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Listen to Westaff's Audio 2nd Quarter Conference Call

WALNUT CREEK, CA, Wednesday, May 29, 2002
Westaff, Inc. (NASDAQ: WSTF), a leading provider of temporary office and light industrial staff, today reported financial results for the second fiscal quarter, which ended April 20, 2002.

Comparing the fiscal 2001 and 2002 second quarters, sales of services and license fees decreased from $127.5 million to $109.7 million - or 14.0%. The decline reflects last year's economic recession as well as current economic conditions. The decline compares favorably, however, with the first quarter of fiscal 2002 sales decline of 21.9% as compared to the first quarter of fiscal 2001. The slowing rate of decline for the second quarter is indicative of improving economic conditions for the temporary staffing industry.

"We are aggressively implementing a multi-faceted program to increase sales and improve margins and the overall productivity of our sales force," said Dwight S. Pedersen, Westaff's President and Chief Executive Officer. "The increases and improvements we are seeing with this program, coupled with the improving domestic economy, make us optimistic about Westaff's return to profitability in the third quarter of fiscal 2002."

Westaff also reported a loss from continuing operations of $1.7 million, or $0.11 per share, for the second quarter of fiscal 2002. The loss compares to income from continuing operations of $0.5 million, or $0.03 per share, for the corresponding fiscal 2001 quarter.

The fiscal 2002 loss includes selling and administrative expenses of $0.9 million relating to the write-off of costs associated with the Company's former revolving credit agreement and senior note facilities. The loss also includes costs of approximately $0.2 million relating to the termination of its operations in Mexico.

Partially offsetting these costs was a reduction to selling and administrative expenses of $0.7 million relating to the arbitration award originally reported during the fourth quarter of fiscal 2001. The final arbitration award included a lesser total amount for opposing counsel's attorneys' fees and costs than was originally estimated by the Company. Finally, the fiscal 2001 quarter included approximately $2.1 million in one-time gains associated with the sale of two of the Company's licensed operations during that quarter.

Excluding the effects of the items noted above, selling and administrative expenses declined $4.7 million for the second quarter of fiscal 2002 as compared to the second quarter of fiscal 2001.

"In the second quarter, we continued to make very good progress with respect to our cost containment programs," Pedersen said. "We believe that the entire third quarter will benefit from the cuts made during the first and second quarters."

For the first 24 weeks of 2002, sales of services and license fees were $216.7 million, a decrease of $47.9 million or 18.1% over the same period in fiscal 2001. The Company reported a net loss from continuing operations of $6.4 million or $0.40 per share for the first twenty-four weeks of fiscal 2002 compared to income from continuing operations of $1.1 million or $0.07 per share for the same period in fiscal 2001.

As previously announced, Westaff closed a new five-year $65 million revolving credit and term loan facility on May 17, 2002 and obtained $3 million of additional subordinated debt.

Senior Vice President and Chief Financial Officer Dirk Sodestrom commented, "This facility should provide Westaff with the long-term financing structure we need to support our ongoing business and projected future growth.

"Furthermore, based on our current projections, this facility will allow us to fully replace our outstanding surety bonds with letters of credit on November 1, 2002," Sodestrom said. "We believe this facility fully addresses the going concern issues raised in the audit opinion relating to our fiscal 2001 financial statements."

Westaff will discuss these results in a conference call at 8:00 a.m. (Pacific) on Thursday, May 30, 2002. The call will be webcast live at www.vcall.com and will be available after the call on our website at www.westaff.com. The call will also be recorded so you may listen at your convenience. The recording will be available through June 3 by dialing 800-428-6051 and entering I.D. code 243938.

Westaff provides staffing services and employment opportunities for businesses in global markets. Westaff annually employs approximately 175,000 people and services more than 20,000 clients from more than 325 offices located throughout the U.S., the United Kingdom, Australia, New Zealand, Norway and Denmark. Westaff achieved fiscal 2001 system revenues of more than $580 million. For more information, please visit our website at www.westaff.com.

This press release contains forward-looking statements as defined in the Securities Exchange Act of 1934, and is subject to the safe harbors created by law. These forward-looking statements involve a number of assumptions, risks and uncertainties. Actual results of future events could differ materially from estimates. Among the factors affecting future operating results are: financing risks, a going concern opinion issued by the Company's former accountants, possible adverse effects of fluctuations in the general economy, reliance on executive management, uncertain ability to continue and manage growth, control by a significant shareholder, reliance on management information systems, risks related to international operations, variability of employee-related costs, risks related to customers, variability of operating results and the seasonality of the business cycle, ability to attract and retain the services of qualified temporary personnel, a highly competitive market, reliance on field management, employer liability risks, risks related to franchise agent and licensed operations, the risk of Nasdaq de-listing and risks related to acquisitions.

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. 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 Form 10-K, Form 10-Q, Form 8-K and other filings.