EXHIBIT 99.1
ADMINISTAFF ANNOUNCES FOURTH QUARTER AND
FULL YEAR 2003 RESULTS
STRONG FOURTH QUARTER AFFIRMS COMPANY'S RETURN TO PROFITABILITY
HOUSTON - Feb. 9, 2004 - Administaff, Inc. (NYSE: ASF), the nation's leading
Professional Employer Organization (PEO), today announced results for the fourth
quarter and year ended Dec. 31, 2003. From its continuing operations, the
company reported fourth quarter net income and diluted earnings per share of
$8.8 million and $0.32, versus $1.3 million and $0.05 in the 2002 period. For
the year ended Dec. 31, 2003, the company reported net income and diluted net
earnings per share from continuing operations of $15.0 million and $0.55, versus
a net loss of $2.9 million and diluted net loss per share of $0.11 for the same
period in 2002.
"A strong fourth quarter punctuated our successful turnaround and return to
profitability in 2003," said Paul J. Sarvadi, Administaff chairman and chief
executive officer. "As we enter 2004, we have a solid financial base to build
from, and we will focus on our goal to return to double-digit growth."
The company also reported a fourth quarter and full-year net loss from its
discontinued operations of $0.03 and $0.08 per share versus $0.01 and $0.04 per
share in the 2002 periods. In December 2003, the company ceased operations of
its subsidiary, Administaff Financial Management Services.
FOURTH QUARTER RESULTS
Revenues for the fourth quarter of 2003 were flat as compared to the 2002 period
at $229 million. During the quarter, the company experienced a 6.9% increase in
revenues per worksite employee per month, which offset a 6.6% decrease in the
number of worksite employees paid. Gross profit increased 12.2% to $58.6
million, and the average gross profit per worksite employee per month increased
20.1% to $263 in the fourth quarter of 2003, versus $219 in the 2002 period.
These increases were primarily due to (1) improved pricing implemented
throughout 2003; (2) lower health insurance costs resulting from plan design and
client selection changes; and (3) the impact of the new pricing and billing
system on the year-end accrual for worksite employee payroll and the associated
revenue. These items were partially offset by an increase in state unemployment
taxes.
Operating expenses for the quarter increased 1.6% over the 2002 period to $44.3
million. This increase was primarily the result of a $4.0 million increase in
compensation costs, including a $2.2 million accrual in incentive compensation,
offset by a $1.8 million decline in general and administrative costs and a $1.0
million decline in depreciation and amortization expense. On a per worksite
employee basis, operating expenses increased 8.7% to $199 per month in the 2003
period from $183 per month in the 2002 period.
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Operating income for the fourth quarter of 2003 increased 66.1% to $14.3
million, with an average operating income per worksite employee of $64 per month
compared to $36 in the 2002 period.
FULL YEAR RESULTS
For the year ended Dec. 31, 2003, revenues increased 5.1% to $891.7 million,
primarily due to an 8.3% increase in revenues per worksite employee per month
partially offset by a 3.0% decrease in the number of worksite employees paid.
Gross profit increased 19.4% to $198.0 million, with an average monthly gross
profit per worksite employee of $220 in the 2003 period compared to $179 in the
2002 period.
Operating expenses increased 4.8% over the 2002 period to $173.7 million. This
increase was due primarily to increased compensation costs, including incentive
compensation accruals of approximately $5.6 million in the 2003 period, and
increased advertising costs, offset by lower commissions and depreciation and
amortization expense. On a per worksite employee basis, operating expenses
increased 7.8% to $193 per month from $179 in the 2002 period.
The resulting operating income for the year ended Dec. 31, 2003 was $24.3
million compared to $67,000 in the 2002 period. The average monthly operating
income per worksite employee was $27 in 2003, compared to $0 in 2002.
The company ended the year with working capital of $56.0 million compared to
$41.2 million at Dec. 31, 2002.
"Our key initiatives to improve pricing and lower benefits costs have resulted
in the significant improvement in our financial performance," said Douglas S.
Sharp, vice president of finance and chief financial officer. "With the return
of our profitability and a strong balance sheet, our plan is to continue to
manage operating expenses as we increase unit growth." 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.
Beginning Jan. 1, 2003, the company implemented a new pricing and billing
system. Substantially all current clients were billed using the new system in
January 2004.
For clients active on the new system in January of each year, this system
includes a feature that accelerates invoicing of the estimated payroll tax
component of the comprehensive service fee to more closely reflect the pattern
of incurred costs. As a result, beginning in 2004, the historical earnings
pattern will only apply to new clients enrolled after January of each year.
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BUSINESS OUTLOOK
Administaff also provided its outlook for the first quarter and full year 2004.
FIRST QUARTER FULL YEAR
------------- ---------
Average worksite employees paid per month 75,000 - 76,000 78,500 - 80,500
Gross profit per worksite employee per month $209 - $215 $209 - $215
Operating expenses (in millions) $42.5 - $43.5 $173.5 - $177.5*
*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 11 a.m. EST to discuss
these results, give guidance for the first quarter and full year 2004, and
answer questions from investment analysts. To listen in, call 800-901-5231 and
use passcode 81517884. 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 33806037, for three 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 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 and workers' compensation premiums and underlying claims
trends, 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; (v) the effectiveness of Administaff's sales and
marketing efforts, including the company's marketing arrangements with other
companies; (vi) the effectiveness of Administaff's retirement services
operation; (vii) changes in the competitive environment in the Professional
Employer Organization industry; (viii) Administaff's liability for worksite
employee payroll and benefits costs; and (ix) an adverse final judgment or
settlement of claims against Administaff. These factors are described in further
detail in Administaff's filings with the Securities and Exchange Commission.)
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ADMINISTAFF, INC.
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND STATISTICAL DATA)
DECEMBER 31,
---------------------------------
2003 2002
--------- ---------
Assets
Cash and cash equivalents $ 104,728 $ 71,799
Restricted cash 4,584 --
Marketable securities 23,989 14,714
Accounts receivable 61,744 82,475
Prepaid expenses and other current assets 30,022 22,535
Deferred income taxes 3,423 641
--------- ---------
Total current assets 228,490 192,164
Property and equipment 160,993 154,794
Accumulated depreciation (82,224) (62,417)
--------- ---------
Net property and equipment 78,769 92,377
Deposits 39,909 26,552
Other assets 903 4,071
--------- ---------
Total assets $ 348,071 $ 315,164
========= =========
Liabilities and Stockholders' Equity
Accounts payable $ 4,319 $ 3,069
Payroll taxes and other payroll deductions payable 65,310 57,228
Accrued worksite employee payroll expense 65,503 69,676
Accrued health insurance costs 6,559 5,815
Accrued workers' compensation costs 5,489 95
Other accrued liabilities 15,898 13,019
Income taxes payable 7,520 348
Current portion of long-term debt 1,860 1,676
--------- ---------
Total current liabilities 172,458 150,926
Long-term debt 40,502 42,493
Accrued workers' compensation costs 7,417 --
Deferred income taxes 5,060 5,396
--------- ---------
Total noncurrent liabilities 52,979 47,889
Stockholders' equity:
Common stock 309 309
Additional paid-in capital 101,681 102,315
Treasury stock, cost (48,795) (43,003)
Accumulated other comprehensive income, net of tax -- 153
Retained earnings 69,439 56,575
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Total stockholders' equity 122,634 116,349
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Total liabilities and stockholders' equity $ 348,071 $ 315,164
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ADMINISTAFF, INC.
SUMMARY FINANCIAL INFORMATION (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND STATISTICAL DATA)
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
----------------------- -----------------------
2003 2002 CHANGE 2003 2002 CHANGE
--------- --------- -------- --------- --------- --------
Operating results:
Revenues (gross billings of $1.315 billion,
$1.331 billion, $4.830 billion and $4.857
billion, less worksite employee payroll
cost of $1.086 million, $1.102 million,
$3.938 billion and $4.009 billion,
respectively) $ 229,126 $ 229,423 (0.1)% $ 891,721 $ 848,416 5.1%
Direct costs:
Payroll taxes, benefits and workers'
compensation costs 170,540 177,209 (3.8)% 693,754 682,626 1.6%
--------- --------- --------- ---------
Gross profit 58,586 52,214 12.2% 197,967 165,790 19.4%
Operating expenses:
Salaries, wages and payroll taxes 22,274 18,283 21.8% 83,195 74,989 10.9%
General and administrative expenses 12,465 14,281 (12.7)% 50,502 50,172 0.7%
Commissions 2,526 3,016 (16.2)% 10,656 12,127 (12.1)%
Advertising 2,287 2,274 0.6% 8,581 7,138 20.2%
Depreciation and amortization 4,717 5,738 (17.8)% 20,759 21,297 (2.5)%
--------- --------- --------- ---------
44,269 43,592 1.6% 173,693 165,723 4.8%
--------- --------- --------- ---------
Operating income 14,317 8,622 66.1% 24,274 67 36,129.9%
Other income (expense):
Interest income 737 287 156.8% 1,910 1,772 7.8%
Interest expense (508) (379) 34.0% (2,176) (437) 397.9%
Write-off of investments -- (3,354) 100.0% -- (3,354) 100.0%
Other, net (18) 38 (147.4)% 462 272 69.9%
--------- --------- --------- ---------
211 (3,408) 106.2% 196 (1,747) 111.2%
Income (loss) before income taxes 14,528 5,214 178.6% 24,470 (1,680) 1,556.5%
Income tax expense (benefit) 5,738 3,964 44.8% 9,485 1,241 664.3%
--------- --------- --------- ---------
Net income (loss) from continuing operations $ 8,790 $ 1,250 603.2% $ 14,985 $ (2,921) 613.0%
========= ========= ========= =========
Discontinued operations:
Loss from operations of
discontinued division (1,161) (400) 190.3% (3,264) (1,917) 70.3%
Income tax expense (benefit) (407) (158) 157.6% (1,143) (757) 51.0%
--------- --------- --------- ---------
Net loss from discontinued operations (754) (242) 211.6% (2,121) (1,160) 82.8%
Net income (loss) $ 8,036 $ 1,008 697.2% $ 12,864 $ (4,081) 415.2%
========= ========= ========= =========
Diluted net income (loss) per share
of common stock:
Income (loss) from continuing operations $ 0.32 $ 0.05 540.0% $ 0.55 $ (0.11) 600.0%
Loss from discontinued operations $ (0.03) $ (0.01) 200.0% $ (0.08) $ (0.04) 100.0%
--------- --------- --------- ---------
Diluted net income (loss) per share
of common stock $ 0.29 $ 0.04 625.0% $ 0.47 $ (0.15) 413.3%
========= ========= ========= =========
Diluted weighted average common
shares outstanding 27,444 27,995 27,253 27,890
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ADMINISTAFF, INC.
SUMMARY FINANCIAL INFORMATION (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND STATISTICAL DATA)
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
-------------------- -------------------
2003 2002 CHANGE 2003 2002 CHANGE
------- ------- ------ ------- ------- ------
Statistical data:
Average number of worksite
employees paid per month 74,332 79,560 (6.6)% 75,036 77,334 (3.0)%
Revenues per worksite employee
per month(1) $ 1,027 $ 961 6.9% $ 990 $ 914 8.3%
Gross profit per worksite employee
per month 263 219 20.1% 220 179 22.9%
Operating expenses per worksite
employee per month 199 183 8.7% 193 179 7.8%
Operating income (loss) per worksite
employee per month 64 36 77.8% 27 0 --
Net income (loss) from continuing
operations per worksite employee
per month 39 5 680.0% 17 (3) 666.7%
(1) Gross billings of $5,897, $5,578, $5,364 and $5,234 per worksite employee
per month less payroll cost of $4,869, $4,616, $4,374 and $4,320 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)
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
-------------------------- --------------------------
2003 2002 CHANGE 2003 2002 CHANGE
---------- ---------- ------ ---------- ---------- ------
GAAP to non-GAAP reconciliation:
Payroll cost (GAAP) $1,085,805 $1,101,846 (1.5)% $3,938,021 $4,008,676 (1.8)%
Less: Bonus payroll cost 164,364 151,780 8.3% 330,903 343,809 (3.8)%
---------- ---------- ---------- ----------
Non-bonus payroll cost $ 921,441 $ 950,066 (3.0)% $3,607,118 $3,664,867 (1.6)%
========== ========== ========== ==========
Payroll cost per worksite
employee (GAAP) $ 4,869 $ 4,616 5.5% $ 4,374 $ 4,320 1.3%
Less: Bonus payroll cost per
worksite employee 737 636 15.9% 367 370 (0.8)%
---------- ---------- ---------- ----------
Non-bonus payroll cost per
worksite employee $ 4,132 $ 3,980 3.8% $ 4,007 $ 3,950 1.4%
========== ========== ========== ==========
Non-bonus payroll cost is a non-GAAP financial measure that excludes 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 new program effective September 1, 2003.
As a result, Administaff management refers to non-bonus payroll cost in
analyzing, reporting and forecasting the company's workers' compensation costs.
These non-GAAP financial measures are not prepared in accordance with generally
accepted accounting principles ("GAAP") and may be different from non-GAAP
financial measures used by other companies. Non-GAAP financial measures should
not be considered as a substitute for, or superior to, measures of financial
performance prepared in accordance with GAAP. Administaff includes these
non-GAAP financial measures 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 new workers' compensation program. 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 table above.
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