EPS up 32% on 21% Revenue Growth and 15% Unit Growth
HOUSTON, Aug. 1 /PRNewswire-FirstCall/ -- Administaff, Inc. (NYSE: ASF), a
leading provider of human resources services for small and medium-sized
businesses, today announced results for the second quarter and six months
ended June 30, 2006. The company reported a 44% increase in second quarter
net income to $10.5 million in the 2006 period from $7.3 million in the 2005
period. Diluted earnings per share increased to $0.37 from $0.28 in the 2005
period.
Second Quarter Results
Revenues for the second quarter of 2006 increased 20.7% over the 2005
period to $337.8 million, due to a 14.9% increase in the average number of
worksite employees paid per month and a 5.0% increase in revenues per worksite
employee per month.
"We reached a major milestone this quarter, surpassing 100,000 paid
worksite employees and have now achieved year-over-year unit growth of 15% or
more for the fourth consecutive quarter," said Paul J. Sarvadi, Administaff
chairman and chief executive officer. "Our excellent first half results have
provided the opportunity to invest in growth and new product offerings for
2007 and beyond, while still targeting 34 - 41% earnings growth for 2006."
Gross profit increased 21.1% over the second quarter 2005 to $68.2 million
due to: (i) the growth in the average number of worksite employees paid; (ii)
an increase in the markup on the company's HR services; and (iii) better-than-
expected results from direct cost programs. The average gross profit per
worksite employee per month increased to $228 in the 2006 period from $216 in
the 2005 period.
Operating expenses for the quarter increased 19.3% to $54.2 million, and
included the planned addition of sales and service personnel and a shift in
the timing and level of advertising expenditures relative to the 2005 period.
Operating income for the second quarter of 2006 increased 28.7% to $14.0
million, with an average operating income per worksite employee per month of
$47 compared to $42 in the 2005 period.
Year-to-Date Results
For the six months ended June 30, 2006, the company reported a 77.2%
increase in net income to $21.0 million compared to $11.9 million in the same
period in 2005. Diluted earnings per share increased to $0.74 from $0.45 in
the 2005 period.
Year-to-date revenues were $698.4 million, a 20.7% increase over the 2005
period, which resulted from a 14.8% increase in the average number of worksite
employees paid per month and a 5.1% increase in revenues per worksite employee
per month. Gross profit for the six months ended June 30, 2006 increased 23.4%
to $136.2 million. The average gross profit per worksite employee per month
was $232, a 7.4% increase over the 2005 period.
Year-to-date operating expenses increased 16.4% to $107.8 million. On a
per worksite employee per month basis, operating expenses increased 1.7% over
the 2005 period to $184. The resulting operating income for the six months
ended June 30, 2006 was $28.4 million compared to $17.7 million in the 2005
period. Operating income per worksite employee per month increased 37.1% to
$48.
"During the quarter, we repaid our $32 million mortgage and repurchased
$13 million of the company's shares while continuing to maintain a strong
working capital position," said Douglas S. Sharp, vice-president of finance,
chief financial officer and treasurer. "At current share prices, we plan to
use our working capital to pursue further share buybacks, while continuing to
invest in growth opportunities."
Business Outlook
Administaff also provided its outlook for the third quarter and full year
2006.
Third Quarter Full Year
Average worksite employees
paid per month 102,500-103,000 101,000-101,500
Gross profit per worksite
employee per month $219 - $223 $226 - $228
Operating expenses (in millions) $53.7 - $54.2 $218 - $219(a)
Net interest income (in millions) $2.75 - $3.25 $11.0 - $12.0
Effective income tax rate 36.7% 36.7%
Average outstanding shares (in millions) 28.3 28.3
(a) 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.
Administaff will be hosting a conference call today at 10 a.m. ET to
discuss these results, give guidance for the third quarter and full year 2006,
and answer questions from investment analysts. To listen in, call
888-396-2356 and use passcode 38275310. 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 will be available at the same Web site later today. A replay of
the conference call will be available at 888-286-8010, passcode 61245070, 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 41 sales offices in 22 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) changes in our direct costs and operating
expenses including, but not limited to, increases in health insurance premiums
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; (iv) the effectiveness of our
sales and marketing efforts; (v) changes in the competitive environment in the
PEO industry, including the entrance of new competitors and our ability to
renew or replace client companies; (vi) our liability for worksite employee
payroll and benefits costs; and (vii) 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)
June 30, December 31,
2006 2005
(Unaudited)
Assets
Cash and cash equivalents $108,713 $137,407
Restricted cash 31,224 27,580
Marketable securities 80,459 57,973
Accounts receivable 96,977 98,411
Prepaid expenses and other current assets 11,106 13,882
Income taxes receivable 2,365 ---
Deferred income taxes 3,931 3,308
Total current assets 334,775 338,561
Property and equipment, net 84,270 83,620
Prepaid insurance 11,000 11,000
Deposits 45,097 56,375
Goodwill and other intangible assets 4,991 5,018
Other assets 711 865
Total assets $480,844 $495,439
Liabilities and Stockholders' Equity
Accounts payable $3,946 $4,979
Payroll taxes and other payroll
deductions payable 82,491 101,293
Accrued worksite employee payroll expense 83,986 78,393
Accrued health insurance costs 3,863 3,495
Accrued workers' compensation costs 33,262 30,212
Accrued corporate payroll and commissions 12,256 17,801
Other accrued liabilities 7,414 7,453
Current portion of long-term debt 562 1,700
Total current liabilities 227,780 245,326
Long-term debt 1,464 33,190
Accrued workers' compensation costs 37,747 32,692
Deferred income taxes 2,873 1,802
Total noncurrent liabilities 42,084 67,684
Stockholders' equity:
Common stock 309 309
Additional paid-in capital 133,857 119,573
Treasury stock, cost (50,300) (45,614)
Deferred compensation expense --- (2,931)
Accumulated other comprehensive
income (loss), net of tax (172) (153)
Retained earnings 127,286 111,245
Total stockholders' equity 210,980 182,429
Total liabilities and stockholders' equity $480,844 $495,439
Administaff, Inc.
Summary Financial Information (continued)
(in thousands, except per share amounts and statistical data)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
2006 2005 Change 2006 2005 Change
Operating results:
Revenues
(gross billings
of $1.910 billion,
$1.559 billion,
$3.822 billion
and $3.133 billion,
less worksite
employee payroll
cost of $1.573 billion,
$1.279 billion,
$3.124 billion and
$2.555 billion,
respectively) $337,778 $279,884 20.7% $698,414 $578,860 20.7%
Direct costs:
Payroll taxes,
benefits and
workers'
compensation
costs 269,562 223,549 20.6% 562,205 468,497 20.0%
Gross profit 68,216 56,335 21.1% 136,209 110,363 23.4%
Operating expenses:
Salaries, wages
and payroll
taxes 29,440 24,634 19.5% 57,664 47,965 20.2%
Stock-based
compensation 1,068 367 191.0% 1,357 1,405 (3.4)%
General and
administrative
expenses 13,876 12,818 8.3% 29,851 26,601 12.2%
Commissions 2,709 2,488 8.9% 5,542 4,852 14.2%
Advertising 3,319 1,524 117.8% 5,702 4,399 29.6%
Depreciation
and amortization 3,829 3,649 4.9% 7,724 7,406 4.3%
Total operating
expenses 54,241 45,480 19.3% 107,840 92,628 16.4%
Operating income 13,975 10,855 28.7% 28,369 17,735 60.0%
Other income
(expense):
Interest income 3,008 1,330 126.2% 5,817 2,452 137.2%
Interest expense (392) (571) (31.3)% (1,062) (1,115) (4.8)%
Other, net (7) 6 (216.7)% 112 (13)(961.5)%
Income before income
tax expense 16,584 11,620 42.7% 33,236 19,059 74.4%
Income tax expense 6,087 4,336 40.4% 12,198 7,185 69.8%
Net income $10,497 $7,284 44.1% $21,038 $11,874 77.2%
Diluted net
income per share
of common stock $0.37 $0.28 32.1% $0.74 $0.45 64.4%
Diluted weighted
average common
shares outstanding 28,561 26,407 28,473 26,244
Administaff, Inc.
Summary Financial Information (continued)
(in thousands, except per share amounts and statistical data)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
2006 2005 Change 2006 2005 Change
Statistical data:
Average number
of worksite
employees paid
per month 99,839 86,868 14.9% 97,923 85,298 14.8%
Revenues per
worksite employee
per month (a) $1,128 $1,074 5.0% $1,189 $1,131 5.1%
Gross profit per
worksite employee
per month 228 216 5.6% 232 216 7.4%
Operating expenses
per worksite
employee per month 181 175 3.4% 184 181 1.7%
Operating income
per worksite
employee per month 47 42 11.9% 48 35 37.1%
Net income
per worksite
employee per month 35 28 25.0% 36 23 56.5%
(a) Gross billings of $6,378, $5,983, $6,506 and $6,122 per worksite
employee per month, less payroll cost of $5,250, $4,909, $5,317 and
$4,991 per worksite employee per month, respectively.
Administaff, Inc.
Summary Financial Information (continued)
(in thousands, except per share amounts and statistical data)
(Unaudited)
GAAP to Non-GAAP Reconciliation Tables
Three months ended Six months ended
June 30, June 30,
2006 2005 Change 2006 2005 Change
Payroll cost
(GAAP) $1,572,541 $1,279,197 22.9% $3,124,043 $2,554,525 22.3%
Less:
Bonus
payroll
cost 108,381 87,760 23.5% 262,108 231,575 13.2%
Non-bonus
payroll
cost $1,464,160 $1,191,437 22.9% $2,861,935 $2,322,950 23.2%
Payroll cost
per worksite
employee
(GAAP) $5,250 $4,909 6.9% $5,317 $4,991 6.5%
Less:
Bonus payroll
cost per
worksite
employee 362 337 7.4% 446 452 (1.3)%
Non-bonus
payroll cost per
worksite
employee $4,888 $4,572 6.9% $4,871 $4,539 7.3%
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.
Six months ended
June 30,
2006 2005
Net income (GAAP) $21,038 $11,874
Interest expense 1,062 1,115
Income tax expense 12,198 7,185
Depreciation and amortization 7,724 7,406
EBITDA $42,022 $27,580
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.
SOURCE: Administaff, Inc.
CONTACT: Investor Relations Douglas S. Sharp, Vice President, Finance,
Chief Financial Officer and Treasurer, +1-281-348-3232, or
Douglas_Sharp@Administaff.com News Media Jason Cutbirth, Managing
Director, Marketing and Corporate Communications, +1-281-312-3085, or
Jason_Cutbirth@Administaff.com both of Administaff, Inc.
Web site: http://www.administaff.com
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