, the mix is much cleaner today than it was then. And I would say that it's much more diversified and it's just so much more broader that we’re not even the same company that we were then.

At this time, there no further questions.

Thank you for your participation. We look forward to talking to you again in October. Thank you.

Thank you. This concludes today’s conference call. You may now disconnect.