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