Exhibit 99.1
ADMINISTAFF ANNOUNCES THIRD QUARTER RESULTS
· | Q3 revenues increase 10.1% on 6.1% unit growth |
· | Year-to-date earnings per share increase 12.9% |
· | Year-to-date EBITDA increases 5.7% to $68 million |
· | Working capital totals $109 million at September 30 |
HOUSTON - Nov. 3, 2008 - Administaff, Inc. (NYSE: ASF), a leading provider of human resources services for small and medium-sized businesses, today announced results for the third quarter and nine months ended September 30, 2008. The company reported 2008 third quarter net income of $11.9 million, or $0.46 diluted earnings per share compared to $12.2 million and $0.45 diluted earnings per share in the 2007 period. Lower interest rates negatively impacted investment income, discounting of workers’ compensation reserves and the effective income tax rate by $0.05 per share in the 2008 period when compared to the third quarter of 2007. For the nine months ended September 30, 2008, the company reported net income of $36.1 million, or $1.40 diluted earnings per share.
Third Quarter Results
Revenues for the third quarter of 2008 increased 10.1% over the 2007 period to $421.9 million, due to a 6.1% increase in the average number of worksite employees paid per month and a 3.7% increase in revenues per worksite employee per month.
“Administaff continues to produce solid results in spite of turmoil in the marketplace and the disruption of Hurricane Ike,” said Paul J. Sarvadi, Administaff chairman and chief executive officer. “We believe our target market strategy to aggregate the most successful small to medium-sized businesses builds considerable resiliency into our business model in a difficult economic environment.”
Gross profit increased 13.9% to $85.5 million from $75.0 million in the third quarter of 2007. The average gross profit per worksite employee per month was $239, compared to $222 in the 2007 period. This increase was a result of a higher surplus on direct cost programs, with improvements in both payroll taxes and benefits.
Operating expenses for the quarter increased 15.8% to $68.6 million, largely attributable to salaries and wages associated with sales and service staffing levels, including those related to the company’s mid-market initiative.
Operating income for the third quarter of 2008 increased 7.1% to $16.9 million, with an average operating income per worksite employee per month of $47, consistent with the 2007 period.
Interest income for the quarter declined 41.6% to $1.7 million from $3.0 million in the 2007 period. This decline was a result of lower yields on the company’s investments.
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Year-to-Date Results
Year-to-date revenues were $1.3 billion, an 11.2% increase over the 2007 period, due to a 7.2% increase in the average number of worksite employees paid per month and a 3.8% increase in revenues per worksite employee per month. Gross profit for the nine months ended September 30, 2008 increased 15.6% to $256.2 million. The average gross profit per worksite employee per month increased 7.9% over the 2007 period to $245.
Year-to-date operating expenses increased 15.9% to $205.7 million. On a per worksite employee per month basis, operating expenses increased 7.7% over the 2007 period. The resulting operating income for the nine months ended September 30, 2008, was $50.5 million compared to $44.1 million in the 2007 period.
EBITDA for the first nine months of the year increased 5.7% over 2007 to $68.0 million. During the period, the company returned $28.7 million to shareholders, including share repurchases of $19.6 million and dividends of $9.1 million.
“Our strong cash position allows us to take advantage of current market conditions, as we repurchase shares at very attractive prices,” said Douglas S. Sharp, senior vice president of finance, chief financial officer and treasurer. “We have repurchased 432,894 shares since our preliminary third quarter release and have now bought back over 1.5 million shares year to date.”
Administaff will be hosting a conference call today at 10 a.m. ET to discuss these results, give guidance for the fourth quarter 2008, and answer questions from investment analysts. To listen in, call 800-573-4842 and use passcode 27570929. The call will also be webcast at http://www.administaff.com/investor_relations. The conference call script and company guidance will be available at the same Web site later today. A replay of the conference call will be available at 888-286-8010, passcode 52091327, 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 49 sales offices in 24 major markets. For additional information, visit Administaff’s Web site 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 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) increases in health insurance costs 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) the effectiveness of our sales and marketing efforts; (v) changes in the competitive environment in the PEO industry, including the entrance of new competitors and our ability to renew or replace client companies; (vi) our liability for worksite employee payroll and benefits costs; and (vii) 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.
Summary Financial Information
(in thousands, except per share amounts and statistical data)
September 30, | December 31, | ||||||
2008 | 2007 | ||||||
(Unaudited) | |||||||
Assets | |||||||
Cash and cash equivalents | $ | 189,470 | $ | 135,793 | |||
Restricted cash | 35,689 | 35,318 | |||||
Marketable securities | 226 | 74,880 | |||||
Accounts receivable | 175,814 | 134,834 | |||||
Prepaid expenses and other current assets | 32,691 | 28,668 | |||||
Income taxes receivable | — | 3,918 | |||||
Total current assets | 433,890 | 413,411 | |||||
Property and equipment, net | 89,265 | 77,941 | |||||
Deposits | 62,016 | 63,720 | |||||
Other assets | 9,514 | 5,579 | |||||
Total assets | $ | 594,685 | $ | 560,651 | |||
Liabilities and Stockholders’ Equity | |||||||
Accounts payable | $ | 4,476 | $ | 5,236 | |||
Payroll taxes and other payroll deductions payable | 80,270 | 113,929 | |||||
Accrued worksite employee payroll expense | 156,350 | 110,406 | |||||
Accrued health insurance costs | 13,486 | 19,297 | |||||
Accrued workers’ compensation costs | 37,530 | 37,150 | |||||
Deferred income taxes | 3,237 | 1,066 | |||||
Income tax payable | 217 | — | |||||
Other accrued liabilities | 28,776 | 28,518 | |||||
Current portion of capital leases | 640 | 629 | |||||
Total current liabilities | 324,982 | 316,231 | |||||
Long-term capital leases | 59 | 537 | |||||
Accrued workers’ compensation costs | 43,794 | 39,116 | |||||
Deferred income taxes | 7,883 | 6,092 | |||||
Total noncurrent liabilities | 51,736 | 45,745 | |||||
Stockholders’ equity: | |||||||
Common stock | 309 | 309 | |||||
Additional paid-in capital | 138,847 | 138,640 | |||||
Treasury stock, cost | (131,454 | ) | (123,600 | ) | |||
Accumulated other comprehensive income, net of tax | — | 5 | |||||
Retained earnings | 210,265 | 183,321 | |||||
Total stockholders’ equity | 217,967 | 198,675 | |||||
Total liabilities and stockholders’ equity | $ | 594,685 | $ | 560,651 |
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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, | ||||||||||||||||||
2008 | 2007 | Change | 2008 | 2007 | Change | ||||||||||||||
Operating results: | |||||||||||||||||||
Revenues (gross billings of $2.560 billion, $2.316 billion, $7.570 billion and $6.781 billion, less worksite employee payroll cost of $2.138 billion, $1.932 billion, $6.271 billion and $5.613 billion, respectively) | $ | 421,914 | $ | 383,380 | 10.1 | % | $ | 1,298,449 | $ | 1,167,896 | 11.2 | % | |||||||
Direct costs: | |||||||||||||||||||
Payroll taxes, benefits and workers’ compensation costs | 336,415 | 308,338 | 9.1 | % | 1,042,282 | 946,320 | 10.1 | % | |||||||||||
Gross profit | 85,499 | 75,042 | 13.9 | % | 256,167 | 221,576 | 15.6 | % | |||||||||||
Operating expenses: | |||||||||||||||||||
Salaries, wages and payroll taxes | 39,373 | 31,774 | 23.9 | % | 113,779 | 96,895 | 17.4 | % | |||||||||||
Stock-based compensation | 2,337 | 1,885 | 24.0 | % | 7,630 | 5,628 | 35.6 | % | |||||||||||
General and administrative expenses | 16,642 | 15,576 | 6.8 | % | 52,304 | 45,798 | 14.2 | % | |||||||||||
Commissions | 3,211 | 3,104 | 3.4 | % | 9,579 | 8,727 | 9.8 | % | |||||||||||
Advertising | 3,062 | 3,074 | (0.4 | )% | 10,998 | 9,134 | 20.4 | % | |||||||||||
Depreciation and amortization | 3,951 | 3,827 | 3.2 | % | 11,396 | 11,251 | 1.3 | % | |||||||||||
Total operating expenses | 68,576 | 59,240 | 15.8 | % | 205,686 | 177,433 | 15.9 | % | |||||||||||
Operating income | 16,923 | 15,802 | 7.1 | % | 50,481 | 44,143 | 14.4 | % | |||||||||||
Other income | 1,733 | 2,935 | (41.0 | )% | 6,076 | 8,867 | (31.5 | )% | |||||||||||
Income before income tax expense | 18,656 | 18,737 | (0.4 | )% | 56,557 | 53,010 | 6.7 | % | |||||||||||
Income tax expense | 6,727 | 6,583 | 2.2 | % | 20,485 | 18,819 | 8.9 | % | |||||||||||
Net income | $ | 11,929 | $ | 12,154 | (1.9 | )% | $ | 36,072 | $ | 34,191 | 5.5 | % | |||||||
Diluted net income per share of common stock | $ | 0.46 | $ | 0.45 | 2.2 | % | $ | 1.40 | $ | 1.24 | 12.9 | % | |||||||
Diluted weighted average common shares outstanding | 25,837 | 26,873 | 25,793 | 27,518 |
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Administaff, Inc.
Summary Financial Information (continued)
(in thousands, except per share amounts and statistical data)
(Unaudited)
Three months ended | Nine months ended | ||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||
2008 | 2007 | Change | 2008 | 2007 | Change | ||||||||||||||
Statistical data: | |||||||||||||||||||
Average number of worksite employees paid per month | 119,389 | 112,496 | 6.1 | % | 116,360 | 108,571 | 7.2 | % | |||||||||||
Revenues per worksite employee per month (1) | $ | 1,178 | $ | 1,136 | 3.7 | % | $ | 1,240 | $ | 1,195 | 3.8 | % | |||||||
Gross profit per worksite employee per month | 239 | 222 | 7.7 | % | 245 | 227 | 7.9 | % | |||||||||||
Operating expenses per worksite employee per month | 191 | 176 | 8.5 | % | 196 | 182 | 7.7 | % | |||||||||||
Operating income per worksite employee per month | 47 | 47 | — | 48 | 45 | 6.7 | % | ||||||||||||
Net income per worksite employee per month | 33 | 36 | (8.3 | )% | 34 | 35 | (2.9 | )% |
(1) Gross billings of $7,147, $6,862, $7,228 and $6,940 per worksite employee per month, less payroll cost of $5,969, $5,726, $5,988 and $5,745 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 | Nine months ended | ||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||
2008 | 2007 | Change | 2008 | 2007 | Change | ||||||||||||||
Payroll cost (GAAP) | $ | 2,137,954 | $ | 1,932,491 | 10.6 | % | $ | 6,271,168 | $ | 5,613,354 | 11.7 | % | |||||||
Less: Bonus payroll cost | 131,647 | 142,231 | (7.4 | )% | 477,565 | 499,006 | (4.3 | )% | |||||||||||
Non-bonus payroll cost | $ | 2,006,307 | $ | 1,790,260 | 12.1 | % | $ | 5,793,603 | $ | 5,114,348 | 13.3 | % | |||||||
Payroll cost per worksite employee (GAAP) | $ | 5,969 | $ | 5,726 | 4.2 | % | $ | 5,988 | $ | 5,745 | 4.2 | % | |||||||
Less: Bonus payroll cost per worksite employee | 367 | 421 | (12.8 | )% | 456 | 511 | (10.8 | )% | |||||||||||
Non-bonus payroll cost per worksite employee | $ | 5,602 | $ | 5,305 | 5.6 | % | $ | 5,532 | $ | 5,234 | 5.7 | % |
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.
Nine months ended September 30, | |||||||
2008 | 2007 | ||||||
Net income (GAAP) | $ | 36,072 | $ | 34,191 | |||
Interest expense | 54 | 87 | |||||
Income tax expense | 20,485 | 18,819 | |||||
Depreciation and amortization | 11,396 | 11,251 | |||||
EBITDA | $ | 68,007 | $ | 64,348 |
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 release to their most directly comparable GAAP financial measures as provided in the tables above.
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