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ADMINISTAFF, INC. POSTS STRONG THIRD QUARTER RESULTS
- Revenues growth exceeds 40%
- Unit growth exceeds 30%
HOUSTON, TX – November
2, 1998 – Administaff, Inc. (NYSE: ASF), a leading Professional
Employer Organization (PEO), today announced results for the third
quarter and nine months ended September 30, 1998. For the third
quarter, the company reported net income of $3.8 million, or $0.26
per share (diluted), versus $2.9 million, or $0.21 per share (diluted),
for the third quarter of 1997. For the nine months ended September
30, 1998, the company reported net income of $5.2 million, or $0.35
per share (diluted), versus net income of $3.9 million, or $0.28
per share (diluted), for the same period in 1997.
"We are pleased with the
strength and consistency of our third quarter operating results,"
commented Paul J. Sarvadi, president and chief executive officer.
"Our growth in worksite employees paid, revenues and gross
profit has allowed us to continue to develop and implement our strategic
technology and infrastructure plans while delivering solid bottom-line
profitability."
Revenues for the third quarter
of 1998 increased 42.6% to $432 million, primarily due to a 31.0%
increase in the number of worksite employees paid. Gross profit
increased 42.8% to $20.0 million, with an average monthly gross
profit per worksite employee of $185 in the 1998 period compared
to $169 in the 1997 period. Gross profit margin remained constant
at 4.6% in both the 1998 and 1997 periods as a decrease in workers’
compensation costs as a percentage of payroll cost was offset by
an increase in the gross payroll cost per worksite employee. Operating
expenses
increased to 3.4% of revenues
in the third quarter of 1998 compared to 3.3% in the third quarter
of 1997, due to increased consulting fees, depreciation and corporate
and sales staff compensation, partially offset by reduced advertising
expenses. As a result, operating income for the third quarter of
1998 increased 33.9% to $5.3 million. This increase in operating
income, combined with an 11.1% increase in interest and other income,
resulted in a 29.5% increase in net income to $3.8 million.
For the nine months ended September
30, 1998, revenues increased 41.4% to $1.2 billion, primarily due
to a 29.6% increase in the number of worksite employees paid. Gross
profit increased 37.9% to $47.5 million, with an average monthly
gross profit per worksite employee of $156 in the 1998 period compared
to $147 in the 1997 period. Gross profit margin decreased to 4.0%
in the 1998 period compared to 4.1% in the 1997 period, due to increases
in the gross payroll cost per worksite employee and the company’s
weighted average state unemployment tax rate as a percentage of
payroll cost. Operating expenses decreased to 3.5% of revenues in
the 1998 period compared to 3.6% in the 1997 period. This decrease
was primarily due to a $1.3 million bad debt charge in the second
quarter of 1997, partially offset by increases in consulting fees,
depreciation and corporate and sales staff compensation. As a result,
operating income for the nine months ended September 30, 1998 increased
32.4% to $5.8 million. This increase in operating income, combined
with a 43.8% increase in interest and other income, resulted in
a 35.2% increase in net income to $5.2 million.
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
which are based on the individual employees’ cumulative earnings
up to specified wage levels, causing employment-related taxes to
be largest in the first quarter and then decline over the course
of the year. The results for the third quarter and nine months ended
September 30, 1998 reflect the effects of this pattern, and the
company expects that the remaining 1998 results will be consistent
with this pattern.
Administaff will be hosting
a conference call today at 11:00 a.m. EST to discuss these results.
To listen in, call 1-800-360-0565.
Administaff is one of the nation’s leading
Professional Employer Organizations, providing a comprehensive Personnel
Management System that encompasses a broad range of services including
benefits and payroll administration, medical and workers’ compensation
insurance programs, personnel records management, liability management,
employee recruiting and selection, performance management, and training
and development services to small and medium-sized businesses. The
company has 22 offices in 14 major markets and serves clients and
worksite employees throughout the United States.
Administaff, Inc.
Summary Financial Information
(in thousands, except per
share amounts and statistical data)
(Unaudited)
|
Three months ended September 30, |
|
Nine months ended
September 30, |
|
|
1998 |
1997 |
Change |
1998 |
1997 |
Change |
| Operating results: |
|
|
|
|
|
|
| Revenues |
$ 431,511
|
$ 302,618
|
42.6%
|
$ 1,187,550
|
$ 839,610
|
41.4%
|
| Direct costs: |
|
|
|
|
|
|
| Salaries and wages
of worksite employees |
357,827
|
249,541
|
43.4%
|
982,781
|
691,244
|
42.2%
|
| Benefits and payroll
taxes |
53,647
|
39,049
|
37.4%
|
157,233
|
113,902
|
38.0%
|
| Gross profit |
20,037
|
14,028
|
42.8%
|
47,536
|
34,464
|
37.9%
|
| Operating expenses: |
|
|
|
|
|
|
| Salaries, wages
and payroll taxes |
6,672
|
4,397
|
51.7%
|
19,229
|
13,014
|
47.8%
|
| General and administrative
expenses |
4,711
|
2,863
|
64.5%
|
12,736
|
9,449
|
34.8%
|
| Commissions |
1,530
|
1,192
|
28.4%
|
4,405
|
3,361
|
31.1%
|
| Advertising |
911
|
1,083
|
(15.9%)
|
2,777
|
2,752
|
0.9%
|
| Depreciation and
amortization |
961
|
572
|
68.0%
|
2,572
|
1,495
|
72.0%
|
|
14,785
|
10,107
|
46.3%
|
41,719
|
30,071
|
38.7%
|
| Operating income
|
5,252
|
3,921
|
33.9%
|
5,817
|
4,393(i)
|
32.4%
|
| Interest and other
income |
854
|
769
|
11.1%
|
2,582
|
1,795
|
43.8%
|
| Income before income
tax expense |
6,106
|
4,690
|
30.2%
|
8,399
|
6,188
|
35.7%
|
| Income tax expense |
2,320
|
1,767
|
31.3%
|
3,192
|
2,338
|
36.5%
|
| Net income |
$ 3,786
|
$ 2,923
|
29.5%
|
$ 5,207
|
$ 3,850(i)
|
35.2%
|
| Net income per
share: |
|
|
|
|
|
|
| Basic |
$ 0.26
|
$ 0.22
|
18.2%
|
$ 0.36
|
$ 0.29(i)
|
24.1%
|
| Diluted |
$ 0.26
|
$ 0.21
|
23.8%
|
$ 0.35
|
$ 0.28(i)
|
25.0%
|
| Weighted average
common
shares outstanding:
|
|
|
|
|
|
|
| Basic |
14,504
|
13,451
|
7.8%
|
14,335
|
13,129
|
9.2%
|
| Diluted |
14,805
|
14,175
|
4.4%
|
14,673
|
13,838
|
6.0%
|
(i) Excluding the effects of the
second quarter 1997 bad debt charge, operating income, net income,
basic net income per share and diluted net income per share would
have been $5.7 million, $4.7 million, $0.36 per share and $0.34
per share, respectively, for the nine months ended September 30,
1997.
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
1998
|
1997
|
Change
|
1998
|
1997
|
Change
|
| Statistical data: |
|
|
|
|
|
|
| Monthly revenue
per worksite employee |
$ 3,785
|
$ 3,509
|
7.9%
|
$ 3,714
|
$ 3,423
|
8.5%
|
| Monthly payroll
cost per worksite employee |
3,112
|
2,873
|
8.3%
|
3,049
|
2,797
|
9.0%
|
| Monthly gross markup
per worksite employee |
673
|
636
|
5.8%
|
665
|
626
|
6.2%
|
| Average number
of worksite employees paid per month during period |
36,161
|
27,604
|
31.0%
|
33,840
|
26,121
|
29.6%
|
|
September 30, 1998
(Unaudited)
|
December 31,1997
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| Balance Sheet data: |
|
|
| Working capital |
$ 54,329
|
$ 46,611
|
| Total assets |
135,900
|
109,455
|
| Total debt |
—
|
—
|
| Total stockholders’ equity |
82,228
|
63,763
|
(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) regulatory and tax developments; (ii)
changes in the company’s direct costs and operating expenses;
(iii) the effectiveness of the company’s sales and marketing
efforts, including its marketing agreement with American Express,
American Express’ ability to set qualified appointments and
the company’s ability to convert those appointments into sales;
(iv) the estimated costs and effectiveness of capital projects and
investments in technology and infrastructure; (v) changes in the
competitive environment in the PEO industry; and (vi) the effectiveness
and estimated costs of the company’s Year 2000 conversion and
contingency plans. These factors are described in further detail
in the company’s filings with the Securities and Exchange Commission.)
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