ADMINISTAFF ANNOUNCES SECOND QUARTER RESULTS
Operating income and net income increase 37% and 35% on 21% revenue growth

HOUSTON, TX — August 1, 2001 — Administaff, Inc. (NYSE: ASF), the nation's leading Professional Employer Organization (PEO), today announced results for the second quarter and six months ended June 30, 2001. For the second quarter, the company reported net income and diluted earnings per share of $3.8 million and $0.13, versus $2.8 million and $0.10 in the 2000 period.

Revenues for the second quarter of 2001 increased 20.9% to $1.0 billion, due to an 11.4% increase in the average number of worksite employees paid per month, a 7.5% increase in fee payroll cost per worksite employee per month, and a 10.4% increase in gross markup per worksite employee per month. Gross profit increased 32.5% to $41.5 million. The average gross profit per worksite employee per month increased 19.3% to $204 in the second quarter of 2001, versus $171 in the 2000 period.

"Our efforts to balance growth and profitability are continuing to produce the desired effects in spite of a sluggish economy," said Paul J. Sarvadi, president and chief executive officer. "Our technology investments are producing efficiencies; and with our substantial increase in trained sales personnel and our improved client retention, we believe a return to historical quarterly sequential unit growth rates of 5% to 7% is attainable for the remainder of 2001 and into 2002."

Operating expenses increased 31.9% over the 2000 period to $36.8 million. On a per worksite employee basis, operating expenses increased 19.1% to $181 per month in the 2001 period from $152 per month in the 2000 period. As a result, operating income for the second quarter of 2001 increased 37.3% to $4.8 million compared to $3.5 million in the 2000 period.

"We are pleased with our second quarter results, which met or exceeded our targets on all five of our key metrics," said Richard G. Rawson, executive vice president of administration and chief financial officer. "While unit growth and payroll average were at the low end of our range due to the current economic climate, gross markup, gross profit per worksite employee, and operating expenses were all favorable, reflecting effective execution of our 2001 operating plan."

For the six months ended June 30, 2001, the company reported a net loss and diluted loss per share of $(563,000) and $(0.02), versus net income and diluted earnings per share of $329,000 and $0.01 for the same period in 2000. Revenues increased 28.9% to $2.1 billion, primarily due to a 17.9% increase in the average number of worksite employees paid per month and an 8.3% increase in fee payroll cost per worksite employee per month. Gross profit increased 33.3% to $69.4 million, with an average monthly gross profit per worksite employee of $171 in the 2001 period compared to $151 in the 2000 period. Operating expenses increased 37.2% over the 2000 period, and increased to $180 per worksite employee per month from $155 in the 2000 period. The resulting operating loss for the six months ended June 30, 2001, was $3.7 million compared to an operating loss of $1.2 million in the 2000 period.</p>

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 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.

Other highlights for the quarter included:

• Administaff finalized the negotiation of its new workers' compensation insurance and claims administration program, which will become effective October 1, 2001. The Hartford Financial Services Group, Inc. will be providing unbundled claims administration services through its subsidiary, Specialty Risk Services; and in a recent development, Kemper Insurance Companies will continue to underwrite the policy. The new two-year, fully-insured policy is a guaranteed-cost contract with an increase that will not exceed 3.5% over the current policy.

• Administaff continued its technology initiatives, including the implementation of its enhanced web-based payroll service. Migration to the new payroll platform has been rapid, exceeding 15% of the client base within the first 90 days. In addition, the company has made significant progress in the development of its web-based employee service center and new employee enrollment projects, which are expected to be completed in the second half of 2001.

• Administaff continued its growth initiatives by adding new sales staff and opening sales offices in two new markets, Boston and San Diego. During the quarter, the average number of trained sales staff increased 39% over the second quarter of 2000. In addition, the company implemented another growth initiative to attract clients ranging from 100 to 1,000 employees. To better serve this market, Administaff has hired consulting firm Watson Wyatt Worldwide to conduct and deliver its Human Capital Index survey as a basis for evaluating human resource practices and establishing service plans.

• Administaff finalized a $21 million revolving line of credit agreement with Chase Manhattan Bank to fund the construction of its new corporate facility in Kingwood, Texas. The new building is expected to be completed in late 2002.

Administaff will be hosting a conference call today at 11:00 a.m. EDT to discuss these results. To listen in, call 1-888-287-1959. The call may also be accessed via the Internet at www.administaff.com or www.streetfusion.com.

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. With 2000 revenues of $3.7 billion, Administaff ranks number 448 on the Fortune 500 list. In addition, Administaff is included on Fortune's list of "America's Most Admired Companies," on the Forbes Platinum 400 list of the best big companies in America and on the InformationWeek 500 list of leading information technology innovators.

Administaff's Personnel Management System includes employment administration, benefits management, government compliance, recruiting and selection, employer liability management, training and development, performance management and owner support. These core services are complemented by an eBusiness strategy that includes Administaff Assistant®, an eService platform that provides clients and worksite employees with information and resources to help maximize the benefit of their Administaff services; and bizzport^SM marketplace, an eCommerce portal that features value-added products and services from best-of-class providers such as American Express, AT&T, Bank One, Continental Airlines, Dell, IBM and Spiegel.

Administaff has 35 sales offices in 19 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; (iii) changes in Administaff's direct costs and operating expenses; (iv) the estimated costs and effectiveness of capital projects and investments in technology and infrastructure; (v) Administaff's ability to effectively implement its eBusiness strategy; (vi) the effectiveness of Administaff's sales and marketing efforts, including the company's marketing arrangements with other companies; and (vii) changes in the competitive environments in the Professional Employer Organization industry. These factors are described in further detail in Administaff's filings with the Securities and Exchange Commission.)

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