Westaff, Inc. Reports Fiscal 2008 Fourth Quarter and Year End Results

WALNUT CREEK, Calif., February 24, 2009 - Westaff, Inc. (NASDAQ: WSTF), a leading provider of staffing services, today announced its financial results for its fourth fiscal quarter and fiscal year ended November 1, 2008. Consistent with the Company's historic financial reporting, the Company's first three fiscal quarters comprise 12 weeks each, while the fourth quarter comprises 16 or 17 weeks, with the Company's fiscal year ending on the Saturday nearest the end of October.

Consolidated gross revenues for fiscal year 2008 were $324.5 million, down $115.3 million (or 26.2%) from fiscal year 2007. Fiscal year 2008 contained 52 weeks while fiscal year 2007 contained 53 weeks. The consolidated gross revenues attributable to the additional 53rd week in fiscal year 2007 were $8.3 million. The decrease in consolidated gross revenues in fiscal year 2008 would have been $107.0 million (or 24.8%) if compared to a comparable 52-week year in fiscal year 2007 that excludes the additional 53rd week in fiscal year 2007. Gross margin remained at 18.1% in fiscal year 2008. In response to the decline in revenue, the Company had taken measures in fiscal year 2008 to reduce the costs of the organization. As a result, selling and administrative expenses for fiscal year 2008 were $52.6 million, which represents a decrease of $8.7 million (or 14.2%) from fiscal year 2007, primarily due to a decrease in headcount and other cost savings in the areas of facilities, advertising and promotion, and supplies.

The Company's net loss for fiscal year 2008 was $46.3 million (or a net loss of $2.77 per basic and diluted share), as compared to net loss of $1.9 million (or a net loss of $0.12 per basic and diluted share) for fiscal year 2007. In the second quarter of fiscal year 2008, Westaff recorded a valuation allowance of $23.2 million against deferred tax assets, and in the third quarter of fiscal year 2008, the Company recorded a pre-tax, non-cash write down of goodwill and other intangibles of $11.5 million. Westaff sold its former United Kingdom operations on March 31, 2008 at a gain of $0.4 million, net of tax of $1.3 million, and sold its former Australia and New Zealand subsidiaries subsequent to fiscal year 2008 on November 10, 2008. The financial results of these foreign operations were presented as discontinued operations in the Company's consolidated financial statements for fiscal year 2008.

Consolidated gross revenues for the fourth fiscal quarter 2008 were $96.3 million, compared with $144.9 million for the fourth fiscal quarter 2007. Excluding the additional 53rd week in fiscal year 2007, consolidated gross revenues for the fourth fiscal quarter 2007 would have been approximately $136.6 million. The Company's net loss for the fourth fiscal quarter 2008 was $4.1 million (or a net loss of $0.25 per basic and diluted share), compared with the net income of $1.2 million (or $ 0.08 cents per basic and diluted share) for the fourth fiscal quarter 2007. Net income for the fourth fiscal quarter 2007 had included a tax benefit of $2.9 million.

About Westaff

Westaff provides staffing services and employment opportunities for businesses through its network of Company-owned and franchise agent offices. Westaff annually employs more than 100,000 people and services thousands of client accounts throughout the United States. For more information, please visit the company Web site at www.westaff.com.

This press release contains forward-looking statements within the meaning of the U.S. securities laws. Forward-looking statements in this release are generally identified by words such as "expects," "believes," "will," "should" and similar expressions that are intended to identify forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement. Forward-looking statements contained herein include, but are not limited to, statements regarding (i) Westaff's expectations regarding the company's growth prospects; (ii) Westaff's expectations that the banks will enter into a longer-term agreement; (iii) Westaff's expectation that it will be able to arrange a long-term solution; (iv) that Westaff continues to streamline its costs, build its leadership team and focus on growth and improved financial performance; and (v) Westaff's belief that it has the working capital resources needed to deliver on its long and short-term objectives. The forward-looking statements contained herein involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Many of these risks and uncertainties cannot be controlled by the Company. These risks and uncertainties include, but are not limited to: our ability to obtain sufficient collateral to permit us to renew our workers' compensation insurance program at the beginning of April 2009; our ability to negotiate a further forbearance under or otherwise restructure our credit facility on terms acceptable to us during a period of severe disruption in the credit markets; possible declines in demand resulting from recessionary economic conditions; our ability to compete in a highly priced sensitive market; our significant working capital needs and our ability to borrow to meet those needs; our ability to borrow under our credit facilities and our compliance with their debt covenants; the sufficiency of our workers' compensation claims reserve; variability of employee-related costs, including workers' compensation liabilities; possible adverse effects of fluctuations in the general economy; our ability to collect on our accounts receivable; risks related to franchise agent operations; risks related to international operations and fluctuating exchange rates; reliance on executive management and key personnel; our ability to attract and retain the services of qualified temporary personnel; the ability of our customers to terminate our service agreement on short notice; variability of the cost of unemployment insurance for our temporary employees; any difficulty with our information technology system; government regulation; potential exposure to employment-related claims; the volatility of the Company's stock price; increased regulatory compliance costs; and litigation and other claims. Additional information concerning the risks and uncertainties listed above, and other factors you may wish to consider, is contained in the Company's filings with the Securities and Exchange Commission, including the Company's most recent Annual Report on Form 10-K for the year ended November 1, 2008.

Forward-looking statements are based on the beliefs and assumptions of the Company's management and on currently available information. The Company undertakes no responsibility to publicly update or revise any forward-looking statement except as required by applicable laws and regulations.