EXHIBIT 99.1
(ADMINISTAFF LOGO)
News Release
INVESTOR RELATIONS CONTACT:
Douglas S. Sharp
Vice President and Chief Financial Officer
(281) 348-3232
douglas_sharp@administaff.com
NEWS MEDIA CONTACT:
Alan Dodd
Director, Corporate Communications
(281) 348-3105
alan_dodd@administaff.com
ADMINISTAFF ANNOUNCES FIRST QUARTER RESULTS
HOUSTON - May 3, 2004 - Administaff, Inc. (NYSE: ASF), the nation's leading
Professional Employer Organization (PEO), today announced results for the first
quarter ended March 31, 2004. From its continuing operations, the company
reported net income and diluted earnings per share of $9.2 million and $0.33,
versus a net loss and diluted net loss per share of $4.1 million and $0.15 in
the 2003 period. These results include proceeds from the Aetna settlement of
$8.25 million, or $5.0 million and $0.18 per share after taxes; and insurance
proceeds of $1.1 million, or $666,000 and $0.02 per share after taxes, related
to the reimbursement of workers' compensation claims that were paid to the state
of Texas during the fourth quarter of 2003.
"We are very pleased with the overall performance of the company during the
quarter," said Paul J. Sarvadi, Administaff chairman and chief executive
officer. "Profitability remains strong, and we are seeing improving trends in
all three areas that lead to unit growth: new sales, client retention and new
hires at existing clients."
Revenues for the first quarter of 2004 increased 11.8% over the 2003 period to
$252 million. During the quarter, the company experienced a 14.1%, or $139
increase in revenues per worksite employee per month to $1,123, which offset a
2.1% decrease in the average number of worksite employees paid per month.
Gross profit increased 39.1% to $50.0 million. The average gross profit per
worksite employee per month increased 42.0%, or $66, to $223 in the first
quarter of 2004. This increase is primarily due to a contractual change with
clients enabling the company to invoice its comprehensive service fee at a
higher rate earlier in the year, which more closely reflects the pattern of
employer-related payroll tax costs. In addition, $1.1 million, or $5 per
worksite employee per month, relates to the workers' compensation
reimbursement mentioned above.
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Operating expenses for the quarter increased less than 1.0% over the 2003 period
to $42.9 million. On a per worksite employee basis, operating expenses increased
2.7% to $191 per month in the 2004 period from $186 per month in the 2003
period, primarily due to the 2.1% decline in the average number of paid worksite
employees per month.
Operating income for the first quarter of 2004 increased 209.1% to $7.2 million,
with an average operating income per worksite employee of $32 per month compared
to a loss of $29 in the 2003 period.
"Our pricing and direct cost management have been effective and resulted in
strong gross profit performance," said Douglas S. Sharp, vice president of
finance and chief financial officer. "With operating expenses relatively flat,
we achieved operating income per worksite employee per month of $32, which is
near the high end of our annual historical range."
Prior to 2004, the company's earnings pattern included losses in the first
quarter, followed by improved profitability in subsequent quarters throughout
the year. This pattern was 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. In the first quarter of 2004, substantially
all clients were invoiced using the company's new pricing and billing system.
Beginning in 2004, the historical earnings pattern will only apply to new
clients enrolled after January of each year.
BUSINESS OUTLOOK
Administaff also provided its outlook for the second quarter and full year 2004.
<Table>
<Caption>
SECOND QUARTER FULL YEAR
-------------- ---------------------
Average worksite employees paid per month 77,000 - 78,000 78,500 - 80,500
Gross profit per worksite employee per month $200 - $204 $206 - $212(1)
Operating expenses (in millions) $43.0 - $44.0 $170.5 - $174.5(1)(2)
</Table>
(1) The full year gross profit per worksite employee per month and operating
expense estimates reflect a change in the method of reporting the company's
retirement services reimbursements. This adjustment to the previously
communicated estimates of $3 per worksite employee per month and
approximately $3 million, respectively, has no impact on operating income
estimates.
(2) 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.
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Administaff will be hosting a conference call today at 10 a.m. EDT to discuss
these results, give guidance for the second quarter and full year 2004, and
answer questions from investment analysts. To listen in, call 800-901-5213 and
use passcode 54453022. 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 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 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)
<Table>
<Caption>
MARCH 31, DECEMBER 31,
2004 2003
------------ ------------
(UNAUDITED)
Assets
Cash and cash equivalents $ 94,833 $ 104,728
Restricted cash 5,311 4,584
Marketable securities 26,174 23,989
Accounts receivable 93,564 61,744
Prepaid insurance 11,538 22,554
Other current assets 5,510 7,468
Deferred income taxes 2,533 3,423
------------ ------------
Total current assets 239,463 228,490
Property and equipment 161,935 160,993
Accumulated depreciation (86,387) (82,224)
------------ ------------
Net property and equipment 75,548 78,769
Deposits 51,641 39,909
Other assets 725 903
------------ ------------
Total assets $ 367,377 $ 348,071
============ ============
Liabilities and Stockholders' Equity
Accounts payable $ 1,157 $ 4,319
Payroll taxes and other payroll deductions payable 62,048 65,310
Accrued worksite employee payroll cost 85,257 65,503
Accrued health insurance costs 1,010 6,559
Accrued workers' compensation costs 6,403 5,489
Other accrued liabilities 14,405 15,898
Income taxes payable 6,430 7,520
Current portion of long-term debt 1,875 1,860
------------ ------------
Total current liabilities 178,585 172,458
Long-term debt 40,026 40,502
Accrued workers' compensation costs 14,689 7,417
Deferred income taxes 4,689 5,060
------------ ------------
Total noncurrent liabilities 59,404 52,979
Stockholders' equity:
Common stock 309 309
Additional paid-in capital 101,534 101,681
Treasury stock, cost (51,135) (48,795)
Accumulated other comprehensive income, net of tax 3 --
Retained earnings 78,677 69,439
------------ ------------
Total stockholders' equity 129,388 122,634
------------ ------------
Total liabilities and stockholders' equity $ 367,377 $ 348,071
============ ============
</Table>
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ADMINISTAFF, INC.
SUMMARY FINANCIAL INFORMATION (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND STATISTICAL DATA)
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31,
2004 2003 CHANGE
------------ ------------ ------------
Operating results:
Revenues (gross billings of $1.284 billion
and $1.196 billion less worksite employee
payroll cost of $1.032 billion and $971
million, respectively) $ 252,047 $ 225,520 11.8%
Direct costs:
Payroll taxes, benefits and workers'
compensation costs 202,013 189,539 6.6%
------------ ------------
Gross profit 50,034 35,981 39.1%
Operating expenses:
Salaries, wages and payroll taxes 22,299 20,344 9.6%
General and administrative expenses 11,765 11,704 0.5%
Commissions 2,544 2,886 (11.9)%
Advertising 1,709 2,210 (22.7)%
Depreciation and amortization 4,551 5,405 (15.8)%
------------ ------------
Total operating expenses 42,868 42,549 0.7%
------------ ------------
Operating income (loss) 7,166 (6,568) 209.1%
Other income (expense):
Interest income 366 315 16.2%
Interest expense (527) (568) 7.2%
Other, net 8,264 8 --
------------ ------------
Income (loss) before income tax benefit 15,269 (6,813) 324.1%
Income tax expense (benefit) 6,031 2,691 124.1%
------------ ------------
Net income (loss) from continuing operations 9,238 (4,122) 324.1%
Discontinued operations:
Loss from operations of discontinued division -- (396) --
Income tax benefit -- 157 --
------------ ------------
Loss on discontinued operations -- (239) --
Net income (loss) $ 9,238 $ (4,361) 311.8%
============ ============
Diluted net income (loss) per share of common stock:
Income (loss) from continuing operations $ 0.33 $ (0.15) 320.0%
Loss from discontinued operations -- (0.01) --
------------ ------------
Net income (loss) $ 0.33 $ (0.16) 306.3%
============ ============
Diluted weighted average
common shares outstanding 27,588 27,427
</Table>
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ADMINISTAFF, INC.
SUMMARY FINANCIAL INFORMATION (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND STATISTICAL DATA)
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31,
2004 2003 CHANGE
------------ ------------ ------------
Statistical data:
Average number of worksite employees paid per month 74,792 76,425 (2.1)%
Revenues per worksite employee per month(1) $ 1,123 $ 984 14.1%
Gross profit per worksite employee per month 223 157 42.0%
Operating expenses per worksite employee per month 191 186 2.7%
Operating income (loss) per worksite employee per month 32 (29) 210.3%
Net income (loss) per worksite employee per month 41 (19) 315.8%
</Table>
(1) Gross billings of $5,724 and $5,219 per worksite employee per month, less
payroll cost of $4,601 and $4,235 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)
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31,
2004 2003 CHANGE
------------ ------------ ------------
GAAP to non-GAAP reconciliation:
Payroll cost (GAAP) $ 1,032,289 $ 970,970 6.3%
Less: Bonus payroll cost (97,171) (70,446) 37.9%
------------ ------------
Non-bonus payroll cost $ 935,118 $ 900,524 3.8%
============ ============
Payroll cost per worksite
employee (GAAP) $ 4,601 $ 4,235 8.6%
Less: Bonus payroll cost per
worksite employee (433) (307) 41.0%
------------ ------------
Non-bonus payroll cost per
worksite employee $ 4,168 $ 3,928 6.1%
============ ============
</Table>
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 current 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 current 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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