-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dr8YeiyNGyuhFSCNEEAJavbcvX5fUNfUjJbQ0P0YUUtzjqH1R7aUs0zgGOC8E0MG RcArm8Q6SIXZtSSwvkX2Ew== 0000891092-03-001910.txt : 20030801 0000891092-03-001910.hdr.sgml : 20030801 20030801084344 ACCESSION NUMBER: 0000891092-03-001910 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030801 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030801 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADMINISTAFF INC \DE\ CENTRAL INDEX KEY: 0001000753 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 760479645 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13998 FILM NUMBER: 03816304 BUSINESS ADDRESS: STREET 1: 19001 CRESCENT SPRINGS DR CITY: KINGWOOD STATE: TX ZIP: 77339 BUSINESS PHONE: 7133588986 MAIL ADDRESS: STREET 1: 19001 CRESCENT SPRINGS DR CITY: KINGWOOD STATE: TX ZIP: 77339 8-K 1 e15378_8k.txt FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (date of earliest event reported): August 1, 2003 Administaff, Inc. (Exact name of registrant as specified in its charter) Delaware 1-13998 76-0479645 (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File Number) Identification No.) 19001 Crescent Springs Drive Kingwood, Texas 77339 (Address of principal executive offices and zip code) Registrant's telephone number, including area code: (281) 358-8986 Item 7. Financial Statements and Exhibits (c) Exhibits 99.1 -- Press release issued by Administaff, Inc. on August 1, 2003. Item 12. Results of Operations and Financial Condition On August 1, 2003, Administaff, Inc. issued a press release announcing the company's financial and operating results for the quarter ended June 30, 2003. A copy of the press release is furnished as Exhibit 99.1 hereto and incorporated by reference. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ADMINISTAFF, INC. By: /s/ John H. Spurgin, II ------------------------------------------ John H. Spurgin, II Vice President, Legal, General Counsel and Secretary Date: August 1, 2003 3 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 99.1 -- Press release issued by Administaff, Inc. on August 1, 2003. EX-99.1 3 e15378ex99_1.txt PRESS RELEASE Exhibit 99.1 Administaff Announces Second Quarter Results - Revenues Increase 7% - Gross Profit Increases 29% - Operating Income Increases To $2.7 Million From $5.4 Million Loss HOUSTON, Aug. 1 /PRNewswire-FirstCall/ -- Administaff, Inc. (NYSE: ASF), the nation's leading Professional Employer Organization, today announced results for the second quarter and six months ended June 30, 2003. From its continuing operations, the company reported second quarter net income and diluted net income per share of $1.9 million and $0.07, versus a net loss of $2.8 million and $0.10 in the 2002 period. The company reported a net loss from its discontinued operations of $0.01 per share in both periods. Included in the 2003 second quarter results is a charge of $2.5 million, or $0.06 per share after taxes, related to the write-off of the company's workers' compensation dividend receivable. The company has taken this charge due to credit concerns caused by recent A.M. Best Co. rating downgrades of its workers' compensation carrier. Also during the second quarter of 2003, the company recorded a gain of $457,000, or $0.02 per share after taxes, related to proceeds from the sale of Administaff's investment in eProsper, Inc., which had previously been written off in 2002. Revenues for the second quarter of 2003 increased to $219 million, an increase of 7.0% over the 2002 period. This increase was due to a 9.0% or $80 increase in revenues per worksite employee per month, partially offset by a 1.8% decrease in the average number of paid worksite employees per month. Gross profit increased 28.7% over the second quarter of 2002 to $46.8 million. The average gross profit per worksite employee per month increased 30.8%, or $49, to $208 per month in the 2003 period. These results reflect the $80 increase in revenues per worksite employee per month, partially offset by increased direct costs of $13 in benefits costs, $17 in workers' compensation costs (including the write-off of the workers' compensation dividend of $11), and $1 in payroll taxes and other direct costs. "We are pleased to see that our effort to increase pricing combined with the lower costs resulting from our benefit plan design changes more than offset the slight reduction in paid worksite employees during the quarter," said Richard G. Rawson, executive vice president of administration and chief financial officer. "I expect the year-over-year improvement in profitability to continue for the balance of the year." Operating expenses increased 5.5%, or $2.3 million, over the 2002 period to $44.1 million. On a per worksite employee basis, operating expenses increased $14 per month, from $182 to $196, primarily due to legal costs associated with the company's lawsuit with Aetna and accruals relating to the 2003 employee incentive compensation plan. Operating income for the second quarter of 2003 was $2.7 million, compared to an operating loss of $5.4 million in the 2002 period. On a per worksite employee basis, operating income improved to $12 per month compared to a loss of $24 per month for the second quarter of 2002. Year-to-Date Results For the six months ended June 30, 2003 the company reported a net loss and diluted net loss per share of $2.2 million and $0.08 from its continuing operations, versus a net loss and diluted net loss per share of $8.2 million and $0.30 for the same period in 2002. The company reported a net loss from its discontinued operations of an additional $0.02 per share in both periods. Year-to-date revenues increased to $444.7 million, or 10.9% over the 2002 period. This increase was due to an $87 increase in revenue per worksite employee per month and a 1.0% increase in the average number of paid worksite employees per month. "I am certainly pleased with our progress over the first half of 2003 in controlling our direct costs and improving profitability," said Paul J. Sarvadi, president and chief executive officer. "Over the balance of the year, I believe our focus on sales and client retention, combined with moderating price increases to new and renewing clients, will reestablish our growth plan as we move into 2004." Gross profit for the six months ended June 30, 2003 increased 23.9% to $82.8 million. The average gross profit per worksite employee per month increased 22.1%, or $33, to $182 in the 2003 period. These results reflect the $87 increase in revenues per worksite employee per month, partially offset by increased direct costs of $33 in benefits costs, $15 in workers' compensation costs (including the write-off of the workers' compensation dividend of $6) and $6 in payroll taxes and other direct costs. Year-to-date operating expenses increased 5.8% over the 2002 period. Operating expenses per worksite employee per month increased to $191 from $182 in the 2002 period, primarily due to legal costs associated with the company's lawsuit with Aetna and accruals relating to the 2003 employee incentive compensation plan. The resulting operating loss for the six months ended June 30, 2003, was $3.8 million compared to an operating loss of $15.0 million in the 2002 period. Historically, the company's earnings pattern has included losses in the first quarter, followed by improved profitability in subsequent quarters throughout the year. This pattern is due to the effects of employment-related taxes that are based on each employee's cumulative earnings up to specified wage levels, causing employment-related taxes to be highest in the first quarter and then decline over the course of the year. Effective January 1, 2003, the company implemented a new pricing and billing system for new and renewing clients. For clients active on the new system in January of any year, the system includes a feature that accelerates invoicing of the payroll tax component of the comprehensive service fee to more closely reflect the pattern of incurred costs. Accordingly, the impact of new and renewing clients invoiced on the new billing system in January 2003, which represented approximately 20% of the company's client base, has resulted in the partial offset of the company's historical earnings pattern in the first and second quarters of 2003. All clients are expected to be using the new system by January 2004. Other Matters -- In late July 2003, Administaff received its initial 2002 and 2003 unemployment tax rate computations from the Texas Workforce Commission (TWC). While the company is currently reviewing the computations with the TWC, it does not expect the final rates to have any negative impact on earnings. -- In May 2003, the company's workers' compensation carrier's rating was downgraded by A.M. Best Co. (Best) from a "B" or "fair" rating to a "C++" or "marginal" rating. In June 2003, Best further downgraded the carrier to a "D" or "poor" rating. Best's rating represents an opinion on the insurer's financial strength and ability to meet its ongoing obligations to its policyholders. The company recorded a charge of $2.5 million in the second quarter of 2003 to write off its dividend receivable from its workers' compensation carrier due to the uncertainty of the carrier's ultimate ability to pay this dividend. Business Outlook Administaff also updated its outlook for the third quarter and full year 2003 on several key metrics: -- The company currently estimates that its paid worksite employee count will average approximately 74,000 for each of the third and fourth quarters, largely due to the termination of a single low-margin account with approximately 1,000 worksite employees. -- Average gross profit per worksite employee per month for the third quarter is expected to increase to a range of $230 to $234, primarily based on continued pricing strength. This includes the effect of an expected 3-4% sequential increase in benefit costs per covered employee over the second quarter. Average gross profit per worksite employee per month for the fourth quarter is expected to increase to a range of $245 to $253, and includes the effect of an expected 2-3% sequential increase in benefit costs per covered employee over the third quarter. -- Operating expenses are expected to be in the range of $42.5 million to $43.0 million for each of the third and the fourth quarters. This guidance excludes the results of Financial Management Services, a division that is currently for sale and is being reported as a discontinued operation. Administaff will be hosting a conference call today at 10:00 a.m. EDT to discuss the quarterly results and business trends, and answer questions from investment analysts. To listen in, call 800-901-5213 and use passcode 29816590. The call will also be webcast at www.administaff.com . To access the webcast, click on the Investor Relations section of the website and select "Live Webcast." The conference call script will be available at the same website later today. A replay of the conference call will be available at 888-286-8010, passcode 88225410, for two weeks after the call. The webcast will be archived for one year. Administaff is a leading personnel management company that serves as a full-service human resources department for small and medium-sized businesses throughout the United States. The company operates 38 sales offices in 21 major markets. For additional information, visit Administaff's web site at www.administaff.com . (Note: The statements contained in this press release that are not historical facts are forward-looking statements that involve a number of risks and uncertainties. Therefore, the actual results of future events described in such forward-looking statements could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are: (i) changes in general economic conditions; (ii) regulatory and tax developments, including, but not limited to, Administaff's ability to comply with Revenue Procedure 2002-21 and possible adverse application of various federal, state and local regulations; (iii) changes in Administaff's direct costs and operating expenses, including, but not limited to, increases in health insurance premiums, increases in underlying health insurance claims trends, workers' compensation rates and state unemployment tax rates, liabilities for employee and client actions or payroll-related claims, changes in the costs of expanding into new markets, and failure to manage growth of Administaff's operations; (iv) the estimated costs and effectiveness of capital projects and investments in technology and infrastructure, including Administaff's ability to maintain adequate financing for such projects; (v) Administaff's ability to effectively implement its 401(k) recordkeeping services; (vi) the effectiveness of Administaff's sales and marketing efforts, including the company's marketing arrangements with other companies; (vii) the failure to sell Administaff Financial Management Services, Inc.; (viii) changes in the competitive environment in the Professional Employer Organization industry; (ix) Administaff's liability for worksite employee payroll and benefits costs; and (x) an adverse final judgment or settlement of claims against Administaff, including the Aetna lawsuit. These factors are described in further detail in Administaff's filings with the Securities and Exchange Commission.) Administaff, Inc. Summary Financial Information (in thousands, except per share amounts and statistical data) (Unaudited) Three months ended June 30, 2003 2002 Change Operating results: Revenues (gross billings of $1.2 billion and $1.2 billion, less worksite employee payroll cost of $942 million and $956 million, respectively) $ 219,226 $ 204,966 7.0% Direct costs: Payroll taxes, benefits and workers' compensation costs 172,404 168,589 2.3% Gross profit 46,822 36,377 28.7% Operating expenses: Salaries, wages and payroll taxes 20,603 19,065 8.1% General and administrative expenses 13,720 12,899 6.4% Commissions 2,656 2,943 (9.8)% Advertising 1,787 1,669 7.1% Depreciation and amortization 5,309 5,194 2.2% 44,075 41,770 5.5% Operating income (loss) 2,747 (5,393) 150.9% Other income (expense): Interest income 263 442 (40.5)% Interest expense (552) -- Other, net 450 305 47.5% Income (loss) before income taxes 2,908 (4,646) 162.6% Income tax expense (benefit) 968 (1,835) 152.8% Net income (loss) from continuing operations $ 1,940 $ (2,811) 169.0% Discontinued operations: Loss from operations of discontinued division (373) (582) 35.9% Income tax expense (benefit) (146) (229) 36.2% Net loss from discontinued operations (227) (353) 35.7% Net income (loss) $ 1,713 $ (3,164) 154.1% Basic and diluted net income (loss) per share of common stock: Income (loss) from continuing operations $ 0.07 $ (0.10) 170.0% Income (loss) from discontinued operations $ (0.01) $ (0.01) -- Net income (loss) per share $ 0.06 $ (0.11) 154.5% Diluted weighted average common shares outstanding 26,814 27,905 Administaff, Inc. Summary Financial Information (in thousands, except per share amounts and statistical data) (Unaudited) Six months ended June 30, 2003 2002 Change Operating results: Revenues (gross billings of $2.4 billion and $2.3 billion, less worksite employee payroll cost of $1.9 billion and $1.9 billion, respectively) $ 444,746 $ 400,924 10.9% Direct costs: Payroll taxes, benefits and workers' compensation costs 361,943 334,094 8.3% Gross profit 82,803 66,830 23.9% Operating expenses: Salaries, wages and payroll taxes 40,947 37,563 9.0% General and administrative expenses 25,424 24,727 2.8% Commissions 5,542 6,084 (8.9)% Advertising 3,997 3,289 21.5% Depreciation and amortization 10,714 10,211 4.9% 86,624 81,874 5.8% Operating income (loss) (3,821) (15,044) 74.6% Other income (expense): Interest income 578 1,177 (50.9)% Interest expense (1,120) -- Other, net 458 261 75.5% Income (loss) before income taxes (3,905) (13,606) 71.3% Income tax expense (benefit) (1,723) (5,374) 67.9% Net income (loss) from continuing operations $ (2,182) $ (8,232) 73.5% Discontinued operations: Loss from operations of discontinued division (769) (1,049) 26.7% Income tax expense (benefit) (303) (413) 26.6% Net loss from discontinued operations (466) (636) 26.7% Net income (loss) $ (2,648) $ (8,868) 70.1% Basic and diluted net income (loss) per share of common stock: Income (loss) from continuing operations $ (0.08) $ (0.30) 73.3% Income (loss) from discontinued operations $ (0.02) $ (0.02) -- Net income (loss) per share $ (0.10) $ (0.32) 68.8% Diluted weighted average common shares outstanding 27,000 27,925 Administaff, Inc. Summary Financial Information (continued) (in thousands, except per share amounts and statistical data) (Unaudited) Three months ended Six months ended June 30, June 30, 2003 2002 Change 2003 2002 Change Statistical data: Average number of worksite employees paid per month 75,103 76,477 (1.8)% 75,764 74,982 1.0% Revenues per worksite employee per month (A) $ 973 $ 893 9.0% $ 978 $ 891 9.8% Gross profit per worksite employee per month 208 159 30.8% 182 149 22.1% Operating expenses per worksite employee per month 196 182 7.7% 191 182 4.9% Operating income (loss) per worksite employee per month 12 (24) 150.0% (8) (33) 75.8% Net income (loss) from continuing operations per worksite employee per month 9 (12) 175.0% (5) (18) 72.2% (A) Gross billings of $5,152, $5,059, $5,186 and $5,134 per worksite employee per month less payroll cost of $4,179, $4,166, $4,207 and $4,243 per worksite employee per month, respectively. Administaff, Inc. Summary Financial Information (continued) (in thousands, except per share amounts and statistical data) June 30, December 31, 2003 2002 (Unaudited) Assets Cash and cash equivalents $ 56,092 $ 71,799 Marketable securities 18,662 14,714 Accounts receivable 84,645 82,475 Prepaid expenses and other current assets 23,690 22,535 Deferred income taxes 513 641 Income tax receivable 331 -- Operations held for sale 1,250 1,282 Total current assets 185,183 193,446 Property and equipment 155,877 153,173 Accumulated depreciation (72,411) (62,078) Net property and equipment 83,466 91,095 Deposits 18,680 26,552 Other assets 1,175 4,071 Total assets $ 288,504 $ 315,164 Liabilities and Stockholders' Equity Accounts payable $ 1,750 $ 3,069 Payroll taxes and other payroll deductions payable 37,483 57,196 Accrued worksite employee payroll expense 76,257 69,676 Accrued health insurance costs 6,348 5,815 Other accrued liabilities 13,558 13,034 Income taxes payable -- 348 Current portion of long-term debt 1,793 1,676 Operations held for sale 144 112 Total current liabilities 137,333 150,926 Long-term debt 41,485 42,493 Deferred income taxes 3,661 5,396 Total noncurrent liabilities 45,146 47,889 Stockholders' equity: Common stock 309 309 Additional paid-in capital 101,792 102,315 Treasury stock, cost (50,091) (43,003) Accumulated other comprehensive income, net of tax 88 153 Retained earnings 53,927 56,575 Total stockholders' equity 106,025 116,349 Total liabilities and stockholders' equity $ 288,504 $ 315,164 SOURCE Administaff, Inc. -0- 08/01/2003 /CONTACT: investor relations, Richard G. Rawson, Executive Vice President and Chief Financial Officer, +1-281-348-3225, or richard_rawson@administaff.com , or news media, Alan Dodd, Director, Corporate Communications, +1-281-348-3105, or alan_dodd@administaff.com , both of Administaff, Inc./ /First Call Analyst: / /FCMN Contact: ruth_holub@administaff.com / /Web site: http://www.administaff.com / (ASF) CO: Administaff, Inc. ST: Texas IN: SU: ERN ERP CCA MAV -----END PRIVACY-ENHANCED MESSAGE-----