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):  November 1, 2010

Administaff, Inc.

(Exact name of registrant as specified in its charter)

Delaware	1-13998	76-0479645
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer 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

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under The Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under The Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.  Results of Operations and Financial Condition

On November 1, 2010, Administaff, Inc. issued a press release announcing the company’s financial and operating results for the quarter and nine months ended September 30, 2010.  A copy of the press release is furnished as Exhibit 99.1 hereto and incorporated by reference.

Item 9.01.  Financial Statements and Exhibits

(c) Exhibits

99.1 — Press release issued by Administaff, Inc. on November 1, 2010.

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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/ Daniel D. Herink
	Daniel D. Herink
	Senior Vice President of Legal, General Counsel and Secretary

Date:  November 1, 2010

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EXHIBIT INDEX

Exhibit

No. Description

99.1  — Press release issued by Administaff, Inc. on November 1, 2010.

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EX-99.1

EXHIBIT 99.1

ADMINISTAFF ANNOUNCES THIRD QUARTER RESULTS

· Net income increases 24% on 6% revenue growth

· Paid worksite employee growth accelerates, increasing 3% sequentially

· EBITDA increases 13% year over year

HOUSTON – Nov. 1, 2010 – Administaff, Inc. (NYSE: ASF), a leading provider of human resources services for small and medium-sized businesses, today reported results for the third quarter and nine months ended September 30, 2010.  For the third quarter, the company reported net income of $7.2 million, a 24.0% increase over the $5.8 million earned in the 2009 period.  Diluted earnings per share increased 21.7% to $0.28 from $0.23 in the 2009 period.

“These excellent results reflect our successful efforts to resume growth and increase profitability as our core business recovered from the economic downturn,” said Paul J. Sarvadi, Administaff chairman and chief executive officer.  “This success has provided a solid foundation from which to launch our adjacent business development strategy, and puts us in position to return to double-digit unit growth in 2011.”

Third Quarter Results

Revenues for the third quarter of 2010 increased 5.9% over the 2009 period due to a 5.1% increase in revenues per worksite employee per month, and a 0.8% increase in the average number of worksite employees paid per month.

Gross profit increased 3.6% to $73.7 million compared to the third quarter of 2009.  The average gross profit per worksite employee per month increased $7, or 3.2%, to $227 in the third quarter of 2010 from $220 in the 2009 period.  This increase was attributable to a higher surplus in our direct cost programs and approximately $4 associated with the company’s two recent acquisitions.

Operating expenses, which included incremental costs associated with the acquisitions, remained flat at $61.6 million compared to the third quarter of 2009.  Operating expenses per worksite employee per month declined 1.0% from $191 in the 2009 period to $189 in the 2010 period.

”Worksite employee growth has accelerated, increasing 2.9% sequentially during the third quarter, compared to a 2.3% sequential increase in the second quarter of 2010,” said Douglas S. Sharp, senior vice-president of finance, chief financial officer and treasurer.  “This acceleration was primarily driven by solid execution in service and sales, resulting in continuing record high levels of client retention and increasing sales momentum.”

Year-to-Date Results

For the nine months ended September 30, 2010, the company had net income of $14.7 million, or $0.56 per diluted share, compared to $19.4 million and $0.76 in 2009.   These results were primarily driven by fewer paid worksite employees during the 2010 period, due to the recent economic recession.

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Year-to-date revenues were $1.3 billion, a 2.1% increase over the 2009 period.  Gross profit for the nine months ended September 30, 2010, decreased 3.9% to $217.7 million.  The average gross profit per worksite employee per month was $229 compared to $230 in the 2009 period.

Year-to-date operating expenses decreased 1.1% to $193.3 million.  On a per worksite employee per month basis, operating expenses increased 2.0% over the 2009 period.  As a result, operating income for the nine months ended September 30, 2010, was $24.4 million compared to $31.1 million in the 2009 period.

Working capital increased by $9.6 million during the first nine months of the year to $137.2 million at September 30, 2010.  During this period, EBITDA plus stock-based compensation totaled $42.6 million and the company returned $18.0 million to shareholders, including dividends of $10.1 million and share repurchases of $7.9 million.  In addition, the company received a scheduled return of $15.6 million in excess funding from its workers’ compensation program during the second quarter of 2010.

Administaff will be hosting a conference call today at 10 a.m. ET to discuss these results, give guidance for the fourth quarter and answer questions from investment analysts.  To listen in, call 877-651-0053 and use conference i.d. number 16399473.  The call will also be webcast at http://www.administaff.com.  To access the webcast, click on the Investor Relations section of the website and select “Live Webcast.”  The conference call script and company guidance will be available at the same website later today.  A replay of the conference call will be available at 800-642-1687, conference i.d. 16399473, for one week.  The webcast will be archived for one year.

Administaff is the nation’s leading professional employer organization (PEO), serving as a full-service human resources department that provides small and medium-sized businesses with administrative relief, big-company benefits, reduced liabilities and a systematic way to improve productivity.  The company also provides an array of additional products and services designed to improve business performance, including software solutions for time and attendance, expense reimbursement and performance management, as well as recruiting, background screening and retirement services, among others.  The company operates 51 sales offices in 24 major markets. For additional information, visit Administaff’s website at http://www.administaff.com.

Administaff, Inc.

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The statements contained herein that are not historical facts are forward-looking statements within the meaning of the federal securities laws (Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).  You can identify such forward-looking statements by the words “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “likely,” “possibly,” “probably,” “goal,” “objective,” “target,” “assume,” “outlook,” “guidance,” “predicts,” “appears,” “indicator” and similar expressions.  Forward-looking statements involve a number of risks and u ncertainties.  In the normal course of business, Administaff, Inc., in an effort to help keep our stockholders and the public informed about our operations, may from time to time issue such forward-looking statements, either orally or in writing.  Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of such plans or strategies, or projections involving anticipated revenues, earnings, unit growth, profit per worksite employee, pricing, operating expenses or other aspects of operating results.  We base the forward-looking statements on our expectations, estimates and projections at the time such statements are made.  These statements are not guarantees of future performance and involve risks and uncertainties that we cannot predict.  In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate.  Therefore, th e actual results of the 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 and possible adverse application of various federal, state and local regulations; (iii) the ability to secure competitive replacement contracts for health insurance and workers’ compensation contracts at expiration of current contracts; (iv) increases in health insurance costs and workers’ compensation rates and underlying claims trends, health care reform, financial solvency of workers’ compensation carriers and other insurers, state unemployment tax rates, liabilities for employee and client actions or payroll-related claims; (v) failure to manage growth of our operations and the effectiveness of our sales and marketing efforts; (vi) changes in the competitive envir onment in the PEO industry, including the entrance of new competitors and our ability to renew or replace client companies; (vii) our liability for worksite employee payroll and benefits costs; (viii) our liability for disclosure of sensitive or private information; (ix) our ability to integrate future acquisitions; and (x) an adverse final judgment or settlement of claims against Administaff.  These factors are discussed in further detail in Administaff’s filings with the U.S. Securities and Exchange Commission.  Any of these factors, or a combination of such factors, could materially affect the results of our operations and whether forward-looking statements we make ultimately prove to be accurate.

Except to the extent otherwise required by federal securities law, we do not undertake any obligation to update our forward-looking statements to reflect events or circumstances after the date they are made or to reflect the occurrence of unanticipated events.

Administaff, Inc.

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Administaff, Inc.

Summary Financial Information

(in thousands, except per share amounts and statistical data)

	September 30, 2010			December 31, 2009
	(Unaudited)
Assets
Cash and cash equivalents	$	207,930		$	227,085
Restricted cash		39,661			36,436
Marketable securities		43,101			6,037
Accounts receivable		151,898			122,592
Prepaid insurance and other current assets		24,383			20,801
Income taxes receivable		—			2,692
Deferred income taxes		170			2,578
Total current assets		467,143			418,221
Property and equipment, net		76,354			81,174
Deposits		59,112			67,529
Other assets		23,598			9,546
Total assets	$	626,207		$	576,470
Liabilities and Stockholders’ Equity
Accounts payable	$	2,194		$	1,857
Payroll taxes and other payroll deductions payable		79,402			127,597
Accrued worksite employee payroll expense		163,453			93,138
Accrued health insurance costs		10,415			6,374
Accrued workers’ compensation costs		40,971			37,049
Other accrued liabilities		32,802			24,579
Income tax payable		682			—
Total current liabilities		329,919			290,594
Accrued workers’ compensation costs		54,291			52,014
Accrued other		1,730			—
Deferred income taxes		8,509			10,702
Total noncurrent liabilities		64,530			62,716
Stockholders’ equity:
Common stock		309			309
Additional paid-in capital		136,004			138,551
Treasury stock, cost		(129,111	)		(135,712	)
Accumulated other comprehensive income		44			3
Retained earnings		224,512			220,009
Total stockholders’ equity		231,758			223,160
Total liabilities and stockholders’ equity	$	626,207		$	576,470

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Administaff, Inc.

Summary Financial Information (continued)

(in thousands, except per share amounts and statistical data)

(Unaudited)

	Three months ended September 30,							Nine months ended September 30,
	2010		2009		Change			2010		2009		Change
Operating results:
Revenues (gross billings of $2.444 billion, $2.322 billion, $7.274 billion and $7.223 billion, less worksite employee payroll cost of $2.030 billion, $1.931 billion, $5.990 billion and $5.966 billion, respectively)	$	414,146	$	390,908		5.9	%	$	1,284,226	$	1,257,199		2.1	%
Direct costs:
Payroll taxes, benefits and workers’ compensation costs		340,460		319,807		6.5	%		1,066,498		1,030,570		3.5	%
Gross profit		73,686		71,101		3.6	%		217,728		226,629		(3.9	)%
Operating expenses:
Salaries, wages and payroll taxes		34,866		34,644		0.6	%		108,558		108,940		(0.4	)%
Stock-based compensation		1,970		2,184		(9.8	)%		6,148		7,881		(22.0	)%
General and administrative expenses		15,546		15,111		2.9	%		47,674		47,111		1.2	%
Commissions		2,889		2,807		2.9	%		8,494		8,976		(5.4	)%
Advertising		2,605		2,632		(1.0	)%		11,180		10,057		11.2	%
Depreciation and amortization		3,732		4,160		(10.3	)%		11,266		12,599		(10.6	)%
Total operating expenses		61,608		61,538		0.1	%		193,320		195,564		(1.1	)%
Operating income		12,078		9,563		26.3	%		24,408		31,065		(21.4	)%
Other income (expense):
Interest income, net		286		478		(40.2	)%		744		1,415		(47.4	)%
Income before income tax expense		12,364		10,041		23.1	%		25,152		32,480		(22.6	)%
Income tax expense		5,130		4,209		21.9	%		10,501		13,097		(19.8	)%
Net income	$	7,234	$	5,832		24.0	%	$	14,651	$	19,383		(24.4	)%
Diluted net income per share of common stock	$	0.28	$	0.23		21.7	%	$	0.56	$	0.76		(26.3	)%

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Administaff, Inc.

Summary Financial Information (continued)

(in thousands, except per share amounts and statistical data)

(Unaudited)

	Three months ended September 30,							Nine months ended September 30,
	2010		2009		Change			2010		2009		Change
Statistical data:
Average number of worksite employees paid per month		108,440		107,625		0.8	%		105,603		109,306		(3.4	)%
Revenues per worksite employee per month (1)	$	1,273	$	1,211		5.1	%	$	1,351	$	1,278		5.7	%
Gross profit per worksite employee per month		227		220		3.2	%		229		230		(0.4	)%
Operating expenses per worksite employee per month		189		191		(1.0	)%		203		199		2.0	%
Operating income per worksite employee per month		37		30		23.3	%		26		32		(18.8	)%
Net income per worksite employee per month		22		18		22.2	%		15		20		(25.0	)%

(1) Gross billings of $7,513, $7,192, $7,653 and $7,342 per worksite employee per month, less payroll cost of $6,240, $5,981, $6,302 and $6,064 per worksite employee per month, respectively.

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Administaff, Inc.

Summary Financial Information (continued)

(in thousands, except per share amounts and statistical data)

(Unaudited)

GAAP to Non-GAAP Reconciliation Tables

	Three months ended September 30,							Nine months ended September 30,
	2010		2009		Change			2010		2009		Change
Payroll cost (GAAP)	$	2,030,006	$	1,930,950		5.1	%	$	5,989,681	$	5,965,854		0.4	%
Less: Bonus payroll cost		105,674		91,375		15.6	%		427,163		409,000		4.4	%
Non-bonus payroll cost	$	1,924,332	$	1,839,575		4.6	%	$	5,562,518	$	5,556,854		0.1	%
Payroll cost per worksite employee (GAAP)	$	6,240	$	5,981		4.3	%	$	6,302	$	6,064		3.9	%
Less: Bonus payroll cost per worksite employee		325		283		14.8	%		449		415		8.2	%
Non-bonus payroll cost per worksite employee	$	5,915	$	5,698		3.8	%	$	5,853	$	5,649		3.6	%

Non-bonus payroll cost represents payroll cost excluding the impact of bonus payrolls paid to the company’s worksite employees.  Bonus payroll cost varies from period to period, but has no direct impact to the company’s ultimate workers’ compensation costs under the current program.  As a result, Administaff management refers to non-bonus payroll cost in analyzing, reporting and forecasting the company’s workers’ compensation costs.

	Three months ended September 30,							Nine months ended September 30,
	2010		2009		Change			2010		2009		Change
Net income (GAAP)	$	7,234	$	5,832		24.0	%	$	14,651	$	19,383		(24.4	)%
Interest expense		—		2		(100.0	)%		—		17		(100.0	)%
Income tax expense		5,130		4,209		21.9	%		10,501		13,097		(19.8	)%
Depreciation and amortization		3,732		4,160		(10.3	)%		11,266		12,599		(10.6	)%
EBITDA		16,096		14,203		13.3	%		36,418		45,096		(19.2	)%
Stock-based compensation		1,970		2,184		(9.8	)%		6,148		7,881		(22.0	)%
	$	18,066	$	16,387		10.2	%	$	42,566	$	52,977		(19.7	)%

EBITDA represents net income computed in accordance with generally accepted accounting principles (“GAAP”), plus interest expense, income tax expense, depreciation and amortization expense.  Administaff management believes EBITDA is often a useful measure of the company’s operating performance, as it allows for additional analysis of the company’s operating results separate from the impact of taxes and capital and financing transactions on earnings.

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Non-bonus payroll and EBITDA are not financial measures prepared in accordance with GAAP and may be different from similar measures used by other companies. Non-bonus payroll and EBITDA should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Administaff includes non-bonus payroll and EBITDA in this press release because the company believes they are useful to investors in allowing for greater transparency related to the costs incurred under the company’s workers’ compensation program and the company’s operating performance during the periods presented. Investors are encouraged to review the reconciliation of the non-GAAP financial measures used in this press rele ase to their most directly comparable GAAP financial measures as provided in the tables above.

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