Second-quarter revenue fell 3.8% at Administaff Inc. (NYSE: ASF), a Kingwood TX-based professional employer organization, to $404.3 million. The average number of worksite employees paid per month fell 6.5%, but was partially offset by a 2.9% increase in revenue per worksite employee.

Gross margin narrowed to 17.8% from 20.0% in the year-ago quarter.

Administaff reported that higher benefits costs caused a 14.4% year-over-year decrease in gross profit. Benefits costs were pushed up because of an increase in COBRA participation from layoffs at client companies and federal stimulus plan legislation that subsidized and expanded COBRA coverage.

The average gross profit per worksite employee per month in the second quarter fell 8.3% to $221 from $241 in the second quarter of 2008.

Second-quarter net income fell 51.0% year over year to $5.4 million.

Separately, Administaff released a survey of small- and medium-sized companies that found 58% of small business owners expect an economic turnaround in 2010 and 14% expect a rebound by the end of this year.

Administaff Inc. (NYSE: ASF)
For the second quarter ended June 30, 2009, compared with the same period in 2008.
Revenue: $404.3 million, -3.8%
Net income: $5.4 million, -51.0%