Welcome to TrueBlue's conference call. (Operator Instructions) Joining us today is TrueBlue CEO Steve Cooper and CFO Derrek Gafford. They will discuss TrueBlue's 2008 second quarter results, which were announced today. If you have not received a copy of this announcement, please contact [Teresa Berkland] at 1-800-610-8920, Extension 8206, and a copy will be faxed to you. At this time, I would like to hand the call over to Stacey Burke for the reading of the Safe Harbor.

Here with me today is TrueBlue's CEO and President, Steve Cooper, and CFO Derrek Gafford. They will be discussing TrueBlue's 2008 second quarter earnings results, which were announced after market close today. Please note that our press release and the accompanying income statement, balance sheet, cash flow statement and financial assumptions are now available on our website at www.TrueBlueInc.com. Before I hand you over to Steve, I ask for your attention as I read the following Safe Harbor. Please note that on this conference call management will reiterate forward-looking statements contained in today's press release and may make or refer to additional forward-looking statements relating to the company's financial results and operations in the future. Although we believe expectations reflected in these statements are reasonable, actual results may be materially different. Additional information concerning factors which could cause results to differ materially is contained in the press release and in the company's filings with the Securities and Exchange Commission, including our most recent Forms 10Q and 10K. I'll now hand this call over to Steve Cooper.

Thank you for joining us this afternoon to discuss our second quarter results for 2008 and a recap of our strategic progress. Earlier today we reported revenue increased 6% this quarter to $371 million, which is in line with our expectations we set at the beginning of the quarter. Net income per share came in at $0.39 compared to $0.41 a year ago and ahead of our earlier high end expectation of $0.30. Holding the revenue trends in line with the beginning of the quarter and implementing further cost cuts during the quarter enabled us to exceed our earlier expectations. In a few minutes Derrek will review with you in detail the items that helped us exceed our net income per share expectations for the quarter. Acquisitions completed during the last 12 months fueled our revenue growth during the quarter, contributing an 18% increase in revenue, while revenue in our organic operations declined by 12%. Derrek will be providing a detailed breakdown for you on the components of the organic revenue decline, but first I'd like to discuss our revenue trends and then I'll talk briefly about the progress we've made in executing our strategy to diversify our revenue streams and develop future growth platforms. The operating environment continues to be challenging and the economic conditions have sure had an impact on us again this quarter. As mentioned on our first quarter results call on April 16, we had maintained essentially flat same-branch revenue growth for about a year. Our trends were stable during the first quarter up to the middle of March. During the last two weeks of March and the first two weeks of April, we saw our same-branch revenue decline by about 8% to 10%, significantly off the trends we had been experiencing. From that trend change…

I'd like to start off today by pointing out the key items that caused us to exceed our expectations for the quarter. Earnings per diluted share of $0.39 exceeded our expectation by about $0.09. This improvement was made up of three major items. First, we received an income tax benefit of $0.04 per diluted share. This benefit was primarily related to the favorable resolution of certain state income tax matters. In short, we were able to settle these liabilities with state tax authorities for less than the exposure we initially expected. Second, we earned an additional $0.04 by further reducing our operating expenses. And lastly, a combination of lower depreciation related to deferring branch maintenance projects to the back half of the year and stock repurchases this quarter added an additional $0.01 per diluted share. I'll provide additional background on these items as we walk through the key operating and financial trends. Revenue for the quarter was $371 million, which was within our expectation at $370 to $375 million, including the acquisition of PMI, and represented growth over the same quarter a year ago of nearly 6%. Of the six percentage points of total revenue growth this quarter, 18 percentage points was from acquisitions completed in the last 12 months offset by a decline in organic revenue of 12 percentage points. Let's take a moment and review the components of this quarter's organic revenue decline: Branches closed within the last 12 months decreased revenue by 3%, same-branch revenue decreased by 11%, revenue from new branches opened in the last 12 months provided 1% of growth, and other items contributed 1% of growth. I also want to highlight our monthly same-branch revenue trends this quarter in comparison with the same period last year. April decreased by 8.2%, May decreased by 11.2%,…

(Operator Instructions) Your first question comes from T.C. Robillard - Banc of America Securities.

Did you talk about any workers comp reversals in the quarter that may have benefited in the quarter?

No, we hadn't talked about that in the prepared comments, however the work comp reversal for prior periods this quarter was about 125 basis points of revenue.

Of revenue? Sorry, Derrek, can you refresh my memory, is that also the same direct impact to the gross margin as well?

Well, it certainly lowered work comp expense by 125 basis points. Probably the best way to answer this to make sure there's no misunderstanding, T.C., is work comp expense this quarter was 4.1% of revenue. Last year same quarter it was 5.1%. So work comp is a point lower, partly because the reversal was slightly larger this quarter than the same quarter a year ago, and then also because our run rate on our current year work comp expense has dropped a bit.

Derrek, I caught some of this in your prepared remarks with respect to the third quarter revenue guidance. Did you talk about at all how that organic portion that you're looking for for the quarter, minus 15%, how is that just a similar minus 3% or so for closed branches minus 12% or so for same branch?

Yes, that's about right. When we give the revenue guidance, we break it out to organic and acquisition. We don't break it down into detailed components for organic, but the answer to your question is it's about 12% on the same branch side and about 3 points or so of - actually, I take that back, T.C., it's about 15 points on organic, about 3 points of that is for closures and the rest is a mixture of same branch, new branch mixture.

You made the comment that, same branch has been pretty much since mid-May to mid-July, minus 12% range. What do you think's going on there that's showing some stability? Is it anniversarying some issues or are you just seeing continued softness in the obvious areas that's being offset by some synergies or some cross sells that you may be getting from some of the acquisitions you're doing? What do you think is working that's keeping that in a fairly stable - because that's a pretty decent time, in two months, that seems to be pretty encouraging.

Well, it was a steep falloff from March 15th-ish to the middle of April, and that was shocking. We disclosed that on the first quarter call. That was really manufacturing and transportation industries hitting a little harder. We've also seen our commercial construction markets take a little bit of a fall down. Now your question is more about what's created the stable base. Seasonal ramp up started, no doubt, and that's helped keep things solid. So it didn't keep falling forever, and that was good news for us. The period of time between March 15th and May 15th was a little bit disheartening, but the seasonal ramp up in construction has held up a bit. But I'd mentioned in my prepared remarks the 12% decline in same-branch revenue that we stabilized, that is really a broad-based decline, whereas we've spent almost three or four quarters talking about new housing markets back in late '06 all the way through '07, and then things somewhat stabilized. The trends didn't get worse after Q4, Q1 of '07, and they held up pretty good for about a year. This is just a broader economic slowdown we're feeling now. It's not being led by worsening housing. Housing has not improved, I don't want to mislead you there, but it's a little bit further decline in commercial construction and then warehousing, manufacturing declining a little bit that we believe is a little more broad-based than just construction right now.

PMI acquisition, was that, as expected, neutral to earnings in the quarter or was that actually a little bit more of a drag than you were expecting?

No, it came in right about where we expected. The revenue was real close. I think we threw out a very round number early on because we hadn't closed the deal with $20 million for the quarter, and it was just real close to that and the earnings were just really neutral.

And is that supposed to be accretive in the second half? Can you refresh my memory?

There could be a little bit there. This first couple of years of owning this deal before we start expanding it will be primarily eaten up through the amortization line. It's going to cash flow nicely for us, but most of this revenue will be offset by the operating expenses and then that additional amortization.

Your next question comes from Clinton Fendley - Davenport & Company, LLC. Clinton Fendley - Davenport & Company, LLC: Steve, I wondered if you could update us on the competitive environment and what you're seeing with regard to pricing across the board here.

It's not getting easier. We're definitely in the part of the cycle where there are a lot of closures. We've closed a lot of units ourselves. Derrek just closed here today 28 units in 2008. We had 50-plus in 2007. So we've closed several of our own, but we do see smaller competitors closing up offices also and retracting their [footprint] going forward. So I think we're winning the game here. We're holding tight on pricing. We're not playing that game. We've seen it a couple of cycles, where that's not a game you win at in a long-term strategy. So if people want to die on that sword as they're going out of business, let them, but we're not playing that game. But your real answer is yes, it's a little more competitive right now. We can see it in our quotes and what's being accepted and what's being rejected and the feedback from our sales teams out there. But it's not overwhelming, I can tell you that. It's not feeling like it's out of control that's causing revenue to get worse, but we're going to hold the line in our camp. Clinton Fendley - Davenport & Company, LLC: Given that we've seen the broader stepdown and slowdown here in the last three months, then how does that affect how you might execute further store closures here from this point forward?

Well, we've really been focused the last 24 months. We saw this downturn start clear back in July of '06. At that point in time we knew that we were headed into a period of time that was familiar. We'd been there before. And so, as Derrek mentioned even here today, some of the very first steps we took is pull back on the openings. And we had a theory of only homeruns can be opened, and so I think we only opened 20, 22 locations in '07, all performing quite well in comparison to the rest of the portfolio. Then in 2008 we've only opened three. And so that was a good signal that we saw economic times worsening. The closing, we jumped right on that also. You get to this part of the cycle and actually go back to the last 18 months, in any give market or town or wherever this branch was located, we lived by the standard that when one of our customers or the group of customers that's using that branch declined to a point where the branch is approaching a state of not being profitable, it first goes onto a list that we monitor closely as it's declining. And so we've seen these customers fall off; we've seen the profitability start to fall off. But we don't rely on that there's another customer that's going to save that branch. In this period of time out there, we can't play that game. And so we've kept our portfolio very clean - the end of '06, the end of '07, and now even scrubbing it in early '08. So we don't have a large portfolio of branches that are losing money. We stay right on top of that. Derrek talked about two things, one, making sure that our portfolio of losing branches is clean at all times, and we still are not in a part of the cycle where we're going to let one of our branches suffer because we believe it's going to be picked back up. There will come a time in the cycle where we'll start investing again, and one of the first investments we make is hanging onto the open branches a little bit longer. And we're not in that part of the cycle, Clinton. We keep it clean. The other thing that Derrek brought up was the headcount in the branches that aren't on this list, just the ongoing branches. And we monitor that on an every two-week basis, really tightly. Clinton Fendley - Davenport & Company, LLC: In your intro you mentioned some interesting dynamics going on in manufacturing. Have you seen any sign that there might be some type of help or pickup in your industrial units here?

Well, we're quite excited about the demographic of this shift that we believe will come. It's early. Oil prices have spiked hard, heavily, the last couple of months. And it's anecdotal evidence; it's reports here and there. We do have some customer reports of this happening, but it's more of a shift, I believe, we'll see over the next 12 to 18 months as people retool where they put their orders in and who increases. So we've seen anecdotal evidence, we've heard a little bit from our customers, and we've seen the reports on the national news. And we're believes of this demographic shift.

Your next question comes from [David Ridley Lane] - Merrill Lynch.

Just trying to understand the onetime costs from office closures in the second quarter. Can you give a little clarification on that?

There's not much to speak of as far as closure costs. If there are termination costs that come with the branches that are significant enough, we'll report that. Most of these branch closures, they were all on shorter-term leases. There are a few CLP branches, while we have shut them down for revenue purposes, we're using them as maybe a recruiting center, so we haven't canceled the lease there. So there's nothing of significance to report as a onetime closure cost this quarter.

And what were the acquired businesses that were primarily responsible for the acceleration there in the acquired business revenues?

It's mostly the acquisition of PMI this quarter.

And then you very nicely gave the bill pay spread and the impact from workers comp. Do you have the impact on gross margins from acquisitions or was that not that significant?

Yes, we've been, I think, fairly transparent on this as we've talked about the acquisitions. I don't think we mentioned this in our combined comments but, our gross margin this year will be about 2 points less than it was last year, and that's primarily because of acquisitions. So if you take a look at our 8-K that we filed today, you'll see we've given gross margin guidance at about 29.5. That's about 2 points less than it would have been if we hadn't done the acquisitions. But also keep in mind that these businesses run a lower SG&A percentage, so the SG&A for the year will, we're running probably about 2.5% of revenue, 2.5 percentage points lower than we would have been without the acquisitions.

Your next question comes from Jeffrey Silber - BMO Capital Markets.

In your prepared remarks you talked about no real difference by geography or industry, that the downturn was pretty much broad-based. How about in your specific service lines? Are your Labor Ready branches, is the organic decline as much as we're seeing in the CLP and Spartan branches, or are there some differences there?

Yes, there have been differences. Obviously, Labor Ready led into this, which we've talked about the natural business cycle. Labor Ready is the temporary of all temporaries, operating on a daily basis with a lot of the workers and with a lot of the customers. So it definitely felt it first and was the steepest declines. And then starting last quarter we started feeling it a little bit more with CLP. And really that had a lot to do with commercial construction lagging residential construction and feeling a little bit of a drop off with the commercial construction the last couple of quarters, that CLP has started to feel it. The Spartan numbers have held up pretty strong with where they serve and out of those offices. Twenty of them are new offices ramping up, still providing growth, still penetrating their markets and penetrating new accounts, but there's been some stabilization to their numbers over the last eight weeks. Spartan, they're still not growing at double-digits, but they're still showing growth. Derrek just mentioned that, PlaneTechs is holding up really nicely. That's been a winner for us, and providing quite a bit of growth, even more than expected when we bought them, so we're quite pleased with that.

Derrek, I think you had talked about some potential deferrals of some of your branch maintenance projects going from second quarter into the second half. Can you give us some rough estimate what that's going to impact in terms of cost in the second half?

Yes, you can see it in our depreciation number for the year, Jeff. We haven't changed it significantly on the 8K, the 2008 assumptions page, but there's about $19 million of depreciation in for the year. We've been running about $4 million a quarter. Not all of that jump is from branch maintenance expense. There's probably a million dollars in the back half of the year, and then the rest of that depreciation is from system rollouts. But I'd call it roughly about a million dollars.

Do you have CapEx guidance for the year in there as well?

Its $20 million, and that hasn't changed. That's right where we had it before.

Are there any other branch closures planned as of now for the rest of the year?

Well, that's a process, Jeff. We keep the portfolio clean, however, there are branches that we're watching closely. But as far as announcements, we're clean on our announcements, but we have not worked through this complete cycle. So we hope that things have stabilized to a point where we could at some point say yes, we're going to ride these things out, but it is a process, no doubt, of watching this.

Your next question comes from David Feinberg - Goldman Sachs.

I was interested, you talked about broad-based weakness and you highlighted transportation. We also cover the trucking stocks and actually we've seen more stabilization in some of the leading indicators we look at as it relates to trucking and transportation. I was curious, if you just thought it was the markets you were playing in or the regions or what it was, a little more - any more color you could give on transportation weakness would be helpful.

Well, it hasn't been our largest falloff. I think just in general it's got to match a little bit where manufacturing's going. Goods aren't moving to these construction sites, just a general indicator like that. It's not the weakest segment at all, so I don't even want to say it's even close to where construction has been and where manufacturing was a little bit. That's good news, what you're reporting.

In one of the other industries we look at we've seen increased interest in some M&A activity, particularly privatetopublic transactions this year, driven by fears over capital gains taxes or, more accurately, changes in the capital gains tax laws in '09 and beyond or potential changes. You have been a net acquirer now for quite some time. Are you seeing any renewed interest or, despite the fact that, the fundamentals of the business are weak right now, is there any renewed or increased interest in some of the private businesses to sell to you in '08 before the end of the year?

Well, there's a little bit of talk about that capital gains tax. But it's not driving more interest than, the pricing that's going on in those businesses right now, as proven by our last acquisition, what we paid for PMI. Our price expectations right now are that we're only going to do deals that this economic downturn has priced in.

That's what I'm trying to drive at. Given looking at your monthly trends on a year-over-year basis, things have deteriorated pretty rapidly here. I'm just trying to understand if that means that the M&A pipeline has dried up or if there's still room for you to close more deals by year end?

Yes, a couple sides to that answer there. Private sellers are more willing, from what we've seen, to hang on through the cycle. And this fear over whether the capital gains tax will be there or not seems to be less of a fear than their willingness to hang on. So there aren't very many deals that are priced correctly at this part of the cycle. So that's one thing; the pipeline is fairly slow. The other is our own interest and as we took on this strategic framework that I rolled out today in my comments and we've talked about we broadened our reach and our method of running TrueBlue, and it's changed a lot in the last 12 months. And we knew that once we got into each of these niches that we've talked about here today that there would be a settling point for us to ensure that our support systems, our IT systems, our communication systems, the expectation setting process, that it all stabilizes and that we have a lot of success going forward. And we're in that period of time. Optimization of current assets is really what we're calling it, not only because of the downturn but because of the significant acquisitions we've brought on. So it's actually a good time for us. The pipeline is still being looked at, but most importantly our first obligation, our first priority, is to optimize what we've currently purchased and what we're running.

That's twice now on the call you've talked about systems and deferring some investment to the back half of the year. Should we expect a major capital upgrade, a systems upgrade, or is what you have in place sufficient to support the businesses that you've brought online?

There's a little of both. Most of our capital upgrade is in our core businesses, not the ones that we've purchased. We had a project under way for a couple of years now that is getting closer to rollout. Derrek talked a little bit about that here today, that this increase in depreciation that has been put in for the year as a whole captures the fact that part of that system will be turned on in the back half of the year, and then other components will be turned on in the first half of next year. So, Derrek, you can give him what your thoughts are on '09.

The depreciation rate on those systems, well, the incremental amount for '09 in comparison with what we will be expensing in '08 is roughly an additional $2 or $3 million of depreciation if you follow how our step up is occurring in Q3 and Q4 of this year.

It's not an endless pipeline, though. We have specific projects that we're working on that have end dates that are on schedule, on budget. And so it's all planned expenditures, and it's going to create the efficiencies that we need. Ultimately we can roll these other acquisitions onto the system we're building, so it's not the new acquisitions, really, that's driving the bulk of this upgrade.

So in terms of projects, they're focusing on some of the legacy brands, and then you'll bring some of the new acquisitions onto them over time?

Yes. We've built them in a way that we knew about the strategy of running more than one brand and it can be expanded down the road, but we needed to get the legacy system right first.

At this time we have no more questions.

Thank you. We appreciate you being with us today and taking an interest in our company. We'll update you as we go forward. Have a nice day.