Administaff Reports Third Quarter Earnings

http://www.businesswire.com/news/home/20091102005219/en

HOUSTON--(Business Wire)--
Administaff, Inc. (NYSE: ASF), a leading provider of human resources services
for small and medium-sized businesses, today reported results for the third
quarter and nine months ended September 30, 2009. For the third quarter 2009,
the company reported net income of $5.8 million, or $0.23 earnings per diluted
share. For the nine months ended September 30, 2009, the company reported net
income of $19.4 million and earnings per diluted share of $0.77.

"We are pleased with our financial results and the stabilization of our worksite
employee base during the third quarter," said Paul J. Sarvadi, chairman of the
board and chief executive officer. "We are continuing to be diligent in our
support of our small business and mid market clients as they manage through the
uncertainty of the economic and political climate."

Third Quarter

Revenues for the third quarter of 2009 decreased 7.3% compared to the 2008
period to $390.9 million, due to an expected 9.9% decrease in the average number
of worksite employees paid per month, partially offset by a 2.8% increase in
revenues per worksite employee per month.

Gross profit for the third quarter 2009 decreased 16.8% to $71.1 million. The
average gross profit per worksite employee per month decreased 7.9% to $220 in
the 2009 period from $239 in the third quarter of 2008. This decline was
primarily the result of higher benefits costs in the 2009 period due to higher
utilization of health benefits by worksite employees, including large claim
activity and increased COBRA participation.

Operating expenses for the quarter decreased 10.3% to $61.5 million, and
remained flat on a per worksite employee per month basis. The resulting
operating income for the third quarter of 2009 was $9.6 million, compared to
$16.9 million in the same period last year.

"Our business continues to produce positive cash flow and increase working
capital through this unprecedented economic climate," said Douglas S. Sharp,
senior vice-president of finance, chief financial officer and treasurer. "EBITDA
plus stock-based compensation exceeded $16 million during the quarter with a $4
million increase in working capital. Our strong balance sheet allows us to
pursue strategic opportunities as they arise."

Year-to-Date

Year-to-date revenues were $1.3 billion, a 3.2% decrease compared to the 2008
period, due to a 6.1% decrease in the average number of worksite employees paid
per month, partially offset by a 3.1% increase in revenues per worksite employee
per month. Gross profit for the nine months ended September 30, 2009 decreased
11.5% to $226.6 million. The average gross profit per worksite employee per
month decreased 6.1% compared to the 2008 period to $230.

Year-to-date operating expenses decreased 4.9% to $195.6 million. On a per
worksite employee per month basis, operating expenses increased 1.5% compared to
the 2008 period. As a result, operating income for the nine months ended
September 30, 2009, was $31.1 million compared to $50.5 million in the 2008
period.

Working capital increased by $31.2 million during the first nine months of the
year to $129.6 million at September 30, 2009. During this period, EBITDA totaled
$45.1 million and the company returned $12.0 million to shareholders, including
share repurchases of $2.0 million and dividends of $10.0 million. Additionally,
the company received a scheduled return of $14.6 million in excess funding from
its workers` compensation program during 2009.

Administaff will be hosting a conference call today at 10 a.m. EST to discuss
these results, give guidance for the fourth quarter and full year 2009 and
answer questions from investment analysts. To listen in, call 888-481-7939 and
use passcode 91751151. 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 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
75939555, 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 50 sales offices in 23 major markets. For additional information, visit
Administaff`s Web site at http://www.administaff.com.

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) the ability to secure competitive
replacement contracts for health insurance and workers` compensation contracts
at expiration of current contracts; (iv) 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; (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;
(viii) our liability for disclosure of sensitive or private information; and
(ix) 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.

Administaff, Inc.

Summary Financial Information

(in thousands, except per share amounts and statistical data)

September 30, December 31,
2009 2008
(Unaudited)
Assets
Cash and cash equivalents $ 194,666 $ 252,190
Restricted cash 35,422 36,466
Marketable securities - 225
Accounts receivable 167,848 125,093
Prepaid expenses and other current assets 21,968 35,646
Total current assets 419,904 449,620

Property and equipment, net 83,552 89,339
Deposits 64,892 68,020
Other assets 9,749 9,861
Total assets $ 578,097 $ 616,840

Liabilities and Stockholders` Equity
Accounts payable $ 2,103 $ 3,007
Payroll taxes and other payroll deductions payable 67,818 123,666
Accrued worksite employee payroll expense 151,868 129,954
Accrued health insurance costs 4,914 14,715
Accrued workers` compensation costs 36,152 38,028
Other accrued liabilities 24,430 35,724
Income tax payable 3,055 4,157
Deferred income taxes - 1,956
Total current liabilities 290,340 351,207

Accrued workers` compensation costs 50,269 46,589
Deferred income taxes 10,692 10,565
Total noncurrent liabilities 60,961 57,154

Stockholders` equity:
Common stock 309 309
Additional paid-in capital 138,360 139,415
Treasury stock, cost (138,021 ) (147,952 )
Retained earnings 226,148 216,707
Total stockholders` equity 226,796 208,479
Total liabilities and stockholders` equity $ 578,097 $ 616,840

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,
2009 2008 Change 2009 2008 Change

Operating results:
Revenues (gross billings of $2.322 billion, $2.560 billion, $7.223 billion and $7.570 billion, less worksite employee payroll cost of $1.931 billion, $2.138 billion, $5.966 billion and $6.271 billion, respectively) $ 390,908 $ 421,914 (7.3 )% $ 1,257,199 $ 1,298,449 (3.2 )%
Direct costs:
Payroll taxes, benefits and workers` compensation costs 319,807 336,415 (4.9 )% 1,030,570 1,042,282 (1.1 )%
Gross profit 71,101 85,499 (16.8 )% 226,629 256,167 (11.5 )%
Operating expenses:
Salaries, wages and payroll taxes 34,644 39,373 (12.0 )% 108,940 113,779 (4.3 )%
Stock-based compensation 2,184 2,337 (6.5 )% 7,881 7,630 3.3 %
General and administrative expenses 15,111 16,642 (9.2 )% 47,111 52,304 (9.9 )%
Commissions 2,807 3,211 (12.6 )% 8,976 9,579 (6.3 )%
Advertising 2,632 3,062 (14.0 )% 10,057 10,998 (8.6 )%
Depreciation and amortization 4,160 3,951 5.3 % 12,599 11,396 10.6 %
Total operating expenses 61,538 68,576 (10.3 )% 195,564 205,686 (4.9 )%
Operating income 9,563 16,923 (43.5 )% 31,065 50,481 (38.5 )%
Interest income 478 1,733 (72.4 )% 1,415 6,076 (76.7 )%
Income before income tax expense 10,041 18,656 (46.2 )% 32,480 56,557 (42.6 )%
Income tax expense 4,209 6,727 (37.4 )% 13,097 20,485 (36.1 )%
Net income $ 5,832 $ 11,929 (51.1 )% $ 19,383 $ 36,072 (46.3 )%
Diluted net income per share of common stock $ 0.23 $ 0.46 (50.0 )% $ 0.77 $ 1.40 (45.0 )%
Diluted weighted average common shares outstanding 25,205 25,837 25,030 25,793

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,
2009 2008 Change 2009 2008 Change

Statistical data:
Average number of worksite employees paid per month 107,625 119,389 (9.9 )% 109,306 116,360 (6.1 )%
Revenues per worksite employee per month (1) $ 1,211 $ 1,178 2.8 % $ 1,278 $ 1,240 3.1 %
Gross profit per worksite employee per month 220 239 (7.9 )% 230 245 (6.1 )%
Operating expenses per worksite employee per month 191 191 - 199 196 1.5 %
Operating income per worksite employee per month 30 47 (36.2 )% 32 48 (33.3 )%
Net income per worksite employee per month 18 33 (45.5 )% 20 34 (41.2 )%

(1) Gross billings of $7,192, $7,147, $7,342 and $7,228 per worksite employee
per month, less payroll cost of $5,981, $5,969, $6,064 and $5,988 per worksite
employee per month, respectively.

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,
2009 2008 Change 2009 2008 Change

Payroll cost (GAAP) $ 1,930,950 $ 2,137,954 (9.7 )% $ 5,965,854 $ 6,271,168 (4.9 )%
Less: Bonus payroll cost 91,375 131,647 (30.6 )% 409,000 477,565 (14.4 )%
Non-bonus payroll cost $ 1,839,575 $ 2,006,307 (8.3 )% $ 5,556,854 $ 5,793,603 (4.1 )%

Payroll cost per worksite employee (GAAP) $ 5,981 $ 5,969 0.2 % $ 6,064 $ 5,988 1.3 %
Less: Bonus payroll cost per worksite employee 283 367 (22.9 )% 415 456 (9.0 )%
Non-bonus payroll cost per worksite employee $ 5,698 $ 5,602 1.7 % $ 5,649 $ 5,532 2.1 %

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 Nine months ended
September 30, September 30,
2009 2008 Change 2009 2008 Change
Net income (GAAP) $ 5,832 $ 11,929 (51.1 )% $ 19,383 $ 36,072 (46.3 )%
Interest expense 2 15 (86.7 )% 17 54 (68.5 )%
Income tax expense 4,209 6,727 (37.4 )% 13,097 20,485 (36.1 )%
Depreciation and amortization 4,160 3,951 5.3 % 12,599 11,396 10.6 %
EBITDA $ 14,203 $ 22,622 (37.2 )% $ 45,096 $ 68,007 (33.7 )%

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.

Administaff, Inc.
Investor Relations Contact:
Senior Vice President, Finance
Chief Financial Officer and Treasurer
Douglas S. Sharp, 281-348-3232
or
News Media Contact:
Managing Director, Marketing
and Corporate Communications
Jason Cutbirth, 281-312-3085
Jason_Cutbirth@Administaff.com

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