• Highest quarterly earnings in company history
• Unit growth accelerates
• Aggressive eBusiness expansion underway

HOUSTON – Nov. 3, 1999 – Administaff, Inc. (NYSE:ASF), a leading Professional Employer Organization (PEO), today announced results for the third quarter and nine months ended September 30, 1999. For the third quarter, the company reported net income and diluted earnings per share of $4.4 million and $0.32, versus $3.8 million and $0.26 for the third quarter of 1998. For the nine months ended September 30, 1999, the company reported net income and diluted earnings per share of $3.8 million and $0.28, versus net income and diluted earnings per share of $5.2 million and $0.35 for the same period in 1998.

"Our third quarter results reflect accelerating unit growth and significant pricing strength," said Richard G. Rawson, executive vice president and chief financial officer. "The growth in paid worksite employees exceeded 8.5% over the prior quarter, the highest sequential growth rate since 1995. In addition, gross profit per worksite employee reached record levels, with a 7.6% increase over the third quarter of 1998."

Revenues for the third quarter of 1999 increased 30.4% to $563 million, primarily due to a 21.3% increase in the number of worksite employees paid and an 8.2% increase in payroll cost per worksite employee. Gross profit increased 30.7% to $26.2 million. The average monthly gross profit per worksite employee increased to $199 in the third quarter, compared to $185 in the 1998 period, reflecting effective execution of the company’s pricing strategy.

Operating expenses increased 33.9% over the 1998 period, and increased to $151 per worksite employee per month in the 1999 period from $136 in the 1998 period due to higher compensation costs, depreciation, and general and administrative expenses associated with the company’s infrastructure investments. As a result, operating income for the third quarter of 1999 increased to $6.4 million in the 1999 period compared to $5.3 million in the 1998 period.

eBusiness Strategy Expanded

During the third quarter, Administaff completed development and began implementation of its comprehensive eBusiness strategy. The three-pronged approach includes establishing a business-to-business eCommerce portal, creating a small business community-of-interest site, and completing Administaff Assistant, the company’s eService platform.

"Our industry leadership, unique client relationships, and quality client base have positioned us to benefit dramatically from the Internet," commented Paul J. Sarvadi, president and CEO. "We intend to establish an eCommerce community among the best small businesses, their employees and families, and best-of-class providers, which we believe will create a shared competitive advantage."

The eCommerce portal will bring a broad range of product and service offerings from best-of-class providers to the premium small business community represented by the Administaff client base. The company intends to leverage its buying power and relationships into significant savings for clients and new revenue streams for the company.

The community-of-interest site will provide rich content and services from Administaff and the best-of-class provider network to extend the Administaff brand and presence as the human resource department for small business. Administaff and alliance partners will market to a broad audience of small business owners to develop new relationships.

Administaff Assistant development will continue to focus on providing automated, personalized PEO services over the Internet, creating internal and external efficiencies. The recently deployed web reporting tool and Administaff’s web payroll application, currently in beta testing, are significant steps in the continuation of this element of the company’s strategy.

"We believe the implementation of our eBusiness plan will positively impact all of our stakeholders," added Sarvadi. "We expect to add new revenue streams and new customers, dramatically extend our brand, and impact our core PEO services by lowering the sales threshold, increasing client retention, and reducing operating costs."

Year-to-Date Results

For the nine months ended September 30, 1999, revenues increased 30.0% to $1.5 billion, primarily due to a 20.8% increase in paid worksite employees and an 8.1% increase in payroll cost per worksite employee. Gross profit increased 25.5% to $59.7 million, with an average monthly gross profit per worksite employee of $162 in the 1999 period compared to $156 in the 1998 period. Operating expenses increased 33.1% over the 1998 period, and increased to $151 per worksite employee per month from $137 in the 1998 period. The resulting operating income for the nine months ended September 30, 1999, was $4.1 million compared to operating income of $5.8 million in the 1998 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 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, 1999, reflect the effect of this pattern, and the company expects that the remaining 1999 results will be consistent with this pattern.

Administaff will be hosting an investor meeting in New York and simultaneous conference call today at 12:30 p.m. EST to discuss these results. To listen in, call 1-888-287-2552.

Administaff provides small and medium-sized businesses with a comprehensive Personnel Management System that includes benefits and payroll administration, medical and workers’ compensation insurance programs, personnel records management, employer liability management, employee recruiting and selection, performance management, and training and development services. With 1998 revenues of $1.7 billion, Administaff ranks number 765 on the Fortune 1000 list. The company also has been named in 1999 to Fortune magazine’s list of "America’s Most Admired Companies," the Forbes Platinum 400 list of the best-performing big companies in the U.S., and the InformationWeek 500 list as one of the top users of information technology. The company currently has 25 offices in 15 major markets and serves clients and worksite employees throughout the United States. For additional information, visit the company’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) 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 environments 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.)

Administaff, Inc.
Summary Financial Information
(in thousands, except per share amounts and statistical data)
(Unaudited)