EX-99.1 2 v041812_ex99-1.htm
Exhibit 99.1

ADMINISTAFF ANNOUNCES FIRST QUARTER RESULTS
AND RAISES 2006 GUIDANCE
 
·
Revenues up 21% on 15% unit growth
·
Operating income up 109%
·
EPS up 106% to $0.37

HOUSTON - May 2, 2006 - Administaff, Inc. (NYSE: ASF), a leading provider of human resources services for small and medium-sized businesses, today announced a 129.7% increase in first quarter net income to $10.5 million in the 2006 period from $4.6 million in the 2005 period. Diluted earnings per share increased to $0.37 from $0.18 in the 2005 period.

“Our strong execution and financial performance during the quarter continue to reflect momentum in growth and profitability, and the efficiency of our business model,” said Paul J. Sarvadi, Administaff chairman and chief executive officer. “These results combined with strong demand for our service increases our optimism for the balance of 2006.”

Revenues for the first quarter of 2006 increased 20.6% over the 2005 period to $360.6 million. This increase was due to a 14.7% increase in the average number of worksite employees paid per month, while revenues per worksite employee per month increased 5.2% to $1,252 compared to $1,190 in the 2005 period.

Gross profit increased 25.8% to $68 million, due to the increase in the average number of worksite employees paid, combined with better than expected pricing and direct costs. The average gross profit per worksite employee per month increased to $236 in the 2006 period from $215 in the 2005 period.
 
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Administaff, Inc.
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Operating expenses increased 13.7% to $53.6 million on the 14.7% increase in the average number of worksite employees. Accordingly, operating expenses on a per worksite employee per month basis declined from $188 in the 2005 period to $186 in the 2006 period.
 
Operating income for the first quarter of 2006 increased 109.2% to $14.4 million, with an average operating income per worksite employee per month of $50 compared to $27 in the 2005 period.

“Our first quarter results generated EBITDA in excess of $21 million, an 81% increase over the first quarter of 2005,” said Douglas S. Sharp, vice-president of finance, chief financial officer and treasurer. “Our strong cash flow has positioned us to fund our growth, make strategic acquisitions and pay off the mortgage on our corporate headquarters, while continuing to pay dividends and repurchase shares.”

Business Outlook

Administaff also provided its outlook for the second quarter and full year 2006.

   
Second Quarter
 
 
Full Year
  
               
Average worksite employees paid per month
    
98,500 - 99,000
    
101,000 - 101,500
  
Gross profit per worksite employee per month
  
 
$221 - $224
  
 
$225 - $227
  
Operating expenses (in millions)
  
 
$53.0 - $53.7
  
 
$215.5 - $217.5
 (1)
Net interest income (in millions)
  
 
$2.25 - $2.75
  
 
$10.0 - $12.0
  
Effective income tax rate
    
36.7
%
  
36.7
%
Average outstanding shares (in millions)
    
28.9
    
28.9
  

(1)
The high end of the full year operating expense range assumes a higher accrual for incentive compensation based upon achieving higher unit growth and gross profit goals.

Administaff will be hosting a conference call today at 10 a.m. ET to discuss these results, give guidance for the second quarter and full year 2006, and answer questions from investment analysts. To listen in, call 866-271-6130 and use passcode 33084672. The call will also be Webcast at http://www.administaff.com. To access the Webcast, click on the Investor Relations section of the Web site and select “Live Webcast.” The conference call script will be available at the same Web site later today. A replay of the conference call will be available at 888-286-8010, passcode 36767299, for two weeks after the call. 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 operates 41 sales offices in 22 major markets. For additional information, visit Administaff’s Web site at http://www.administaff.com.
 
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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,” “assume,” “outlook,” “guidance,” “predicts,” “appears,” “indicator” and similar expressions. Forward-looking statements involve a number of risks and uncertainties. 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 current expectations, estimates and projections. 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, the 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) changes in our direct costs and operating expenses including, but not limited to, increases in health insurance premiums and workers’ compensation rates and underlying claims trends, financial solvency of workers’ compensation carriers and other insurers, 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 our operations; (iv) our ability to effectively manage our retirement services operation; (v) the effectiveness of our sales and marketing efforts; (vi) changes in the competitive environment 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; and (viii) 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.
 
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Administaff, Inc.
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Administaff, Inc.
Summary Financial Information
(in thousands, except per share amounts and statistical data)

   
March 31,
 
 
December 31,
 
 
 
2006
 
 
2005
  
   
(Unaudited)
        
Assets
              
Cash and cash equivalents
  
$
150,929
  
$
137,407
  
Restricted cash
    
29,116
    
27,580
  
Marketable securities
    
63,617
    
57,973
  
Accounts receivable
    
102,125
    
98,411
  
Prepaid expenses and other current assets
    
14,331
    
13,882
  
Income taxes receivable
    
1,207
    
—
  
Deferred income taxes
    
2,264
    
3,308
  
Total current assets
    
363,589
    
338,561
  
               
Property and equipment, net
    
83,003
    
83,620
  
Prepaid insurance
    
11,000
    
11,000
  
Deposits
    
66,115
    
56,375
  
Goodwill and other intangible assets
    
4,985
    
5,018
  
Other assets
    
970
    
865
  
Total assets
  
$
529,662
  
$
495,439
  
               
Liabilities and Stockholders’ Equity
              
Accounts payable
  
$
4,315
  
$
4,979
  
Payroll taxes and other payroll deductions payable
    
111,419
    
101,293
  
Accrued worksite employee payroll expense
    
85,221
    
78,393
  
Accrued health insurance costs
    
5,573
    
3,495
  
Accrued workers’ compensation costs
    
31,114
    
30,212
  
Accrued corporate payroll and commissions
    
7,399
    
17,801
  
Other accrued liabilities
    
7,699
    
7,453
  
Current portion of long-term debt
    
1,712
    
1,700
  
Total current liabilities
    
254,452
    
245,326
  
               
Long-term debt
    
32,756
    
33,190
  
Accrued workers’ compensation costs
    
35,750
    
32,692
  
Deferred income taxes
    
2,029
    
1,802
  
Total noncurrent liabilities
    
70,535
    
67,684
  
               
Stockholders’ equity:
              
Common stock
    
309
    
309
  
Additional paid-in capital
    
128,045
    
119,573
  
Treasury stock, cost
    
(42,823
)
  
(45,614
)
Deferred compensation expense
    
—
    
(2,931
)
Accumulated other comprehensive income
(loss), net of tax
    
(165
)
  
(153
)
Retained earnings
    
119,309
    
111,245
  
Total stockholders’ equity
    
204,675
    
182,429
  
Total liabilities and stockholders’ equity
  
$
529,662
  
$
495,439
  
 
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Administaff, Inc.
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Administaff, Inc.
Summary Financial Information (continued)
(in thousands, except per share amounts and statistical data) 
(Unaudited)

 
   
Three months ended March 31,
        
   
2006
 
 
2005
 
 
Change
  
                     
Operating results:
                    
Revenues (gross billings of $1.912 billion and $1.574 billion less worksite employee payroll cost of
$1.551 billion and $1.275 billion, respectively)
  
$
360,636
  
$
298,976
    
20.6
%
Direct costs:
                    
Payroll taxes, benefits and workers’ compensation costs
    
292,643
    
244,948
    
19.5
%
Gross profit
    
67,993
    
54,028
    
25.8
%
Operating expenses:
                    
Salaries, wages and payroll taxes
    
28,224
    
23,331
    
21.0
%
Stock-based compensation
    
289
    
1,038
    
(72.2
)%
General and administrative expenses
    
15,975
    
13,783
    
15.9
%
Commissions
    
2,833
    
2,364
    
19.8
%
Advertising
    
2,383
    
2,875
    
(17.1
)%
Depreciation and amortization
    
3,895
    
3,757
    
3.7
%
Total operating expenses
    
53,599
    
47,148
    
13.7
%
Operating income
    
14,394
    
6,880
    
109.2
%
Other income (expense):
                   
Interest income
    
2,809
    
1,122
    
150.4
%
Interest expense
    
(670
)
  
(544
)
  
23.2
%
Other, net
    
119
    
(19
)
  
(726.3
)%
Income before income tax expense
    
16,652
    
7,439
    
123.8
%
Income tax expense
    
6,111
    
2,849
    
114.5
%
Net income
 
$
10,541
  
$
4,590
    
129.7
%
Diluted net income per share of common stock
  
$
0.37
  
$
0.18
    
105.6
%
Diluted weighted average common shares outstanding
    
28,383
    
26,081
        
 
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Administaff, Inc.
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Administaff, Inc.
Summary Financial Information (continued)
(in thousands, except per share amounts and statistical data)


 
Three months ended March 31,
      
   
2006
 
 
2005
 
 
Change
  
Statistical data: 
                    
Average number of worksite employees paid per month
    
96,006
    
83,729
    
14.7
%
Revenues per worksite employee per month(1)
  
$
1,252
  
$
1,190
    
5.2
%
Gross profit per worksite employee per month
    
236
    
215
    
9.8
%
Operating expenses per worksite employee per month
    
186
    
188
    
(1.1
)%
Operating income per worksite employee per month
    
50
    
27
    
85.2
%
Net income per worksite employee per month
    
37
    
18
    
105.6
%

(1) Gross billings of $6,639 and $6,267 per worksite employee per month, less payroll cost of $5,387 and $5,077 per worksite employee per month, respectively.
 
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Administaff, Inc.
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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 March 31,
      
   
2006
 
 
2005
 
 
Change
  
                     
Payroll cost (GAAP)
  
$
1,551,502
  
$
1,275,328
    
21.7
%
Less: Bonus payroll cost
    
(153,727
)
  
(143,815
)
  
6.9
%
Non-bonus payroll cost
  
$
1,397,775
  
$
1,131,513
    
23.5
%
                     
Payroll cost per worksite employee (GAAP)
  
$
5,387
  
$
5,077
    
6.1
%
Less: Bonus payroll cost per worksite employee
    
(534
)
  
(572
)
  
(6.6
)%
Non-bonus payroll cost per worksite employee
  
$
4,853
  
$
4,505
    
7.7
%
 
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 March 31,
   
2006
 
 
2005
  
               
Net income (GAAP)
  
$
10,541
  
$
4,590
  
Interest expense
    
670
    
544
  
Income tax expense
    
6,111
    
2,849
  
Depreciation and amortization
    
3,895
    
3,757
  
EBITDA
  
$
21,217
  
$
11,740
  

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.

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 release to their most directly comparable GAAP financial measures as provided in the tables above.

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