Good morning, ladies and gentlemen, and welcome to the CBIZ second quarter 2008 results conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Mr. Steven Gerard. Mr. Gerard, you may begin.

Thank you, John. Good morning, everyone. And thank you for calling into CBIZ's second quarter 2008 conference call. Before I begin my comments, I'd like to remind you of a few things. As with all our conference calls, this call is intended to answer the questions of our shareholders and analysts. If there are media representatives on the call, you're welcome to listen in. However, I ask that if you have questions you hold them until after the call and we will be happy to address them at that time. This call is also being webcast and you can access the call over our website at www.cbiz.com. You should have all received a copy of the release which was issued this morning. If you did not, you can access it on our website or you can call our corporate office. Finally, remember that during the course of this call we may make forward-looking statements. These statements represent Management's intentions, hopes, beliefs, expectations and predictions of the future. Actual results can, and sometimes do, differ materially from those projected in the forward-looking statements. Additional information concerning the factors that could cause actual results to materially differ from those in the forward-looking statements are contained in our SEC filings, our Form 10-K and our press release. Joining me on the call this morning is Jerry Grisko, our President and Chief Operating Officer and Ware Grove, our Chief Financial Officer. Before we opened this morning, we were pleased to release our second quarter results, which continued to show growth in both revenue and earnings per share. Our revenue for the quarter was up over 12% and our earnings from continuing operations were up over 20%. I will turn the call over to Ware now to give you the details and then I will come back and talk about some of the other information we wish to impart.

Thank you, Steve, and good morning, everyone. Let me take a few minutes to review the highlights of the numbers we released this morning for the second quarter and year-to-date results for 2008. Total revenue for the second quarter was $175.7 million, an increase of $19.1 million, or as Steve commented, 12.2% growth; compared with revenue in the second quarter a year go. Same unit revenue increased by 5.8% in the second quarter and the revenue increase attributed to newly acquired business was 6.4% or $10.0 million, compared with the second quarter a year ago. We were very pleased that this quarter represents the 20th consecutive quarter of same unit revenue growth for CBIZ. In the second quarter this year, same unit growth in our financial services group increased by 8.5%, increased by 5.0% in our employee services group, and increased by 6.5% in our medical management professionals group. And for our national practices group, which is primarily comprised of our technology services business units, same unit revenue declined by 8.1% for the second quarter, compared with the second quarter a year ago. We have completed three acquisitions so far in 2008 that generate approximately $9.4 million of revenue annually. I also want to remind you that we acquired Healthcare Business Resources, a $30 million emergency medicine billing business, in the fourth quarter of 2007. These acquisitions are performing well and they are expected to make a significant contribution to our revenue growth in 2008, as evidenced by the 6.4% contribution to revenue growth in the second quarter this year. We have always described our long term revenue growth goal as a strategy that is a blend between same unit organic growth, complemented by acquisitions. The mix between these sources of growth will be variable on a year-to-year basis, primarily…

Thank you, Ware. I am very pleased with our top line and bottom line results for the quarter and the six months, as we have reported a good mix of organic and acquisition growth, which is consistent with both our 2008 and longer term guidance. While we've achieved our goals and are confident of our ability to meet or exceed our full year targets, we continue to be somewhat impacted by the softness in the property and casualty business, the lower asset valuations in our wealth management business, somewhat higher processing costs in our MMP business, due to our transition to more off-shoring and some collection interruption from the implementation of the National Physician Identifier rule, as well as the obvious weakness in our technology business. I'd also want to emphasize that based on our continued successful performance we are continuing to make investments in both people and technology, which are necessary for the future growth and success of the company. A combination of these intentional investments in people and technology, coupled with the various external market issues I mentioned above, have resulted in year-to-date operating margins somewhat below what we're striving for. However, let me remind you that our plan for 2008 was not only a revenue growth of at least 10% and a growth in earnings per share of at least 20%, but a pretax margin improvement continuing the trend of the last four years. Based upon the operating plans of our various business units and our pipeline of pending business and our ability to continue to leverage our G&A, we believe that we will also achieve our margin goals for 2008. With that, I'd like to stop and I'd be happy to take questions from our shareholders and analysts.

Thank you. We will now begin the question and answer session. (Operator instructions) Our first question comes from Josh Vogel from Sidoti & Company. Please go ahead. Josh Vogel – Sidoti & Company: Great. Thank you. Good morning, guys. My first question is on the pricing environment. I was mostly concerned for financial services and employee services, what were you seeing on that end?

This is a difficult economic time for everyone. I would characterize the pricing as – except for the property and casualty, which we talked about in the first quarter call and I've just mentioned again, I would say that the pricing for the balance of our benefits and insurance business is relatively unchanged. There's always competitive pressures, but there haven't been dramatic market shifts. The pricing in our financial services business, quite frankly, is relatively unchanged also. Don't forget that a substantial part of our businesses are contracted to towards the end of last year, in terms of when our clients on the financial services side engage us for taxes for the next year or for audits for the next year. So that pricing tends to get somewhat locked in. I would characterize the pricing across the board as being somewhat higher competitive to pressure, but other than property and casualty, we're not seeing dramatic pricing, downward pricing pressure. Josh Vogel – Sidoti & Company: Okay. So maybe as you look out towards the end of this year and as you look to lock in business for 2009, do you think that the pricing environment is going to be a little bit more difficult?

I think it may be too soon to tell. I think the negotiations may be a little bit more difficult. But I'm not envisioning dramatic changes in pricing going into next year. Josh Vogel – Sidoti & Company: Okay. Great. And what about on the wage side; are you seeing rapid wage inflation or has that been pretty steady as well?

No. That's been very steady. The wage inflation has not gone up. Now there continues to be pressure in our financial services group, primarily among our more senior accounting professionals. As in any professional group, the best people are always in demand. So there's a little bit more pressure there. But across the board we're not seeing dramatic inflation or salary pressure in our workforce. Josh Vogel – Sidoti & Company: Okay. Good. And you've done a great job layering in the acquisitions, with the three this year and the healthcare billing in Q4. Is there any way to quantify what you think those three businesses are going to add to the bottom line for full year '08?

We haven't really quantified bottom line impact, Josh. Typically our acquisitions are accretive and they tend to have a marginally higher incremental contribution in the core business, just because we can leverage the add-ons. Josh Vogel – Sidoti & Company: Okay. And just lastly, what percent of your total business is in California?

I don't know off the top of my head. I would have to get back to you. Is there a particular reason why you're asking that question? Josh Vogel – Sidoti & Company: I was just curious because the economy there is probably one of the hardest hit markets in the U.S. And I'm just trying to gauge the exposure there.

We would have to try and calculate that across all of our major business groups and I'd be happy to do that. Let me say this to you, it's not a disproportionate amount of our business. We have strong accounting groups there and insurance groups, and very little MMP business out there. So I would guess that there's no disproportionate contribution there. And our accounting groups, in particular in Northern California, in the L.A. Area and Southern California are among the most well positioned of our businesses anywhere, with very strong client bases. So I wouldn't expect a dramatic downturn in the California economy to have a disproportionate impact on them. Josh Vogel – Sidoti & Company: Okay. That's helpful. Thank you very much.

Our next question comes from Jim Macdonald from First Analysis. Please go ahead. Jim Macdonald – First Analysis: Hi, guys. Can we (inaudible) on the margins a little more? I mean, any economic impact on margins? Any impact of the physician identifier shift in MMP? I mean, it seemed like margins were sort of up across the board and – but on the flip side your corporate unallocated was much lower than usual.

I'll address the margins and Ware can talk about the unallocated. He gets the hard questions. MMPs probably saw some disruption in collections from the May 23rd implementation of the NPI, the National Physician Identifier, as some of the carriers struggled to match up the claims with the doctor groups. We viewed that, and we said I think to you and others, that that was a short term issue which would resolve itself in the third quarter. So to the extent that there was any revenue dislocation there, and then we think there was some, we'll see that picked up. With respect to the margin in our other businesses, I think we've explained the obvious margin deterioration in the employee services group as being primarily in the property and casualty arena and the asset-based fee area. And on the financial services side we've seen some expenses for people, as we build up that business. And we've had some timing issues of some contingent revenue that came in in the second quarter of 2007 that isn't going to come in until the third and fourth quarter of 2008, which is one of the reasons why we try and emphasize that to look at us quarter by quarter isn't as applicable as perhaps some other companies, because we do have timing on both the insurance side and the accounting side of what we could call normal business. It just tends to come in one quarter versus the other. So the margin issues across the board – and the margins were off, as I indicated in my introduction, in all of our businesses for the quarter. But I would reiterate what I said, which is we do expect to hit our goals for the full year. There's enough on our plate to make it up.

Yes, Jim. This is Ware. Let me go through our deferred compensation impact. You talked about the unallocated expenses up in the gross margin table that we provide on page 3 of the attachment to the press release, and the fact that the unallocated expenses are lower this year, compared to last year. That's primarily driven by the impact of the deferred compensation accounting. We now have about $24 million in assets in that rabbi trust. And just to run you through how this works again, as the value of those assets gain in market value, that generates additional compensation expense, which is then offset in the other income or loss expense line. So there is no net pretax impact or no net bottom line. But it does impact the gross margins and the operating income. Now for the second quarter this year, and even for the first half this year, we've seen market declines in those assets. It was a fairly modest decline in the second quarter. And for the first quarter – for the year to date there is about a 10% decline or about a $2 million decline in the value of those assets. So when you look at the other income and expense line, you'll see that in that line. But it's also up above in that unallocated line. So the extent that we have market reductions, that reduces expense up in the operating income area and then it creates a loss or an expense down below. Is that clear? I know this is kind of a complicated area. Jim Macdonald – First Analysis: Yes. I mean, it's sort of clear. Although you didn't seem to have that much of an impact of the rabbi trust in the second quarter?

No. It really wasn't. It was maybe, if you calculate the all-in impact to the operating income margin, maybe 7 basis points. Jim Macdonald – First Analysis: Right. So I'm just wondering; that seems like a relatively small amount to impact the corporate unallocated so largely.

Well, when you're comparing it against last year, last year remember we were in a different market and we had some gains which would have increased expenses last year compared to the reduction in expenses. So the year-to-year comparison is really probably what you're looking at. Jim Macdonald – First Analysis: Okay. Thanks. And then let me ask – on the MMP, we started down that path. Any estimate of how much revenue will shift Q2 to Q3 because of the NPI shift? And that is given some of the Medicare billing issues and the buy; will that shift any revenue from Q3 to Q4? Or will that all be (inaudible) in Q3?

It's actually a little bit hard for us to calculate. The best estimate that we're able to come up with, and the range is very wide, is somewhere between $200,000 and $500,000 of revenue that may be attributable to the NPI. And we tend to know that as the claims processing ages. Assuming those numbers are correct, and again I appreciate the range is very wide, we would expect to pick up the bulk of it in the third quarter and possibly a little bit more in the fourth quarter, based on the ability of the carrier to straighten out their bookkeeper. Jim Macdonald – First Analysis: And have you been impacted by the Medicare physician billing rate issues and lack of –?

So it didn't have any significant impact in the second quarter. And there may be a little bit of an overtime or clerical expense to correct some of the billing that may have been done in that two week period of time. But I don't expect it will be material. In fact I don't expect we'll even comment on it in the third quarter. Jim Macdonald – First Analysis: Okay. And then just another one on the convertible, the new accounting rules for that, have you made any estimates of the impact of that in 2009?

No. We haven't yet, Jim. We'll be looking at that in the second quarter, and of course – I'm sorry, in the second half of this year. And of course that's in effect as of January 1st, 2009. If we're not ready to disclose and have a conversation about some of the details at the end of the third quarter, certainly by the end of the year we would have some information for you. Jim Macdonald – First Analysis: Okay. But is my estimate of a $0.03 to $0.04 impact way out of line?

You know I really can't say at this stage. We're still looking at it. So I don't really know that I have a comment on that yet. Jim Macdonald – First Analysis: Okay. Thanks very much.

Our next question comes from Vincent Colicchio from Noble Financial. Please go ahead. Vincent Colicchio – Noble Financial: Ware, a question for you. What portion of your reoccurring revenue contracts will expire in the second half of the year? Is that a large number or no?

It's Steve, Vince. Let me explain it this way. We have an 80-plus percent reoccurring business, as you know. But our definition of reoccurring revenue is the insurance and the accounting businesses that we do year after year after year. By example, if we've been doing your taxes for seven years, we expect we'll do it on the eighth year. That business tends to be re-upped every year. There is no guarantee that it will be, but the track record over the last 10 years is that over 80% is renewed. So that's what we talk about our reoccurring revenue. Our MMP business tends to have two and three year contracts and those are on a rolling basis, with no significant amount rolling off in any one given year. Our Edward Jones business, which is our largest single client, is a three-year contract. And that contract is up this fall and we are discussing the new contract with Edward Jones with a very, very high degree of confidence that a new contract will be in place going forward. So the specific question is you can't really look at our "reoccurring business" on a contractual basis because every year it gets redone. Vincent Colicchio – Noble Financial: That's helpful. On the MMP business, you had mentioned competition from offshore providers. I know you've talked about potentially off-shoring a portion of your processing. Could you give us an update there, on both what's happening on the competitive front and what your plans are in response?

Well, sure. I think the comment I made was that we have slightly higher costs in the last two quarters because we are transitioning more and more of our business offshore. And in that transition, while we are benefiting from the lower item processing costs, we still haven't reduced the headcount in a commensurate way. So we have a little bit of a double up until we make sure it's all going well. We're off-shoring today about 35% of our coding, which is one of a multi-step process. And we're in the process of looking at a number of our other processes to see whether they're applicable for off-shoring. So this is an investment we're making now that we think will have benefits in the future. The competitive pricing in MMP continues to be very fierce. There are a number of billing companies out there. We are a market leader so we are a target. And I would say we have as much, if not more, competitive pricing pressure in our MMP business as we do anyplace else. The offset of it is we're probably the best in the business. So we have a client service and a processing capability that a lot of people don't have. And that helps us retain business. But it isn't easy on a day to day basis. We are seeing competition from the other major billing companies. We're not seeing a lot of competition yet from "offshore" companies taking over the entire billing process, although that is certainly possible in the future. Vincent Colicchio – Noble Financial: And you're preparing for that obviously?

And we are preparing for that. Vincent Colicchio – Noble Financial: Okay. One housekeeping item I may have missed, Ware. What was the cash from operations?

I didn't really talk about the cash from operations. But think let us of it this way we've used roughly $30 million of additional funds on our credit facilities for the first half. We have spent from non-operating uses, between acquisition investments and share repurchase investments, roughly $58 million. So in round terms, roughly $30 million has come from the underlying operations in the first half. Vincent Colicchio – Noble Financial: Okay. Thanks, guys. Nice quarter in a tough market.

Robert Kirkpatrick from Cardinal Capital is on the line with a question. Please state your question. Robert Kirkpatrick – Cardinal Capital: Good morning and let me add my congratulations as well. Any investment banking deals done during the quarter or is that about as quiet as we expected it?

We closed the acquisition of EFL on the first of April, I think. Are you talking about our acquisitions or our M&A business? Robert Kirkpatrick – Cardinal Capital: I was talking about your M&A business. Excuse me.

Robert Kirkpatrick – Cardinal Capital: Okay. And has there been any change in provision for bad debts with the deterioration in the economy, at least as reported by the public press?

Yes. We've taken a slightly more conservative view on AR aging. And so we have made a very modest increase in the bad debt allowance for the first half compared to last year. Robert Kirkpatrick – Cardinal Capital: Okay. And then Steve or Ware; how much is remaining on your current share buyback authorization?

Well, we've got 5 million shares authorized through March of '09. I think we've used roughly 1.5 million to 2 million shares of that authorization to date. Robert Kirkpatrick – Cardinal Capital:

Again, as you know, the authorizations are just bookkeeping. The fact is that we will continue to use our cash – first priority is acquisitions. Our acquisition pipeline is as strong, if not stronger, than it's ever been. So that's probably the first priority. If for some reason that strength dissipates, you can expect that we would continue to invest in our stock at the current price. And do it opportunistically. But it is too soon to judge what the quarter is going to look like. Robert Kirkpatrick – Cardinal Capital: Great. And then do you have much in the way of earn-out payments for the balance of this year?

No, we don't. Many of the large transactions we did in prior years have now fully gone through their earn-out phases. So from here on out we have fairly moderate obligations. Robert Kirkpatrick – Cardinal Capital: Great. Thank you very much, gentlemen.

Our next question comes from William DiTullio from Boenning & Scattergood. Please go ahead. William DiTullio – Boenning & Scattergood: Good morning. Thank you for taking my call. Could you just give us an update on the cross serving revenue, where that stands for the year?

Yes. I'd be happy to. Our cross serving revenue continues on track. We're about 45% of our full-year target. This is typically the percentage we are at, at this point every year, because the reporting tends to get a little bit back ended. So cross serving continues. Our goal that we published – our goal for cross serving last year was a little over $19 million. We've put forth a goal of $21 million and as we sit here today, we're on track. William DiTullio – Boenning & Scattergood: Great. And you said that your acquisition pipeline looks very strong. Could you just give us some more color and what kind of spaces you're looking at and what kind of size deals possibly we could expect?

We continue to look at acquisitions in our three major business segments, financial services, employee services, and medical management business. And we have acquisition possibilities in each of them. And they range in a very, very broad range of sizes from very small to reasonably large. And we're actively pursuing quite a number of them. William DiTullio – Boenning & Scattergood: Okay. Great. Well congratulations on a strong quarter, guys. Thanks.

Our next question comes from Ted Hillenmeyer from Northstar Partners. Please go ahead. Ted Hillenmeyer – Northstar Partners: Yes. How much of a headwind is the soft P&C market for your internal growth in employee services?

It's definitely a factor. I think if you read the literature, people have generally acknowledged roughly a 10% decline in pricing on P&C products. In our book of business, it's probably been less than that, maybe half of that, depending on the clients and the carrier and the line of coverage. But we've also been successful as to working with our clients in this soft market to have them take advantage to buy up additional coverage. So to the extent that deductibles are now going down and/or more coverage is being obtained, our total revenue growth is actually positive in that area on a year-to-year basis. And clearly less than it would have been otherwise. Ted Hillenmeyer – Northstar Partners: So was it a drag on the same-store number for employee services?

No. It was about in line with the same store number. Clearly, had the environment been better, the same-store number would have been better because of the P&C market. But the growth in the P&C revenue was generally in line with the overall employee services revenue growth. Ted Hillenmeyer – Northstar Partners: And when you say, by additional coverage, is that higher amounts or a longer period? And is that robbing from potentially future years?

Well, you know, people go through renewals and the thought process on a year to year basis. And it's not uncommon for a risk manager to take advantage, or a company to take advantage of a soft market to gain more coverage, either with more gross amounts combined with lower deductibles. Ted Hillenmeyer – Northstar Partners: But it's not doing a two-year deal versus a one-year deal?

No.

No. Typically not.

And our property and casualty business as a percentage of the total employee services business is maybe 15%. So your question as to the headwinds, there is clearly an impact. And it's softened our margin. If we had been carrying the same margin on the same revenue as we did a year ago, it would have made up the margin shortfall in the employee services group, or a good part of it. But it is not by itself a crippler, given the total size of the employee services group. Ted Hillenmeyer – Northstar Partners: Okay. And then can you just discuss the national practices technology group? You mentioned it was down and in what areas? Can you remind me; is the M&A in that bucket?

Yes. M&A is in that bucket. Our consulting firm, our healthcare consulting firm is in that bucket. But the majority of it is our technology business. It's about $40 million of annual revenue. Half of that or a little under half of that is the Edward Jones contract, which is performing very, very well. The balance of that is hardware, software installation, network monitoring and that tends to be project business. And that's the kind of business that gets soft when the economy slows up because that tends to be investment by clients into either new technology or upgrades. And so our software installation business is down, our hardware business is down and our networking business is, at best, flat. So while we have some opportunities in this area, and it is a good business for us historically, we will carry that business for a while and suffer some margin hits as that market right-sizes itself. Ted Hillenmeyer – Northstar Partners: Okay. And on the earn-outs, are you able to just give me a general ballpark of the magnitude and in general how acquisitions are structured with earn-outs?

Oh sure. Of course, every acquisition is different but the best rule of thumb is that typically about half of the consideration is paid at closing and the balance over a two or three year period, based on hitting certain performance measures. And as the time goes on, as most of our acquisitions have hit their performance measures, they earn the earn-out and they get paid in the subsequent year. Ted Hillenmeyer – Northstar Partners: And where in terms of what's left and might be recognized? And where does that sit on the balance sheet and how does it flow through the income statement?

Well we really don't book it on the balance sheet until the earn-out is actually earned and the contingencies that the earn-out needs to meet are met. And at that point in time we would book a liability on the balance sheet. And of course when it's paid, the cash would relieve that liability. So there is no P&L impact; it's just a balance sheet impact on the earn-outs. Traditionally, many of our investments and acquisitions have closed in the first half of the year. And therefore, as we go through the first, second or third anniversary of those acquisitions the earn-out calculations are made and paid. So generally the earn-out payments are in the first half of the year. So with $21 million, $22 million paid year to date on acquisitions and earn-outs, about half of that would be earn-outs for prior year acquisitions and about half of it for initial payments on the acquired businesses in the first half of this year. But as I commented earlier, we have very few earn-outs left for the balance of the year. And many of the acquisitions that triggered some larger earn-outs, which is a good thing quite frankly, are now behind us. Ted Hillenmeyer – Northstar Partners: Appreciate it, guys. Thanks.

And our next question comes from Jim Macdonald. Please go ahead. Jim Macdonald – First Analysis: Yes. Just a quick one. You mentioned softness on the project on the IT group. But what are you seeing on the projects related to the financial services business, the late in the year projects?

Given the visibility that we have, we think that the financials, what we call the project-related, namely the non-committed business in the third and fourth quarter, seems to be on track with what our expectations are. We don't have, as you know, visibility down to the little transactions. But basically, it looks to us like our financial services group is going to be well-employed in the third and fourth quarter with the pipeline of what we have. Jim Macdonald – First Analysis: Okay. Thanks.

(Operator instructions) And at this time, I show no questions.

Okay. Well, I'd like to thank our analysts and our shareholders for their continued support, obviously our employees who are listening in for their great work. As someone on the call said, great results in a difficult environment and that's the best way to summarize where we're at. This is a tough market and we're doing extremely well. And we're very proud of everybody who works for the company. And the outlook for the rest of the year is at least on target with our guidance, if not better. So we thank everybody and look forward to the third quarter call.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.