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Delaware
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95-3359658
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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1100 San Leandro Blvd., Suite 400, San Leandro, CA
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94577
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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x
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Accelerated filer
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o
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Non-accelerated filer
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o
(do not check if a smaller reporting company)
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Smaller reporting company
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o
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Emerging growth company
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o
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BUSINESS
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BUSINESS
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TECHNOLOGY
PLATFORM
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HR EXPERTISE
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BENEFITS
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COMPLIANCE
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BUSINESS
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BUSINESS
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•
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remittance to WSEs of salaries, wages and certain other compensation, as reported and paid to us by the client, related tax reporting and remittance to tax authorities and processing of garnishment and wage deduction orders. Unlike a payroll service provider, we issue each WSE a payroll check drawn on our bank accounts,
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•
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report the wages, withhold and deposit the associated payroll taxes as the employer for regulatory reporting and payroll tax returns,
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provision and maintenance of workers' compensation insurance and workers' compensation claims processing,
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provision and administration of group health, welfare, and retirement benefits to WSEs under TriNet-sponsored insurance plans,
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compliance with applicable law for employee benefits offered to WSEs,
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BUSINESS
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•
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processing of unemployment claims, and
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provision of certain HR policies, including an employee handbook describing the co-employment relationship.
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day-to-day management of their worksites and WSEs,
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compliance with laws associated with the classification of employees as exempt or non-exempt, such as overtime pay and minimum wage law compliance,
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accurate and timely reporting to TriNet of compensation and deduction information, including information relating to hours worked, rates of pay, salaries, wages and certain other compensation,
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•
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accurate and timely reporting to TriNet of information relating to workplace injuries, employee hires and termination, and certain other information relevant to TriNet’s services,
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•
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provision and administration of any employee benefits not provided by TriNet (e.g., equity incentive plans),
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compliance with all laws and regulations applicable to the clients' workplace and business, including work eligibility laws, laws relating to workplace safety or the environment, laws relating to family and medical leave, laws pertaining to employee organizing efforts and collective bargaining and employee termination notice requirements,
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•
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payment of TriNet invoices which include wages to WSEs and applicable employment taxes and service fees, and
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all other matters for which TriNet does not assume responsibility under the client service agreement, such as intellectual property ownership and protection and liability for products produced and/or services provided.
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BUSINESS
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BUSINESS
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BUSINESS
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•
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Other PEOs that compete directly with us,
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•
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HR and information systems departments and personnel of companies that perform their own administration of employee benefits, payroll and HR,
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•
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providers of certain endpoint HR services, including payroll, employee benefits and business process outsourcers with high-volume transaction and administrative capabilities, such as Automatic Data Processing, Inc., Paychex, Inc. and other third-party administrators,
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employee benefit exchanges that provide benefits administration services over the Internet to companies that otherwise maintain their own employee benefit plans,
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insurance brokers who allow third party HR systems to integrate with their platform, and
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BUSINESS
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RISK FACTORS
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RISK FACTORS
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RISK FACTORS
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RISK FACTORS
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•
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the volume and severity of health and workers' compensation insurance claims by our WSEs, recorded as part of our insurance costs, and the timing of related claims information provided by our insurance carriers,
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•
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the amount and timing of our other insurance costs, operating expenses and capital expenditures,
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the number of our new clients initiating service and the number of WSEs employed by each new client,
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the retention, loss or merger of existing clients,
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reduction in the number of WSEs employed by existing clients,
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•
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the timing of client payments and payment defaults by clients,
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costs associated with our acquisitions of companies, assets and technologies,
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payments or drawdowns on our credit facility,
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unanticipated expenses, such as litigation or other dispute-related settlement payments,
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expenses we incur for geographic and service expansion,
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changes in laws or adverse interpretation of laws increasing our regulatory compliance costs,
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•
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changes in our effective tax rate, and
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•
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the impact of new accounting pronouncements.
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RISK FACTORS
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RISK FACTORS
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•
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identifying attractive acquisition candidates,
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over-valuing and over-paying for acquisition candidates,
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integrating the operations, systems, technologies, services and personnel of the acquired companies, including the migration of WSEs from an acquired company’s technology platform and legal service providers to ours,
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•
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establishing or maintaining internal controls, procedures and policies relating to the acquired systems and processes, including the potential for actual or perceived control weaknesses associated with or arising from the acquisitions and integration of acquired systems,
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•
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diversion of management’s attention from other business concerns,
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•
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litigation resulting from activities of the acquired company, including claims from terminated employees, clients, former stockholders and other third parties,
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insufficient revenues to offset increased expenses associated with the acquisitions and unanticipated liabilities of the acquired companies,
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•
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insufficient indemnification or security from the selling parties for legal liabilities that we may assume in connection with our acquisitions,
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•
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entering markets in which we have no prior experience and may not succeed,
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•
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potential loss of key employees of the acquired companies, and
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•
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impairment of relationships with clients and employees of the acquired companies or our clients and employees as a result of the integration of acquired operations and new management personnel.
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RISK FACTORS
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RISK FACTORS
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RISK FACTORS
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•
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incur, assume or guarantee additional debt,
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•
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pay dividends or distributions or redeem or repurchase capital stock,
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•
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incur or assume liens,
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make loans, investments and acquisitions,
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engage in sales of assets and subsidiary stock,
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enter into sale-leaseback transactions,
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enter into certain transactions with affiliates,
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enter into certain hedging agreements,
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enter into new lines of business,
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•
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prepay certain indebtedness,
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transfer all or substantially all of our assets or enter into merger or consolidation transactions with another person, and
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enter into agreements that prohibit the incurrence of liens or the payment by our subsidiaries of dividends and distributions.
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RISK FACTORS
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PROPERTIES, LEGAL PROCEEDINGS AND MINE SAFETY DISCLOSURES
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STOCK ACTIVITIES
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STOCK ACTIVITIES
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Automatic Data Processing, Inc.
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Insperity, Inc.
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Paychex, Inc.
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Barrett Business Services, Inc.
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Intuit, Inc.
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STOCK ACTIVITIES
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Period
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Total Number of
Shares Purchased
(1)
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Average Price
Paid Per Share
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Total Number of
Shares
Purchased as Part of Publicly
Announced Plans
(2)
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Approximate Dollar Value
of Shares that May Yet Be Purchased
Under the Plans
(in millions)
(2)
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||||||
October 1 - October 31, 2017
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90,793
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$
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34.41
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89,407
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$
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18
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November 1 - November 30, 2017
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112,208
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$
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41.02
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31,070
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$
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16
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December 1 - December 31, 2017
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410
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$
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43.13
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—
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$
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136
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Total
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203,411
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120,477
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SELECTED FINANCIAL DATA
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Year Ended December 31,
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||||||||||||||
(in millions, except per share data)
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2017
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2016
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2015
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2014
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2013
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||||||||||
Income Statement Data:
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Total revenues
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$
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3,275
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$
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3,060
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$
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2,659
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$
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2,194
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$
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1,644
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Operating income
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217
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124
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78
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87
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66
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|||||
Net income
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178
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61
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32
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15
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13
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|||||
Diluted net income per share of common stock
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2.49
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0.85
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0.44
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0.22
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0.24
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|||||
Non-GAAP measures
(1)
:
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||||||||||
Net Service Revenues
(1)
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809
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646
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547
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508
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417
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|||||
Net Insurance Service Revenues
(1)
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351
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199
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146
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166
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145
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|||||
Adjusted EBITDA
(1)
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285
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185
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151
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165
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136
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|||||
Adjusted Net income
(1)
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142
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87
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71
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74
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57
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|||||
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||||||||||
Balance Sheet Data:
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||||||||||
Cash and cash equivalents
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$
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336
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$
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184
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$
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166
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$
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134
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$
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94
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Working capital
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234
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156
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112
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121
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82
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|||||
Total assets
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2,593
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2,095
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2,092
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2,341
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1,435
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|||||
Notes payable
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423
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459
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494
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545
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819
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|||||
Total liabilities
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2,387
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2,060
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2,084
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2,366
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1,705
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|||||
Convertible preferred stock
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—
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—
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—
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—
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123
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|||||
Total stockholders’ equity (deficit)
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206
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35
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8
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(25
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)
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(393
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)
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|||||
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||||||||||
Cash Flow Data:
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||||||||||
Net cash provided by operating activities
(2)
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$
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253
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$
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149
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$
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151
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$
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162
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$
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116
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Net cash used in investing activities
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(24
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)
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(27
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)
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(38
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)
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(45
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)
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(212
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)
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|||||
Net cash provided by (used in) financing activities
(2)
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(77
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)
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(104
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)
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(81
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)
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(76
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)
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127
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(1)
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Refer to Non-GAAP Financial Measures section on the following pages for definitions and reconciliations from GAAP measures.
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(2)
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Prior years' balances have been retrospectively adjusted for Accounting Standards Update (ASU) 2016-09. Refer to Note 1 in Item 8 of this Form 10-K for details.
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SELECTED FINANCIAL DATA
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Business Acquisitions
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Equity and Debt Activities
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2014
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None
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• In March, we completed our initial public offering (IPO) by issuing
15,000,000 shares of common stock and received $217 million net
proceeds.
• As a result of the IPO, all our shares of preferred stock were converted
into common stock.
• With the IPO proceeds, the outstanding second lien term loan of
$190 million was fully paid off.
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2013
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• We acquired Ambrose for a total of $195 million.
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• The board of directors declared and paid total special dividends of
$358 million.
• In August, the outstanding credit facility was amended and restated with:
- A $750 million first lien credit facility including a $175 million three-
year term loan (B-1 term loan), a $455 million seven-year term loan
(B-2 term loan) and a $75 million revolving facility, and
- A $190 million second lien seven-year-six-month term loan.
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SELECTED FINANCIAL DATA
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|
Non-GAAP Measure
|
Definition
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How We Use The Measure
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Net Service Revenues
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• Sum of professional service revenues and Net Insurance Service Revenues, or total revenues less insurance costs.
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• Provides a comparable basis of revenues on a net basis. Professional service revenues are represented net of client payroll costs whereas insurance service revenues are presented gross of insurance costs for financial reporting purposes.
• Acts as the basis to allocate resources to different functions and evaluates the effectiveness of our business strategies by each business function.
• Provides a measure, among others, used in the determination of incentive compensation for management.
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Net Insurance Service Revenues
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• Insurance revenues less insurance costs.
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• Is a component of Net Service Revenues.
• Provides a comparable basis of revenues on a net basis. Professional service revenues are represented net of client payroll costs whereas insurance service revenues are presented gross of insurance costs for financial reporting purposes. Promotes an understanding of our insurance services business by evaluating insurance service revenues net of WSE related costs which are substantially pass-through for the benefit of WSEs. Under GAAP, insurance service revenues and costs are recorded gross as we have latitude in establishing the price, service and supplier specifications.
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Adjusted EBITDA
|
• Net income, excluding the effects of:
- income tax provision,
- interest expense,
- depreciation,
- amortization of intangible assets,
- stock-based compensation expense and,
- in 2014, secondary offering costs related to offering of shares from existing stockholders.
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• Provides period-to-period comparisons on a consistent basis and an understanding as to how our management evaluates the effectiveness of our business strategies by excluding certain non-cash charges such as depreciation and amortization that have fluctuated significantly over the past five years, and stock-based compensation recognized based on the estimated fair values. We believe these charges are not directly resulting from our core operations or indicative of our ongoing operations.
• Enhances comparisons to prior periods and, accordingly, facilitates the development of future projections and earnings growth prospects.
• Provides a measure, among others, used in the determination of incentive compensation for management.
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Adjusted Net Income
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• Net income, excluding the effects of:
- effective income tax rate
(1)
,
- stock-based compensation,
- amortization of intangible assets,
- non-cash interest expense
(2)
,
- debt prepayment premium,
- in 2014, secondary offering costs related to offering of shares from existing stockholders, and
- the income tax effect (at our effective tax rate
(1)
) of these pre-tax adjustments.
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• Provides information to our stockholders and board of directors to understand how our management evaluates our business, to monitor and evaluate our operating results, and analyze profitability of our ongoing operations and trends on a consistent basis by excluding certain non-cash charges as described above, debt payment premiums and our secondary offering costs as these are not directly resulting from our core operations or indicative of our ongoing operations.
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(1)
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As a of result changes in state income taxes from an increase in excludable income for state income tax purposes or state legislative changes, we have adjusted our non-GAAP effective tax rate to
41%
,
43%
,
42%
,
40%
and
40%
for 2017, 2016, 2015, 2014 and 2013, respectively. These non-GAAP effective tax rates exclude the income tax impact from stock-based compensation, changes in uncertain tax positions and nonrecurring benefits or expenses from federal legislative changes.
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(2)
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Non-cash interest expense represents amortization and write-off of our debt issuance costs.
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|
SELECTED FINANCIAL DATA
|
|
|
Year Ended December 31,
|
||||||||||||||
(in millions)
|
2017
|
2016
|
2015
|
2014
|
2013
|
||||||||||
Total revenues
|
$
|
3,275
|
|
$
|
3,060
|
|
$
|
2,659
|
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$
|
2,194
|
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$
|
1,644
|
|
Less: Insurance costs
|
2,466
|
|
2,414
|
|
2,112
|
|
1,686
|
|
1,227
|
|
|||||
Net Service Revenues
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$
|
809
|
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$
|
646
|
|
$
|
547
|
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$
|
508
|
|
$
|
417
|
|
|
Year Ended December 31,
|
||||||||||||||
(in millions)
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2017
|
2016
|
2015
|
2014
|
2013
|
||||||||||
Insurance service revenues
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$
|
2,817
|
|
$
|
2,613
|
|
$
|
2,258
|
|
$
|
1,852
|
|
$
|
1,372
|
|
Less: Insurance costs
|
2,466
|
|
2,414
|
|
2,112
|
|
1,686
|
|
1,227
|
|
|||||
Net Insurance Service Revenues
|
$
|
351
|
|
$
|
199
|
|
$
|
146
|
|
$
|
166
|
|
$
|
145
|
|
|
Year Ended December 31,
|
||||||||||||||
(in millions)
|
2017
|
2016
|
2015
|
2014
|
2013
|
||||||||||
Net income
|
$
|
178
|
|
$
|
61
|
|
$
|
32
|
|
$
|
15
|
|
$
|
13
|
|
Provision for income taxes
|
22
|
|
43
|
|
28
|
|
18
|
|
8
|
|
|||||
Stock-based compensation
|
32
|
|
26
|
|
18
|
|
11
|
|
6
|
|
|||||
Interest expense and bank fees
|
20
|
|
20
|
|
19
|
|
54
|
|
46
|
|
|||||
Depreciation
|
28
|
|
19
|
|
15
|
|
14
|
|
12
|
|
|||||
Amortization of intangible assets
|
5
|
|
16
|
|
39
|
|
52
|
|
51
|
|
|||||
Secondary offering costs
|
—
|
|
—
|
|
—
|
|
1
|
|
—
|
|
|||||
Adjusted EBITDA
|
$
|
285
|
|
$
|
185
|
|
$
|
151
|
|
$
|
165
|
|
$
|
136
|
|
Adjusted EBITDA Margin
(1)
|
35
|
%
|
29
|
%
|
28
|
%
|
33
|
%
|
33
|
%
|
|
Year Ended December 31,
|
||||||||||||||
(in millions)
|
2017
|
2016
|
2015
|
2014
|
2013
|
||||||||||
Net income
|
$
|
178
|
|
$
|
61
|
|
$
|
32
|
|
$
|
15
|
|
$
|
13
|
|
Effective income tax rate adjustment
|
(59
|
)
|
(1
|
)
|
3
|
|
5
|
|
—
|
|
|||||
Stock-based compensation
|
32
|
|
26
|
|
18
|
|
11
|
|
6
|
|
|||||
Amortization of intangible assets
|
5
|
|
16
|
|
39
|
|
52
|
|
51
|
|
|||||
Non-cash interest expense
|
2
|
|
4
|
|
4
|
|
22
|
|
14
|
|
|||||
Debt prepayment premium
|
—
|
|
—
|
|
—
|
|
4
|
|
—
|
|
|||||
Secondary offering costs
|
—
|
|
—
|
|
—
|
|
1
|
|
—
|
|
|||||
Income tax impact of pre-tax adjustments
|
(16
|
)
|
(19
|
)
|
(25
|
)
|
(36
|
)
|
(27
|
)
|
|||||
Adjusted Net Income
|
$
|
142
|
|
$
|
87
|
|
$
|
71
|
|
$
|
74
|
|
$
|
57
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
•
|
Made significant investments in our technology platform to provide our users with improved functionality, including online and mobile productivity tools, and to allow our platform to integrate more effectively with third party software applications. This improves our client experience and permits further operational scale in the future.
|
•
|
Launched and began on-boarding clients to TriNet Main Street, our vertical offering designed for clients in the hospitality, retail and manufacturing industries. During the third quarter, we started migrating existing clients from our legacy (SOI) platform onto our common TriNet platform.
|
•
|
Leveraged our scale by decreasing administrative costs associated with our insurance programs. As a result of these efforts and our 2017 favorable insurance experience, we launched a fee credit initiative that was designed to reward certain clients. The total amount of credit was less than 0.5% of total 2017 revenue. Eligible clients will receive the fee credit in the first quarter of 2018.
|
•
|
Changed the contract terms with one of our health insurance carriers from a guaranteed-cost arrangement to an arrangement that continues to be fully insured, but where we will be responsible for reimbursement of claim payments within our deductible layer as further discussed below.
|
•
|
Invested significantly in improving our internal control environment to support the compliance requirements of Sarbanes-Oxley Act of 2002 (SOX).
|
•
|
served approximately
14,800
clients, co-employed approximately
325,000
WSEs, and our Total WSEs decreased
4%
over
2016
|
•
|
processed over
$37.1 billion
in payroll and payroll tax payments for our clients in
2017
with an
increase
of
8%
over
2016
,
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
•
|
Total revenues
increased
7%
to
$3.3 billion
, while
Net Service Revenues
increased
25%
to
$809 million
,
|
•
|
Operating income
increased
75%
to
$217 million
,
|
•
|
our
effective tax rate
decreased to
11%
,
|
•
|
Net income
increased
190%
to
$178 million
, or
$2.49
per diluted share, while
Adjusted Net Income
increased
62%
to
$142 million
,
|
•
|
Adjusted EBITDA
increased
53%
to
$285 million
, and
|
•
|
Cash provided by operating activities
increased
70%
to
$253 million
.
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
Year Ended December 31,
|
% Change
|
|||||||||||
(in millions, except operating metrics data)
|
2017
|
2016
|
2015
|
2017 vs. 2016
|
2016 vs. 2015
|
||||||||
Income Statement Data:
|
|
|
|
|
|
||||||||
Professional service revenues
|
$
|
458
|
|
$
|
447
|
|
$
|
401
|
|
3
|
%
|
11
|
%
|
Insurance service revenues
|
2,817
|
|
2,613
|
|
2,258
|
|
8
|
|
16
|
|
|||
Total revenues
|
3,275
|
|
3,060
|
|
2,659
|
|
7
|
|
15
|
|
|||
Insurance costs
|
2,466
|
|
2,414
|
|
2,112
|
|
2
|
|
14
|
|
|||
Other Operating Expenses
|
559
|
|
487
|
|
415
|
|
15
|
|
18
|
|
|||
Depreciation
|
28
|
|
19
|
|
15
|
|
45
|
|
32
|
|
|||
Amortization of intangible assets
|
5
|
|
16
|
|
39
|
|
(67
|
)
|
(59
|
)
|
|||
Total costs and operating expenses
|
3,058
|
|
2,936
|
|
2,581
|
|
4
|
|
14
|
|
|||
Operating income
|
217
|
|
124
|
|
78
|
|
75
|
|
58
|
|
|||
Other income (expense)
|
(17
|
)
|
(20
|
)
|
(18
|
)
|
(10
|
)
|
7
|
|
|||
Income before provision for income taxes
|
200
|
|
104
|
|
60
|
|
91
|
|
74
|
|
|||
Income tax expense
|
22
|
|
43
|
|
28
|
|
(50
|
)
|
52
|
|
|||
Net income
|
$
|
178
|
|
$
|
61
|
|
$
|
32
|
|
190
|
%
|
94
|
%
|
|
|
|
|
|
|
||||||||
Non-GAAP measures
(1)
:
|
|
|
|
|
|
||||||||
Net Service Revenues
|
$
|
809
|
|
$
|
646
|
|
$
|
547
|
|
25
|
%
|
18
|
%
|
Net Insurance Service Revenues
|
351
|
|
199
|
|
146
|
|
76
|
|
37
|
|
|||
Adjusted EBITDA
|
285
|
|
185
|
|
151
|
|
53
|
|
23
|
|
|||
Adjusted Net income
|
142
|
|
87
|
|
71
|
|
62
|
|
24
|
|
|||
|
|
|
|
|
|
||||||||
Operating Metrics:
|
|
|
|
|
|
||||||||
Total WSEs payroll and payroll taxes processed (in millions)
|
$
|
37,115
|
|
$
|
34,281
|
|
$
|
30,559
|
|
8
|
%
|
12
|
%
|
Total WSEs
|
325,370
|
|
337,885
|
|
324,399
|
|
(4
|
)
|
4
|
|
|||
Average WSEs
|
324,679
|
|
326,850
|
|
303,917
|
|
(1
|
)
|
8
|
|
(1)
|
Refer to Non-GAAP measures definitions and reconciliations from GAAP measures in Item 6. Selected Financial Data.
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
•
|
Insurance service revenues
increased
8%
over
2016
to
$2.8 billion
due to increased participation in our health plans combined with an increase in health insurance service fees per plan participant.
|
•
|
Professional service revenues were
$458 million
, an
increase
of
3%
over
2016
.
|
•
|
Insurance service revenues grew
16%
over
2015
to
$2.6 billion
.
|
•
|
Professional service revenues were
$447 million
, an
increase
of
11%
over
2015
.
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
•
|
Total compensation costs increased
$41 million
or
13%
primarily due to an increase in sales related compensation costs associated with a new sales performance incentive program as well as increased headcount related to investments in technology to support product delivery and platform integration.
|
•
|
Consulting expenses increased
$12 million
and included costs associated with enhancing our product offerings
|
•
|
Accounting and other professional fees
increased
$11 million
in connection with significant time and resources required for our internal control remediation efforts and audit of our internal controls as required by Section 404 of the Sarbanes-Oxley Act of 2002.
|
•
|
Other expenses increased
$8 million
in
2017
due to additional compliance costs and external sales costs.
|
•
|
Total compensation costs increased
$41 million
or
15%
primarily due to increases in our
|
◦
|
client services functions to support the growth and migration of clients from legacy platforms to TriNet platform,
|
◦
|
risk services functions to strengthen our insurance business management by hiring new leaders and actuarial teams,
|
◦
|
technology function to support product delivery and platform integration, and
|
◦
|
other supporting functions as a result of increased operational and compliance requirements for a growing public company.
|
•
|
Consulting expenses increased
$9 million
and included costs associated with reviewing and administering our insurance programs, as well as consulting firms engaged in enhancing our product offerings.
|
•
|
Accounting and other professional fees increased
$8 million
in primarily as a result of the professional fees to support our internal control remediation efforts.
|
•
|
Other expenses
increased
$14 million
in
2016
and included office leases and IT infrastructure costs to support the increased operational requirements.
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
•
|
20% decrease attributable to revaluation of deferred taxes resulting from federal legislative changes pursuant to the TCJA additionally described in Note 12, Item 8 of this Form 10-K,
|
•
|
8% decrease due to a discrete tax benefit from recognizing excess tax benefits from stock-based compensation,
|
•
|
5% increase due to changes in uncertain tax positions (UTP) and exposures to ongoing tax examinations,
|
•
|
4% decrease resulting from the recognition of Section 199 benefits and decreased nondeductible expenses, and
|
•
|
3% decrease related to tax credits and excludable income for state tax purposes.
|
•
|
6% decrease attributable to revaluation of deferred taxes resulting from state legislative changes enacted in
2015
,
|
•
|
2% decrease in state income taxes from an increase in excludable income for state income tax purposes,
|
•
|
1% decrease from discrete benefits recorded in 2016 associated with prior year state income tax expense resulting from a state tax return to provision (RTP) adjustment relating to audit premiums paid for workers' compensation insurance, partially offset by
|
•
|
2% increase from net operating loss adjustment recorded in
2015
.
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
Year Ended December 31,
|
|||||
(in millions)
|
2017
|
2016
|
||||
Cash and cash equivalents
|
$
|
336
|
|
$
|
184
|
|
Working capital:
|
|
|
||||
Corporate working capital
|
227
|
|
151
|
|
||
WSE related assets, net of WSE related liabilities
|
7
|
|
5
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
Year Ended December 31,
|
||||||||
(in millions)
|
2017
|
2016
|
2015
|
||||||
Net cash provided by (used in):
|
|
|
|
||||||
Operating activities
|
$
|
253
|
|
$
|
149
|
|
$
|
151
|
|
Investing activities
|
(24
|
)
|
(27
|
)
|
(38
|
)
|
|||
Financing activities
|
(77
|
)
|
(104
|
)
|
(81
|
)
|
|||
Net increase in cash and cash equivalents
|
$
|
152
|
|
$
|
18
|
|
$
|
32
|
|
|
Year Ended December 31,
|
||||||||
(in millions)
|
2017
|
2016
|
2015
|
||||||
Net income
|
$
|
178
|
|
$
|
61
|
|
$
|
32
|
|
Depreciation and amortization
|
35
|
|
39
|
|
53
|
|
|||
Stock-based compensation expense
|
32
|
|
26
|
|
18
|
|
|||
Payment of interest
|
(16
|
)
|
(15
|
)
|
(15
|
)
|
|||
Income tax (payments) refunds, net
|
(2
|
)
|
(39
|
)
|
(2
|
)
|
|||
Collateral (paid to) refunded from insurance carriers, net
|
(3
|
)
|
(25
|
)
|
10
|
|
|||
Changes in deferred taxes
|
(25
|
)
|
42
|
|
15
|
|
|||
Changes in other operating assets and liabilities
|
54
|
|
60
|
|
40
|
|
|||
Net cash provided by operating activities
|
$
|
253
|
|
$
|
149
|
|
$
|
151
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
Year Ended December 31,
|
||||||||
(in millions)
|
2017
|
2016
|
2015
|
||||||
Capital expenditures:
|
|
|
|
||||||
Software and hardware
|
$
|
28
|
|
$
|
31
|
|
$
|
13
|
|
Office furniture, equipment and leasehold improvements
|
10
|
|
9
|
|
6
|
|
|||
Cash used in capital expenditures
|
$
|
38
|
|
$
|
40
|
|
$
|
19
|
|
|
|
|
|
||||||
Investments:
|
|
|
|
||||||
Purchases of restricted investments
|
$
|
—
|
|
$
|
(15
|
)
|
$
|
(42
|
)
|
Proceeds from maturity of restricted investments
|
14
|
|
28
|
|
28
|
|
|||
Cash provided by (used in) investments
|
$
|
14
|
|
$
|
13
|
|
$
|
(14
|
)
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
|
Year Ended December 31,
|
||||||||
|
2017
|
2016
|
2015
|
||||||
Shares repurchased under the plan
|
1,549,434
|
|
3,414,675
|
|
1,895,625
|
|
|||
Amounts (in millions)
|
$
|
44
|
|
$
|
72
|
|
$
|
48
|
|
|
Year Ended December 31,
|
||||||||
(in millions)
|
2017
|
2016
|
2015
|
||||||
Repayment of notes payable
|
$
|
38
|
|
$
|
36
|
|
$
|
45
|
|
|
Payments Due by Period
|
||||||||||||||
(in millions)
|
Total
|
Less than 1 year
|
1-3 years
|
3-5 years
|
More than 5 years
|
||||||||||
Debt obligations
(1)
|
$
|
451
|
|
$
|
59
|
|
$
|
392
|
|
$
|
—
|
|
$
|
—
|
|
Workers' compensation obligations
(2)
|
258
|
|
76
|
|
62
|
|
36
|
|
84
|
|
|||||
Operating lease obligations
(3)
|
72
|
|
17
|
|
29
|
|
16
|
|
10
|
|
|||||
Purchase obligations
(4)
|
28
|
|
27
|
|
1
|
|
|
|
|
|
|||||
Uncertain tax positions
(5)
|
6
|
|
—
|
|
6
|
|
—
|
|
—
|
|
|||||
Total
|
$
|
815
|
|
$
|
179
|
|
$
|
490
|
|
$
|
52
|
|
$
|
94
|
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
•
|
the selection of method used and the relative weights given to selecting the method used for each policy year,
|
•
|
the underlying assumptions of loss development factor (LDF) used in these models,
|
•
|
the effect of any changes to claims handling and payment processes,
|
•
|
evaluation of loss (medical and indemnity) cost trends, costs from changes in the risk exposure being evaluated and any applicable changes in legal, regulatory or judicial environment.
|
•
|
TriNet's historical frequency and severity of workers' compensation claims experience, exposure data and industry loss experience,
|
|
|
|
MANAGEMENT'S DISCUSSION AND ANALYSIS
|
|
•
|
inputs of WSEs’ job responsibilities and location,
|
•
|
estimates of future cost trends to establish expected loss ratios for subsequent accident years,
|
•
|
expected loss ratios for the latest accident year or prior accident years, adjusted for the loss trend, the effect of rate changes and other quantifiable factors, and
|
•
|
loss development factors to project the reported losses for each accident year to an ultimate basis.
|
•
|
TriNet historical loss claims payment patterns and medical cost trend rates,
|
•
|
current period claims costs and claims reporting patterns (completion factors), and
|
•
|
plan enrollment.
|
|
|
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
(In millions, except share and per share data)
|
December 31, 2017
|
December 31, 2016
|
||||
Assets
|
|
|
||||
Current assets:
|
|
|
||||
Cash and cash equivalents
|
$
|
336
|
|
$
|
184
|
|
Restricted cash and cash equivalents
|
15
|
|
15
|
|
||
Prepaid income taxes
|
5
|
|
42
|
|
||
Prepaid expenses
|
8
|
|
11
|
|
||
Other current assets
|
2
|
|
2
|
|
||
Worksite employee related assets
|
1,625
|
|
1,281
|
|
||
Total current assets
|
1,991
|
|
1,535
|
|
||
Workers' compensation collateral receivable
|
39
|
|
32
|
|
||
Restricted cash, cash equivalents and investments
|
162
|
|
131
|
|
||
Property and equipment, net
|
70
|
|
59
|
|
||
Goodwill
|
289
|
|
289
|
|
||
Other intangible assets, net
|
26
|
|
31
|
|
||
Deferred and other long term income taxes
|
2
|
|
—
|
|
||
Other assets
|
14
|
|
18
|
|
||
Total assets
|
$
|
2,593
|
|
$
|
2,095
|
|
Liabilities and stockholders’ equity
|
|
|
|
|||
Current liabilities:
|
|
|
|
|||
Accounts payable
|
$
|
45
|
|
$
|
23
|
|
Accrued corporate wages
|
40
|
|
31
|
|
||
Notes payable
|
40
|
|
37
|
|
||
Other current liabilities
|
14
|
|
12
|
|
||
Worksite employee related liabilities
|
1,618
|
|
1,276
|
|
||
Total current liabilities
|
1,757
|
|
1,379
|
|
||
Notes payable, noncurrent
|
383
|
|
422
|
|
||
Workers' compensation loss reserves
(net of collateral paid $17 and $22 at December 31, 2017 and 2016, respectively)
|
165
|
|
159
|
|
||
Deferred income taxes
|
68
|
|
92
|
|
||
Other liabilities
|
14
|
|
8
|
|
||
Total liabilities
|
2,387
|
|
2,060
|
|
||
Commitments and contingencies (see Note 13)
|
|
|
|
|
||
Stockholders’ equity:
|
|
|
||||
Preferred stock
($0.000025 par value per share; 20,000,000 shares authorized; no shares issued and outstanding at December 31, 2017 and 2016)
|
—
|
|
—
|
|
||
Common stock and additional paid-in capital
($0.000025 par value per share; 750,000,000 shares authorized; 69,818,392 and 69,015,690 shares issued and outstanding at December 31, 2017 and 2016, respectively)
|
583
|
|
535
|
|
||
Accumulated deficit
|
(377
|
)
|
(500
|
)
|
||
Total stockholders’ equity
|
206
|
|
35
|
|
||
Total liabilities and stockholders’ equity
|
$
|
2,593
|
|
$
|
2,095
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
Year Ended December 31,
|
||||||||
(In millions, except share and per share data)
|
2017
|
2016
|
2015
|
||||||
Professional service revenues
|
$
|
458
|
|
$
|
447
|
|
$
|
401
|
|
Insurance service revenues
|
2,817
|
|
2,613
|
|
2,258
|
|
|||
Total revenues
|
3,275
|
|
3,060
|
|
2,659
|
|
|||
Insurance costs
|
2,466
|
|
2,414
|
|
2,112
|
|
|||
Cost of providing services (exclusive of depreciation and amortization of intangible assets)
|
213
|
|
190
|
|
151
|
|
|||
Sales and marketing
|
187
|
|
174
|
|
167
|
|
|||
General and administrative
|
114
|
|
92
|
|
69
|
|
|||
Systems development and programming
|
45
|
|
31
|
|
28
|
|
|||
Depreciation
|
28
|
|
19
|
|
15
|
|
|||
Amortization of intangible assets
|
5
|
|
16
|
|
39
|
|
|||
Total costs and operating expenses
|
3,058
|
|
2,936
|
|
2,581
|
|
|||
Operating income
|
217
|
|
124
|
|
78
|
|
|||
Other income (expense):
|
|
|
|
||||||
Interest expense and bank fees
|
(20
|
)
|
(20
|
)
|
(19
|
)
|
|||
Other, net
|
3
|
|
—
|
|
1
|
|
|||
Income before provision for income taxes
|
200
|
|
104
|
|
60
|
|
|||
Income tax expense
|
22
|
|
43
|
|
28
|
|
|||
Net income
|
$
|
178
|
|
$
|
61
|
|
$
|
32
|
|
Other comprehensive income (loss), net of tax
|
—
|
|
1
|
|
(1
|
)
|
|||
Comprehensive income
|
178
|
|
62
|
|
31
|
|
|||
|
|
|
|
||||||
Net income per share:
|
|
|
|
||||||
Basic
|
$
|
2.57
|
|
$
|
0.88
|
|
$
|
0.45
|
|
Diluted
|
$
|
2.49
|
|
$
|
0.85
|
|
$
|
0.44
|
|
Weighted average shares:
|
|
|
|
||||||
Basic
|
69,175,377
|
|
70,159,696
|
|
70,228,159
|
|
|||
Diluted
|
71,385,280
|
|
71,972,486
|
|
72,618,069
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
Common Stock and Additional Paid-In Capital
|
Accumulated Deficit
|
Accumulated Other Comprehensive Loss
|
Total Stockholders’ Equity (Deficit)
|
||||||||||
(In millions, except share data)
|
Shares
|
Amount
|
||||||||||||
Balance at December 31, 2014
|
69,811,326
|
|
$
|
443
|
|
$
|
(468
|
)
|
$
|
—
|
|
$
|
(25
|
)
|
Net income
|
—
|
|
—
|
|
32
|
|
—
|
|
32
|
|
||||
Other comprehensive income
|
—
|
|
—
|
|
—
|
|
(1
|
)
|
(1
|
)
|
||||
Issuance of common stock for vested restricted stock units
|
106,136
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Issuance of common stock under employee stock purchase plan
|
272,836
|
|
5
|
|
—
|
|
—
|
|
5
|
|
||||
Issuance of common stock from exercise of stock options
|
2,112,131
|
|
7
|
|
—
|
|
—
|
|
7
|
|
||||
Stock-based compensation expense
|
—
|
|
18
|
|
—
|
|
—
|
|
18
|
|
||||
Repurchase of common stock
|
(1,895,625
|
)
|
—
|
|
(48
|
)
|
—
|
|
(48
|
)
|
||||
Awards effectively repurchased for required employee withholding taxes
|
(35,379
|
)
|
—
|
|
(1
|
)
|
—
|
|
(1
|
)
|
||||
Excess tax benefit from equity incentive plan activity
|
—
|
|
20
|
|
—
|
|
—
|
|
20
|
|
||||
Realized tax benefit of deductible IPO transaction costs
|
—
|
|
1
|
|
—
|
|
|
1
|
|
|||||
Balance at December 31, 2015
|
70,371,425
|
|
494
|
|
(485
|
)
|
(1
|
)
|
8
|
|
||||
Net income
|
—
|
|
—
|
|
61
|
|
—
|
|
61
|
|
||||
Other comprehensive income
|
—
|
|
—
|
|
—
|
|
1
|
|
1
|
|
||||
Issuance of common stock for vested restricted stock units
|
695,253
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Issuance of common stock under employee stock purchase plan
|
283,644
|
|
4
|
|
—
|
|
—
|
|
4
|
|
||||
Issuance of common stock from exercise of stock options
|
1,297,812
|
|
5
|
|
—
|
|
—
|
|
5
|
|
||||
Stock-based compensation expense
|
—
|
|
26
|
|
—
|
|
—
|
|
26
|
|
||||
Repurchase of common stock
|
(3,414,675
|
)
|
—
|
|
(72
|
)
|
—
|
|
(72
|
)
|
||||
Awards effectively repurchased for required employee withholding taxes
|
(217,769
|
)
|
—
|
|
(4
|
)
|
—
|
|
(4
|
)
|
||||
Excess tax benefit from equity incentive plan activity
|
—
|
|
6
|
|
—
|
|
—
|
|
6
|
|
||||
Balance at December 31, 2016
|
69,015,690
|
|
535
|
|
(500
|
)
|
—
|
|
35
|
|
||||
Net income
|
—
|
|
—
|
|
178
|
|
—
|
|
178
|
|
||||
Issuance of common stock from vested restricted stock units
|
1,020,352
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Issuance of common stock for employee stock purchase plan
|
224,928
|
|
5
|
|
—
|
|
—
|
|
5
|
|
||||
Issuance of common stock from exercise of stock options
|
1,441,957
|
|
11
|
|
—
|
|
—
|
|
11
|
|
||||
Stock-based compensation expense
|
—
|
|
32
|
|
—
|
|
—
|
|
32
|
|
||||
Repurchase of common stock
|
(1,549,434
|
)
|
—
|
|
(44
|
)
|
—
|
|
(44
|
)
|
||||
Awards effectively repurchased for required employee withholding taxes
|
(335,101
|
)
|
—
|
|
(11
|
)
|
—
|
|
(11
|
)
|
||||
Balance at December 31, 2017
|
69,818,392
|
|
$
|
583
|
|
$
|
(377
|
)
|
$
|
—
|
|
$
|
206
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
Year Ended December 31,
|
||||||||
(in millions)
|
2017
|
2016
|
2015
|
||||||
Operating activities
|
|
|
|
||||||
Net income
|
$
|
178
|
|
$
|
61
|
|
$
|
32
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||||
Depreciation and amortization
|
35
|
|
39
|
|
53
|
|
|||
Stock-based compensation
|
32
|
|
26
|
|
18
|
|
|||
Deferred income taxes
|
(25
|
)
|
42
|
|
15
|
|
|||
Accretion of workers' compensation and leases fair value adjustment
|
—
|
|
—
|
|
(1
|
)
|
|||
Changes in operating assets and liabilities:
|
|
|
|
||||||
Restricted cash and cash equivalents
|
(46
|
)
|
(42
|
)
|
(18
|
)
|
|||
Prepaid income taxes
|
37
|
|
(38
|
)
|
24
|
|
|||
Prepaid expenses and other current assets
|
1
|
|
(2
|
)
|
1
|
|
|||
Workers' compensation collateral receivable
|
(7
|
)
|
(3
|
)
|
3
|
|
|||
Other assets
|
4
|
|
—
|
|
(15
|
)
|
|||
Accounts payable
|
22
|
|
9
|
|
—
|
|
|||
Accrued corporate wages and other current liabilities
|
11
|
|
4
|
|
6
|
|
|||
Workers' compensation loss reserves and other non-current liabilities
|
12
|
|
55
|
|
32
|
|
|||
Worksite employee related assets
|
(343
|
)
|
92
|
|
262
|
|
|||
Worksite employee related liabilities
|
342
|
|
(94
|
)
|
(261
|
)
|
|||
Net cash provided by operating activities
|
253
|
|
149
|
|
151
|
|
|||
Investing activities
|
|
|
|
||||||
Acquisitions of businesses
|
—
|
|
—
|
|
(5
|
)
|
|||
Purchases of marketable securities
|
—
|
|
(15
|
)
|
(42
|
)
|
|||
Proceeds from maturity of marketable securities
|
14
|
|
28
|
|
28
|
|
|||
Purchase of property and equipment
|
(38
|
)
|
(40
|
)
|
(19
|
)
|
|||
Net cash used in investing activities
|
(24
|
)
|
(27
|
)
|
(38
|
)
|
|||
Financing activities
|
|
|
|
||||||
Repurchase of common stock
|
(44
|
)
|
(72
|
)
|
(48
|
)
|
|||
Proceeds from issuance of common stock on exercised options
|
11
|
|
5
|
|
7
|
|
|||
Proceeds from issuance of common stock on employee stock purchase plan
|
5
|
|
4
|
|
5
|
|
|||
Awards effectively repurchased for required employee withholding taxes
|
(11
|
)
|
(4
|
)
|
(1
|
)
|
|||
Proceeds from issuance of notes payable
|
—
|
|
58
|
|
—
|
|
|||
Payments for extinguishment of debt
|
—
|
|
(58
|
)
|
—
|
|
|||
Repayment of notes payable
|
(38
|
)
|
(36
|
)
|
(45
|
)
|
|||
Payment of debt issuance costs
|
—
|
|
(1
|
)
|
—
|
|
|||
Tax credit received for deductible IPO transaction costs
|
—
|
|
—
|
|
1
|
|
|||
Net cash used in financing activities
|
(77
|
)
|
(104
|
)
|
(81
|
)
|
|||
Net increase in cash and cash equivalents
|
152
|
|
18
|
|
32
|
|
|||
Cash and cash equivalents at beginning of year
|
184
|
|
166
|
|
134
|
|
|||
Cash and cash equivalents at end of year
|
$
|
336
|
|
$
|
184
|
|
$
|
166
|
|
|
|
|
|
||||||
Supplemental disclosures of cash flow information
|
|
|
|
||||||
Interest paid
|
$
|
16
|
|
$
|
15
|
|
$
|
15
|
|
Income taxes paid (refund), net
|
2
|
|
39
|
|
2
|
|
|||
Supplemental schedule of noncash investing and financing activities
|
|
|
|
||||||
Payable for purchase of property and equipment
|
$
|
2
|
|
$
|
1
|
|
$
|
—
|
|
Allowance for tenant improvements
|
—
|
|
—
|
|
1
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
•
|
compensation through wages and salaries,
|
•
|
employer payroll-related taxes payment,
|
•
|
employee payroll-related taxes withholding and payment,
|
•
|
employee benefit programs including health and life insurance, and others, and
|
•
|
workers' compensation coverage.
|
•
|
liability for unpaid losses and loss adjustment expenses (loss reserves) related to workers' compensation and workers' compensation collateral receivable,
|
•
|
health insurance loss reserves,
|
•
|
liability for insurance premiums payable,
|
•
|
impairments of goodwill and other intangible assets,
|
•
|
income tax assets and liabilities, and
|
•
|
liability for legal contingencies.
|
|
|
|
FINANCIAL STATEMENTS
|
|
•
|
TriNet's historical loss experience, exposure data, and industry loss experience,
|
•
|
inputs including WSE job responsibilities and location,
|
•
|
historical frequency and severity of workers' compensation claims,
|
•
|
an estimate of future cost trends to establish expected loss ratios for subsequent accident years,
|
|
|
|
FINANCIAL STATEMENTS
|
|
•
|
expected loss ratios for the latest accident year or prior accident years, adjusted for the loss trend, the effect of rate changes and other quantifiable factors, and
|
•
|
loss development factors to project the reported losses for each accident year to an ultimate basis.
|
|
|
|
FINANCIAL STATEMENTS
|
|
•
|
Level I—observable inputs for identical assets or liabilities, such as quoted prices in active markets,
|
•
|
Level II—inputs other than the quoted prices in active markets that are observable either directly or indirectly,
|
•
|
Level III—unobservable inputs in which there is little or no market data, which requires that we develop our own assumptions.
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
•
|
Our annual service contracts with our clients that are cancellable with thirty days' notice will be considered 30-days contracts under the new standard;
|
•
|
Professional service revenues will be recognized on a completed contract basis which results in recognition at the time payroll is processed;
|
•
|
Our non-refundable set up fees will no longer be deferred but recognized as revenue when set up service is complete and will be allocated among professional service revenues and insurance revenues;
|
•
|
The majority of sales commissions that are currently expensed will be capitalized as contract assets and amortized over the estimated customer life.
|
|
|
|
FINANCIAL STATEMENTS
|
|
(in millions)
|
|
Increase (Decrease) under new guidance
|
||
Deferred revenue related to upfront recognition of non-refundable set up fees
|
|
|
||
Other current liabilities
|
|
$
|
(4
|
)
|
Other liabilities
|
|
$
|
(3
|
)
|
Derecognition of previously accrued Professional Service Fees in unbilled revenue
|
|
|
||
Worksite employee related assets
|
|
$
|
(7
|
)
|
Contract assets related to deferral of sales commission expense associated with incomplete contracts as of
December 31, 2017
|
|
|
||
Other current assets
|
|
$
|
2
|
|
Other assets
|
|
$
|
1
|
|
Deferred tax liabilities, net of adjustment to deferred tax assets
|
|
$
|
2
|
|
Retained earnings
|
|
$
|
1
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
December 31, 2017
|
December 31, 2016
|
||||||||||||||||||||||
(in millions)
|
Cash and cash equivalents
|
Available for sale marketable securities
|
Certificate
of
deposits
|
Total
|
Cash and cash equivalents
|
Available for sale marketable securities
|
Certificate
of
deposits
|
Total
|
||||||||||||||||
Cash and cash equivalents
|
$
|
336
|
|
$
|
—
|
|
$
|
—
|
|
$
|
336
|
|
$
|
184
|
|
$
|
—
|
|
$
|
—
|
|
$
|
184
|
|
Restricted cash and cash equivalents
|
15
|
|
—
|
|
—
|
|
15
|
|
15
|
|
—
|
|
—
|
|
15
|
|
||||||||
Restricted cash, cash equivalents and investments, noncurrent
|
|
|
|
|
|
|
|
|
||||||||||||||||
Collateral for workers' compensation claims
|
125
|
|
37
|
|
—
|
|
162
|
|
79
|
|
52
|
|
—
|
|
131
|
|
||||||||
Worksite employee related assets
|
|
|
|
|
|
|
|
|
||||||||||||||||
Restricted cash, cash equivalents and investments, current
|
|
|
|
|
|
|
|
|
||||||||||||||||
Collateral for health benefits claims
|
69
|
|
—
|
|
—
|
|
69
|
|
64
|
|
—
|
|
—
|
|
64
|
|
||||||||
Collateral for workers' compensation claims
|
98
|
|
1
|
|
—
|
|
99
|
|
65
|
|
—
|
|
—
|
|
65
|
|
||||||||
Collateral to secure standby letter of credit
|
—
|
|
—
|
|
2
|
|
2
|
|
—
|
|
—
|
|
2
|
|
2
|
|
||||||||
Total WSE related restricted cash, cash equivalents and investments, current
|
167
|
|
1
|
|
2
|
|
170
|
|
129
|
|
—
|
|
2
|
|
131
|
|
||||||||
Payroll funds collected
|
1,095
|
|
—
|
|
—
|
|
1,095
|
|
826
|
|
—
|
|
—
|
|
826
|
|
||||||||
Total
|
$
|
1,738
|
|
$
|
38
|
|
$
|
2
|
|
$
|
1,778
|
|
$
|
1,233
|
|
$
|
52
|
|
$
|
2
|
|
$
|
1,287
|
|
(in millions)
|
Maturity
(in years)
|
Amortized Cost
|
Gross Unrealized Gains
|
Gross Unrealized Losses
|
Fair Value
|
||||||||
December 31, 2017
|
|
|
|
|
|
||||||||
U.S. treasuries
|
>1-5 years
|
$
|
37
|
|
$
|
—
|
|
$
|
—
|
|
$
|
37
|
|
Exchange traded fund
|
N/A
|
1
|
|
—
|
|
—
|
|
1
|
|
||||
Total
|
|
$
|
38
|
|
$
|
—
|
|
$
|
—
|
|
$
|
38
|
|
|
|
|
|
|
|
||||||||
December 31, 2016
|
|
|
|
|
|
||||||||
U.S. treasuries
|
>1-5 years
|
$
|
51
|
|
$
|
—
|
|
$
|
—
|
|
$
|
51
|
|
Exchange traded fund
|
N/A
|
1
|
|
—
|
|
—
|
|
1
|
|
||||
Total
|
|
$
|
52
|
|
$
|
—
|
|
$
|
—
|
|
$
|
52
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
•
|
Payroll funds collected represents cash collected from clients in advance to fund payroll and payroll taxes, and other payroll related liabilities;
|
•
|
Other payroll assets, which primarily include payroll tax receivables;
|
•
|
Client deposits, which represents indemnity guarantee payments received from clients and collections from clients in excess of payroll and other payroll related liabilities;
|
•
|
Other payroll withholdings, which primarily includes withholdings under 401(k) plans and flexible benefit plans.
|
(in millions)
|
December 31, 2017
|
December 31, 2016
|
||||
Worksite employee related assets:
|
|
|
||||
Restricted cash, cash equivalents and investments
|
$
|
170
|
|
$
|
131
|
|
Payroll funds collected
|
1,095
|
|
826
|
|
||
Unbilled revenues
(net of advance collections of $12 and $9 at December 31, 2017
and 2016, respectively)
|
297
|
|
293
|
|
||
Accounts receivable
|
20
|
|
5
|
|
||
Prepaid insurance premiums
|
25
|
|
13
|
|
||
Workers' compensation collateral receivable
|
1
|
|
2
|
|
||
Other payroll assets
|
17
|
|
11
|
|
||
Total worksite employee related assets
|
$
|
1,625
|
|
$
|
1,281
|
|
|
|
|
||||
Worksite employee related liabilities:
|
|
|
|
|||
Accrued wages
|
$
|
289
|
|
$
|
273
|
|
Client deposits
|
52
|
|
56
|
|
||
Payroll tax liabilities
|
981
|
|
692
|
|
||
Unpaid losses and loss adjustment expenses (less than 1 year):
|
|
|
||||
Health benefits loss reserves
(net of prepayments of $19 and $0 at December 31, 2017 and 2016, respectively) |
151
|
|
129
|
|
||
Workers' compensation loss reserves
(net of collateral paid of $6 and $10 at December 31, 2017
and 2016, respectively)
|
67
|
|
64
|
|
||
Insurance premiums and other payables
|
25
|
|
14
|
|
||
Other payroll withholdings
|
53
|
|
48
|
|
||
Total worksite employee related liabilities
|
$
|
1,618
|
|
$
|
1,276
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
Year Ended December 31,
|
||||||||
(in millions)
|
2017
|
2016
|
2015
|
||||||
Total loss reserves, beginning of year
|
$
|
255
|
|
$
|
190
|
|
$
|
148
|
|
Incurred
|
|
|
|
||||||
Current year
|
98
|
|
113
|
|
89
|
|
|||
Prior years
|
(6
|
)
|
28
|
|
27
|
|
|||
Total incurred
|
92
|
|
141
|
|
116
|
|
|||
Paid
|
|
|
|
||||||
Current year
|
(14
|
)
|
(14
|
)
|
(16
|
)
|
|||
Prior years
|
(78
|
)
|
(62
|
)
|
(58
|
)
|
|||
Total paid
|
(92
|
)
|
(76
|
)
|
(74
|
)
|
|||
Total loss reserves, end of year
|
$
|
255
|
|
$
|
255
|
|
$
|
190
|
|
(in millions)
|
|
December 31,
2017 |
December 31,
2016 |
||||
Total loss reserves, end of year
|
|
$
|
255
|
|
$
|
255
|
|
Collateral paid to carriers and offset against loss reserves
|
|
(23
|
)
|
(32
|
)
|
||
Total loss reserves, net of carrier collateral offset
|
|
$
|
232
|
|
$
|
223
|
|
|
|
|
|
||||
Payable in less than 1 year
(1)
(net of collateral paid to carriers of $6 and $10 as of December 31, 2017 and 2016, respectively)
|
|
67
|
|
64
|
|
||
Payable in more than 1 year
(net of collateral paid to carriers of $17 and $22 as of December 31, 2017 and 2016, respectively)
|
|
165
|
|
159
|
|
||
Workers' Compensation Loss Reserves
|
|
$
|
232
|
|
$
|
223
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
(in millions)
|
December 31, 2017
|
December 31, 2016
|
||||
Software
|
$
|
114
|
|
$
|
88
|
|
Office equipment, including data processing equipment
|
23
|
|
21
|
|
||
Leasehold improvements
|
15
|
|
12
|
|
||
Furniture, fixtures, and equipment
|
15
|
|
11
|
|
||
Projects in progress
|
7
|
|
11
|
|
||
Total
|
174
|
|
143
|
|
||
Less: Accumulated depreciation
|
(104
|
)
|
(84
|
)
|
||
Property and equipment, net
|
$
|
70
|
|
$
|
59
|
|
|
|
December 31, 2017
|
December 31, 2016
|
||||||||||||||||
(in millions)
|
Weighted Average Amortization Period
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net
Carrying Amount
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net Carrying Amount
|
||||||||||||
Goodwill
|
|
$
|
289
|
|
$
|
—
|
|
$
|
289
|
|
$
|
289
|
|
$
|
—
|
|
$
|
289
|
|
Amortizable intangibles:
|
|
|
|
|
|
|
|
||||||||||||
Customer contracts
|
10 years
|
210
|
|
(187
|
)
|
23
|
|
210
|
|
(182
|
)
|
28
|
|
||||||
Trademark
|
3 years
|
17
|
|
(17
|
)
|
—
|
|
17
|
|
(17
|
)
|
—
|
|
||||||
Developed technology
|
5 years
|
6
|
|
(3
|
)
|
3
|
|
5
|
|
(2
|
)
|
3
|
|
||||||
Noncompete agreements
|
3 years
|
2
|
|
(2
|
)
|
—
|
|
2
|
|
(2
|
)
|
—
|
|
||||||
Total
|
|
$
|
235
|
|
$
|
(209
|
)
|
$
|
26
|
|
$
|
234
|
|
$
|
(203
|
)
|
$
|
31
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
(in millions)
|
Level 1
|
Level 2
|
Total
|
||||||
December 31, 2017
|
|
|
|
||||||
Restricted cash equivalents:
|
|
|
|
||||||
Money market mutual funds
|
$
|
199
|
|
$
|
—
|
|
$
|
199
|
|
Commercial paper
|
21
|
|
—
|
|
21
|
|
|||
Total restricted cash equivalents
|
220
|
|
—
|
|
220
|
|
|||
Restricted investments:
|
|
|
|
||||||
U.S. Treasuries
|
37
|
|
—
|
|
37
|
|
|||
Exchange traded fund
|
1
|
|
—
|
|
1
|
|
|||
Certificate of deposit
|
—
|
|
2
|
|
2
|
|
|||
Total restricted investments
|
38
|
|
2
|
|
40
|
|
|||
Total restricted cash equivalents and investments
|
$
|
258
|
|
$
|
2
|
|
$
|
260
|
|
|
|
|
|
||||||
December 31, 2016
|
|
|
|
||||||
Restricted cash equivalents:
|
|
|
|
||||||
Money market mutual funds
|
$
|
117
|
|
$
|
—
|
|
$
|
117
|
|
Commercial paper
|
23
|
|
—
|
|
23
|
|
|||
Total restricted cash equivalents
|
140
|
|
—
|
|
140
|
|
|||
Restricted investments:
|
|
|
|
||||||
U.S. Treasuries
|
51
|
|
—
|
|
51
|
|
|||
Exchange traded fund
|
1
|
|
—
|
|
1
|
|
|||
Certificate of deposit
|
—
|
|
2
|
|
2
|
|
|||
Total restricted investments
|
52
|
|
2
|
|
54
|
|
|||
Total restricted cash equivalents and investments
|
$
|
192
|
|
$
|
2
|
|
$
|
194
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
(in millions)
|
December 31,
2017 |
December 31,
2016 |
Annual
Contractual Interest Rate |
Effective Interest Rate
|
Maturity
Date |
|||||||
Term loan A
|
$
|
303
|
|
$
|
330
|
|
3.95
|
%
|
(1)
|
4.07
|
%
|
July 2019
|
Term loan A-2
|
122
|
|
132
|
|
3.83
|
%
|
(2)
|
3.90
|
%
|
July 2019
|
||
Total term loans
|
425
|
|
462
|
|
|
|
|
|
||||
Deferred loan costs
|
(2
|
)
|
(3
|
)
|
|
|
|
|
||||
Less: current portion
|
(40
|
)
|
(37
|
)
|
|
|
|
|
||||
Non-current term portion
|
$
|
383
|
|
$
|
422
|
|
|
|
|
|
(1)
|
Bears interest at LIBOR plus
2.25%
or the prime rate plus
1.25%
at our option, subject to certain rate adjustments based upon our total leverage ratio.
|
(2)
|
Bears interest at LIBOR plus
2.125%
or the prime rate plus
1.125%
at our option, subject to certain rate adjustments based upon our total leverage ratio.
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
Year ending December 31,
|
|
|||||||
|
2018
|
2019
|
Total
|
||||||
Term loan repayments
|
$
|
42
|
|
$
|
383
|
|
$
|
425
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
Number
of Shares |
Weighted
Average Exercise Price |
Weighted
Average Remaining Contractual Term
(in years)
|
Aggregate
Intrinsic Value (in millions) |
|||||
Balance at December 31, 2016
|
2,815,224
|
|
$
|
9.96
|
|
6.66
|
$
|
46
|
|
Granted
|
—
|
|
—
|
|
|
|
|||
Exercised
|
(1,441,957
|
)
|
7.43
|
|
|
|
|||
Forfeited
|
(64,107
|
)
|
15.95
|
|
|
|
|||
Expired
|
(12,297
|
)
|
33.51
|
|
|
|
|||
Balance at December 31, 2017
|
1,296,863
|
|
$
|
12.27
|
|
5.87
|
$
|
41
|
|
Exercisable at December 31, 2017
|
1,140,450
|
|
$
|
10.85
|
|
5.75
|
$
|
38
|
|
Vested and expected to vest at December 31, 2017
|
1,296,863
|
|
$
|
12.27
|
|
5.87
|
$
|
41
|
|
|
Year Ended December 31,
|
||||||||
Additional Disclosures for Stock Options
|
2017
|
2016
|
2015
|
||||||
Weighted-average grant date fair value of stock options
|
N/A
|
|
N/A
|
|
$
|
12.73
|
|
||
Total fair value of options vested (in millions)
|
$
|
7
|
|
$
|
7
|
|
$
|
12
|
|
Total intrinsic value of options exercised (in millions)
|
$
|
36
|
|
$
|
21
|
|
$
|
53
|
|
Cash received from options exercised (in millions)
|
$
|
11
|
|
$
|
5
|
|
$
|
7
|
|
•
|
The time-based restricted stock units (RSUs) granted to non-employee directors generally fully vest on the first anniversary of the grant date;
|
•
|
The RSU granted to employees are generally subject to vesting ratably on a quarterly basis over
four
years;
|
◦
|
For new hires, one quarter of the total RSUs granted are subject to vesting on the first anniversary of the grant date. The remaining RSUs vest ratably on a quarterly basis over three years;
|
•
|
The performance-based restricted stock units (PSUs) are subject to vesting based on our achievement of the financial performance metrics and other goals that are established at the grant date. Depending on the results achieved, the actual number of shares to be granted may range from
0%
to
200%
of the target share value. Compensation expense is recognized ratably over the vesting period based on the probability of the number of awards expected to vest at each reporting date.
|
◦
|
The financial performance metric established for the PSUs granted during fiscal year 2015, represents cumulative annual growth rate in our Net Service Revenues as defined in the grant notice over
three
-year performance periods.
|
◦
|
The financial performance metric established for the PSUs granted during fiscal year 2017, represents annual growth rates in our Net Service Revenues and our Cash from Operations as defined in the grant notice. The PSUs will vest
50%
in 2018 and the remaining in 2019.
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
RSUs
|
PSUs
|
||||||||
|
Number of Units
|
Weighted-Average
Grant Date
Fair Value
|
Number of Units
|
Weighted-Average
Grant Date
Fair Value
|
||||||
Nonvested at December 31, 2016
|
2,323,051
|
|
$
|
20.32
|
|
149,412
|
|
$
|
33.51
|
|
Granted
|
1,231,507
|
|
29.73
|
|
330,674
|
|
29.69
|
|
||
Vested
|
(1,012,834
|
)
|
20.93
|
|
(7,518
|
)
|
33.51
|
|
||
Forfeited
|
(292,063
|
)
|
23.14
|
|
(18,894
|
)
|
33.51
|
|
||
Nonvested at December 31, 2017
|
2,249,661
|
|
$
|
24.83
|
|
453,674
|
|
$
|
30.72
|
|
|
RSUs
|
|
PSUs
|
||||||||||||||||
|
Year Ended December 31,
|
|
Year Ended December 31,
|
||||||||||||||||
Additional Disclosures for equity-based plans
|
2017
|
2016
|
2015
|
|
2017
|
2016
|
2015
|
||||||||||||
Total grant date fair value of shares granted (in millions)
|
$
|
37
|
|
$
|
42
|
|
$
|
31
|
|
|
$
|
10
|
|
$
|
—
|
|
$
|
6
|
|
Total grant date fair value of shares vested (in millions)
|
$
|
21
|
|
$
|
16
|
|
$
|
4
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Shares withheld to settle payroll tax liabilities related to vesting of shares held by employees
|
332,857
|
|
217,769
|
|
35,379
|
|
|
2,244
|
|
—
|
|
—
|
|
|
Stock Option Assumptions
|
ESPP Assumptions
|
||||||||||
Year Ended December 31,
|
Expected Term (in Years)
|
Expected Volatility
|
Risk-Free Interest Rate
|
Expected Dividend Yield
|
Expected Term (in Years)
|
Expected Volatility
|
Risk-Free Interest Rate
|
Expected Dividend Yield
|
||||
2017
|
N/A
|
N/A
|
|
N/A
|
|
N/A
|
|
0.50
|
28-37%
|
0.62-1.42%
|
0
|
%
|
2016
|
N/A
|
N/A
|
|
N/A
|
|
N/A
|
|
0.50
|
32-76%
|
0.33-0.62%
|
0
|
%
|
2015
|
6.08
|
39
|
%
|
1.73
|
%
|
0
|
%
|
0.50
|
34-76%
|
0.07-0.33%
|
0
|
%
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
Year Ended December 31,
|
||||||||
(in millions)
|
2017
|
2016
|
2015
|
||||||
Cost of providing services
|
$
|
8
|
|
$
|
7
|
|
$
|
4
|
|
Sales and marketing
|
6
|
|
6
|
|
4
|
|
|||
General and administrative
|
14
|
|
11
|
|
8
|
|
|||
Systems development and programming costs
|
4
|
|
2
|
|
2
|
|
|||
Total stock-based compensation expense
|
$
|
32
|
|
$
|
26
|
|
$
|
18
|
|
Income tax benefit related to stock-based compensation expense
|
$
|
7
|
|
$
|
9
|
|
$
|
6
|
|
Tax benefit realized from stock options exercised and similar awards
|
$
|
28
|
|
$
|
7
|
|
$
|
20
|
|
|
Amount
(in millions) |
Weighted-Average Period (in Years)
|
||
Nonvested stock options
|
$
|
1
|
|
0.76
|
Nonvested RSUs
|
$
|
50
|
|
2.43
|
Nonvested PSUs
|
$
|
7
|
|
1.50
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
Year Ended December 31,
|
||||||||
(In millions, except per share data)
|
2017
|
2016
|
2015
|
||||||
Net income
|
$
|
178
|
|
$
|
61
|
|
$
|
32
|
|
Weighted average shares of common stock outstanding
|
69
|
|
70
|
|
70
|
|
|||
Basic EPS
|
$
|
2.57
|
|
$
|
0.88
|
|
$
|
0.45
|
|
|
|
|
|
||||||
Net income
|
$
|
178
|
|
$
|
61
|
|
$
|
32
|
|
Weighted average shares of common stock
|
69
|
|
70
|
|
70
|
|
|||
Dilutive effect of stock options and restricted stock units
|
2
|
|
2
|
|
3
|
|
|||
Weighted average shares of common stock outstanding
|
71
|
|
72
|
|
73
|
|
|||
Diluted EPS
|
$
|
2.49
|
|
$
|
0.85
|
|
$
|
0.44
|
|
|
|
|
|
||||||
Common stock equivalents excluded from income per
diluted share because of their anti-dilutive effect
|
2
|
|
1
|
|
1
|
|
|
Year Ended December 31,
|
||||||||
(in millions)
|
2017
|
2016
|
2015
|
||||||
Current:
|
|
|
|
||||||
Federal
|
$
|
46
|
|
$
|
1
|
|
$
|
9
|
|
State
|
1
|
|
—
|
|
4
|
|
|||
Total Current
|
47
|
|
1
|
|
13
|
|
|||
Deferred:
|
|
|
|
||||||
Federal
|
12
|
|
38
|
|
12
|
|
|||
State
|
3
|
|
5
|
|
—
|
|
|||
Revaluation due to legislative changes
|
(40
|
)
|
(1
|
)
|
3
|
|
|||
Total Deferred
|
(25
|
)
|
42
|
|
15
|
|
|||
Total
|
$
|
22
|
|
$
|
43
|
|
$
|
28
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
Year Ended December 31,
|
|||||||||||||||||||||||
|
2017
|
2016
|
2015
|
|||||||||||||||||||||
(In millions, except percent)
|
Pre-Tax Income
|
Tax Expense/(Benefit)
|
Percent of Pre-Tax Income (Loss)
|
Pre-Tax Income
|
Tax Expense/(Benefit)
|
Percent of Pre-Tax Income (Loss)
|
Pre-Tax Income
|
Tax Expense/(Benefit)
|
Percent of Pre-Tax Income (Loss)
|
|||||||||||||||
|
$
|
200
|
|
|
|
$
|
104
|
|
|
|
$
|
60
|
|
|
|
|||||||||
U.S. federal statutory tax rate
|
|
$
|
70
|
|
35
|
%
|
|
$
|
37
|
|
35
|
%
|
|
$
|
21
|
|
35
|
%
|
||||||
State income taxes, net of federal benefit
|
|
10
|
|
5
|
|
|
4
|
|
4
|
|
|
4
|
|
7
|
|
|||||||||
Tax rate change
|
|
(40
|
)
|
(20
|
)
|
|
(1
|
)
|
(1
|
)
|
|
3
|
|
5
|
|
|||||||||
Nondeductible meals, entertainment and penalties
|
|
1
|
|
—
|
|
|
4
|
|
4
|
|
|
2
|
|
3
|
|
|||||||||
Stock-based compensation
|
|
(15
|
)
|
(7
|
)
|
|
1
|
|
1
|
|
|
1
|
|
1
|
|
|||||||||
Uncertain tax positions
|
|
4
|
|
2
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|||||||||
Tax credits
|
|
(3
|
)
|
(1
|
)
|
|
(1
|
)
|
(1
|
)
|
|
(2
|
)
|
(2
|
)
|
|||||||||
State and tax return to provision adjustment
|
|
(5
|
)
|
(3
|
)
|
|
(1
|
)
|
(1
|
)
|
|
—
|
|
—
|
|
|||||||||
Sec 199 benefits
|
|
(3
|
)
|
(1
|
)
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|||||||||
Other
|
|
3
|
|
1
|
|
|
—
|
|
—
|
|
|
(1
|
)
|
(2
|
)
|
|||||||||
Total
|
|
$
|
22
|
|
11
|
%
|
|
$
|
43
|
|
41
|
%
|
|
$
|
28
|
|
47
|
%
|
FINANCIAL STATEMENTS
|
|
|
Year Ended December 31,
|
|||||
(in millions)
|
2017
|
2016
|
||||
Deferred tax assets:
|
|
|
||||
Net operating losses (federal and state)
|
$
|
4
|
|
$
|
4
|
|
Accrued expenses
|
6
|
|
11
|
|
||
Accrued workers' compensation costs
|
8
|
|
13
|
|
||
Stock-based compensation
|
8
|
|
6
|
|
||
Tax benefits relating to uncertain positions
|
1
|
|
—
|
|
||
Tax credits (federal and state)
|
9
|
|
6
|
|
||
Total
|
36
|
|
40
|
|
||
Valuation allowance
|
(7
|
)
|
(6
|
)
|
||
Total deferred tax assets
|
29
|
|
34
|
|
||
Deferred tax liabilities:
|
|
|
||||
Depreciation and amortization
|
(13
|
)
|
(8
|
)
|
||
Deferred service revenues
|
(79
|
)
|
(114
|
)
|
||
Prepaid health plan expenses
|
(3
|
)
|
(4
|
)
|
||
Total deferred tax liabilities
|
(95
|
)
|
(126
|
)
|
||
Net deferred tax liabilities
|
$
|
(66
|
)
|
$
|
(92
|
)
|
FINANCIAL STATEMENTS
|
|
|
Year Ended December 31,
|
||||||||
(in millions)
|
2017
|
2016
|
2015
|
||||||
Unrecognized tax benefits at January 1
|
$
|
1
|
|
$
|
3
|
|
$
|
2
|
|
Additions for tax positions of prior periods
|
4
|
|
—
|
|
—
|
|
|||
Additions for tax positions of current period
|
1
|
|
—
|
|
1
|
|
|||
Reductions for tax positions of prior period:
|
|
|
|
||||||
Settlements with taxing authorities
|
—
|
|
(2
|
)
|
—
|
|
|||
Unrecognized tax benefits at December 31
|
$
|
6
|
|
$
|
1
|
|
$
|
3
|
|
(in millions)
|
Operating Leases
|
||
Year ending December 31:
|
|
||
2018
|
$
|
17
|
|
2019
|
15
|
|
|
2020
|
14
|
|
|
2021
|
9
|
|
|
2022
|
7
|
|
|
Thereafter
|
10
|
|
|
Minimum lease payments
|
$
|
72
|
|
FINANCIAL STATEMENTS
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
Quarter ended
|
|||||||||||
(In millions, except per share data)
|
March 31
|
June 30
|
September 30
|
December 31
|
||||||||
2017
|
|
|
|
|
||||||||
Total revenues
|
$
|
808
|
|
$
|
801
|
|
$
|
818
|
|
$
|
848
|
|
Insurance costs
|
609
|
|
600
|
|
613
|
|
644
|
|
||||
Operating income
|
49
|
|
57
|
|
63
|
|
48
|
|
||||
Net income
(1)
|
29
|
|
40
|
|
43
|
|
66
|
|
||||
Basic net income per share
(1)
|
$
|
0.42
|
|
$
|
0.58
|
|
$
|
0.62
|
|
$
|
0.95
|
|
Diluted net income per share
(1)
|
$
|
0.41
|
|
$
|
0.56
|
|
$
|
0.60
|
|
$
|
0.92
|
|
2016
|
|
|
|
|
||||||||
Total revenues
|
$
|
733
|
|
$
|
746
|
|
$
|
770
|
|
$
|
811
|
|
Insurance costs
|
570
|
|
597
|
|
609
|
|
638
|
|
||||
Operating income
|
26
|
|
26
|
|
29
|
|
43
|
|
||||
Net income
|
11
|
|
12
|
|
15
|
|
23
|
|
||||
Basic net income per share
|
$
|
0.16
|
|
$
|
0.17
|
|
$
|
0.21
|
|
$
|
0.34
|
|
Diluted net income per share
|
$
|
0.16
|
|
$
|
0.17
|
|
$
|
0.20
|
|
$
|
0.32
|
|
|
|
|
DISCLOSURE CONTROLS AND PROCEDURES
|
|
|
|
|
DISCLOSURE CONTROLS AND PROCEDURES
|
|
•
|
Entity Level Controls - Control Activities and Monitoring
|
•
|
Information Technology General Controls (ITGC)
|
•
|
Payroll Tax Liabilities
|
•
|
Insurance Costs and Insurance Liabilities
|
•
|
Payroll Operations and controls over price changes to Health Services revenue
|
|
|
|
DISCLOSURE CONTROLS AND PROCEDURES
|
|
|
|
|
DISCLOSURE CONTROLS AND PROCEDURES
|
|
•
|
Ineffective controls over revenue from professional service and workers’ compensation insurance services due to the lack of complete review and available support for the Company’s renewal rate price changes
|
|
|
|
MANAGEMENT AND CERTAIN SECURITY HOLDERS
|
|
|
|
|
FINANCIAL STATEMENT SCHEDULES
|
|
|
Balance at
|
Credited/
|
Charges
|
Balance at
|
||||||
|
Beginning of
|
Charged to
|
Utilized/
|
End of
|
||||||
(in millions)
|
Period
|
Net Income
|
Write-Offs
|
Period
|
||||||
Allowances for Doubtful Accounts and Authorized Credits
|
|
|
|
|
||||||
Year ended December 31, 2017
|
$
|
—
|
|
1
|
|
(1
|
)
|
$
|
—
|
|
Year ended December 31, 2016
|
$
|
1
|
|
1
|
|
(2
|
)
|
$
|
—
|
|
Year ended December 31, 2015
|
$
|
—
|
|
2
|
|
(1
|
)
|
$
|
1
|
|
Tax Valuation Allowance
|
|
|
|
|
||||||
Year ended December 31, 2017
|
$
|
6
|
|
1
|
|
—
|
|
$
|
7
|
|
Year ended December 31, 2016
|
$
|
5
|
|
1
|
|
—
|
|
$
|
6
|
|
Year ended December 31, 2015
|
$
|
7
|
|
—
|
|
(2
|
)
|
$
|
5
|
|
|
|
|
EXHIBITS
|
|
|
|
|
|
Incorporated by Reference
|
|
|
|||||||
Exhibit
No.
|
|
Description of Exhibit
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing
|
|
Filed
Herewith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.1
|
|
|
S-1
|
|
333-192465
|
|
2.1
|
|
|
11/21/2013
|
|
|
|
|
|
|
|
|
|
|
|||||||
2.2
|
|
|
S-1
|
|
333-192465
|
|
2.2
|
|
|
11/21/2013
|
|
|
|
|
|
|
|
|
|
|
|||||||
3.1
|
|
|
8-K
|
|
001-36373
|
|
3.1
|
|
|
4/1/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.2
|
|
|
10-Q
|
|
001-36373
|
|
3.1
|
|
|
11/2/2017
|
|
|
|
|
|
|
|
|
|
|
|||||||
3.3
|
|
|
S-1/A
|
|
333-192465
|
|
3.4
|
|
|
3/4/2014
|
|
|
|
|
|
|
|
|
|
|
|||||||
4.1
|
|
|
8-K
|
|
001-36373
|
|
4.1
|
|
|
2/2/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1*
|
|
|
S-1/A
|
|
333-192465
|
|
10.3
|
|
|
3/14/2014
|
|
|
|
|
|
|
|
|
|
|
|||||||
10.2*
|
|
|
10-Q
|
|
001-36373
|
|
10.1
|
|
|
5/8/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.3*
|
|
|
S-1/A
|
|
333-192465
|
|
10.4
|
|
|
3/4/2014
|
|
|
|
|
|
|
|
|
|
|
|||||||
10.4*
|
|
|
S-1/A
|
|
333-192465
|
|
10.6
|
|
|
3/4/2014
|
|
|
|
|
|
|
|
|
|
|
|||||||
10.5*
|
|
|
S-1/A
|
|
333-192465
|
|
10.7
|
|
|
3/14/2014
|
|
|
|
|
|
|
|
|
|
|
|||||||
10.6*
|
|
|
8-K
|
|
001-36373
|
|
N/A
|
|
|
3/11/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.7*
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.8*
|
|
|
10-K
|
|
001-36373
|
|
10.10
|
|
|
4/1/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.9*
|
|
|
8-K
|
|
001-36373
|
|
10.1
|
|
|
5/23/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.10*
|
|
|
S-1/A
|
|
333-192465
|
|
10.8
|
|
|
3/4/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.11*
|
|
|
S-1/A
|
|
333-192465
|
|
10.9
|
|
|
2/13/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXHIBITS
|
|
|
|
|
|
Incorporated by Reference
|
|
|
|||||||
Exhibit
No.
|
|
Description of Exhibit
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing
|
|
Filed
Herewith
|
|
10.12*
|
|
|
10-Q
|
|
001-36373
|
|
10.1
|
|
|
8/1/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.13*
|
|
|
10-Q
|
|
001-36373
|
|
10.2
|
|
|
8/6/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.14*
|
|
|
10-Q
|
|
001-36373
|
|
10.2
|
|
|
8/1/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.15*
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.16*
|
|
|
S-1/A
|
|
333-192465
|
|
10.12
|
|
|
2/13/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.17*
|
|
|
S-1/A
|
|
333-192465
|
|
10.11
|
|
|
2/13/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.18*
|
|
|
8-K
|
|
001-36373
|
|
10.1
|
|
|
10/3/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.19*
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.20
|
|
|
8-K
|
|
001-36373
|
|
10.1
|
|
|
12/22/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.21
|
|
|
8-K
|
|
001-36373
|
|
10.1
|
|
|
7/10/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.22
|
|
|
8-K
|
|
001-36373
|
|
10.1
|
|
|
8/1/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16.1
|
|
|
8-K
|
|
001-36373
|
|
16.1
|
|
|
5/10/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21.1
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.1
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.2
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXHIBITS
|
|
|
|
|
|
Incorporated by Reference
|
|
|
|||||||
Exhibit
No.
|
|
Description of Exhibit
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing
|
|
Filed
Herewith
|
|
24.1
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
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32.1**
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X
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101.INS
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XBRL Instance Document.
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X
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101.SCH
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XBRL Taxonomy Extension Schema Document.
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X
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document.
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X
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document.
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X
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document.
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X
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document.
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X
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*
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Constitutes a management contract or compensatory plan or arrangement.
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**
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Document has been furnished, is deemed not filed and is not to be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, irrespective of any general incorporation language contained in any such filing.
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SIGNATURES
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TRINET GROUP, INC.
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Date: February 27, 2018
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By:
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/s/ Burton M. Goldfield
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Burton M. Goldfield
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Chief Executive Officer
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SIGNATURES
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Signature
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Title
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Date
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/s/ Burton M. Goldfield
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Chief Executive Officer (
principal executive officer
)
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February 27, 2018
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Burton M. Goldfield
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/s/ Richard Beckert
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Chief Financial Officer (
principal financial officer
)
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February 27, 2018
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Richard Beckert
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/s/ Michael P. Murphy
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Chief Accounting Officer (
principal accounting officer
)
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February 27, 2018
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Michael P. Murphy
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/s/ Michael J. Angelakis
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Director
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February 27, 2018
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Michael J. Angelakis
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/s/ Katherine August-deWilde
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Director
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February 27, 2018
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Katherine August-deWilde
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/s/ Martin Babinec
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Director
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February 27, 2018
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Martin Babinec
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/s/ H. Raymond Bingham
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Director
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February 27, 2018
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H. Raymond Bingham
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/s/ Paul Chamberlain
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Director
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February 27, 2018
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Paul Chamberlain
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/s/ Kenneth Goldman
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Director
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February 27, 2018
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Kenneth Goldman
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/s/ David C. Hodgson
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Director
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February 27, 2018
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David C. Hodgson
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/s/ Wayne B. Lowell
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Director
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February 27, 2018
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Wayne B. Lowell
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Annual Retainer (Chair)
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Annual Retainer (non-Chair)
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Fee per Meeting
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Board
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$75,000
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$50,000
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$1,500
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Audit Committee
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$30,000
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$15,000
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$1,000
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Compensation Committee
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$30,000
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$15,000
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$1,000
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Nominating and Corporate Governance Committee
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$15,000
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$7,500
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$500
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1.
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EMPLOYMENT BY THE COMPANY
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2.
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COMPENSATION.
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/s/ Barrett Boston
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2/26/2018
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BARRETT BOSTON
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DATE
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Company Name
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DBA/AKA
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Incorporation
Jurisdiction
|
210 Park Avenue Holding, Inc.
|
|
|
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Oklahoma
|
Accord Human Resources 12, Inc.
|
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Accord Human Resources of Florida, Inc.
|
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Florida
|
Accord Technology, LLC
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Oklahoma
|
Affiliated Risk Management, Inc.
|
|
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North Carolina
|
ALSUB-36, Inc.
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Alabama
|
Ambrose Advisory Services, LLC
|
|
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New York
|
Amlease Corporation
|
|
|
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Delaware
|
Amlease of PA, Inc.
|
|
|
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Pennsylvania
|
App7, Inc.
|
|
ExpenseCloud
|
|
Delaware
|
Archimedes Risk Solutions, Ltd.
|
|
|
|
Bermuda
|
ASOI, Inc.
|
|
|
|
Delaware
|
AZSUB-51, Inc.
|
|
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Arizona
|
Gevity Insurance Agency, Inc.
|
|
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Delaware
|
HR Complete, Inc.
|
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Delaware
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Mayberry HR Outsourcing, Inc.
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North Carolina
|
Mosaic By Accord, LLC
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Oklahoma
|
NYSUB-54, Inc.
|
|
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New York
|
NYSUB-55, Inc.
|
|
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New York
|
Real Solutions, Inc.
|
|
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Arizona
|
Rocky Top HR Outsourcing, Inc.
|
|
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Tennessee
|
Route 66 HR Outsourcing, Inc.
|
|
|
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California
|
SOI Holdings, Inc.
|
|
|
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Delaware
|
SOI, Inc.
|
|
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Delaware
|
SOI-17 of TN, Inc.
|
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Tennessee
|
SOI-23 of FL, Inc.
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Florida
|
SOI-27 of CA, Inc.
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California
|
SOI-28 of TX, Inc.
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Texas
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SOI-29 of AR, Inc.
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Arkansas
|
SOI-31 of AR, Inc.
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Arkansas
|
SOI-59 of TX, Inc.
|
|
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Texas
|
Star Outsourcing, Inc.
|
|
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Arizona
|
Strategic Outsourced HR, Inc.
|
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Indiana
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Company Name
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DBA/AKA
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Incorporation
Jurisdiction
|
Strategic Outsourcing, Inc.
|
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SOI
|
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Delaware
|
Summit Services of Georgia, Inc.
|
|
|
|
Georgia
|
Summit Services, Inc.
|
|
|
|
New Jersey
|
TriNet Advisory Services, Inc.
|
|
|
|
Delaware
|
TriNet Employee Benefit Insurance Trust
|
|
|
|
a Grantor Trust
|
TriNet Employer Group Canada, Inc.
|
|
TriNet
|
|
Ontario
|
TriNet Holdings A, Inc.
|
|
|
|
Delaware
|
Trinet Holdings B, Inc.
|
|
|
|
Delaware
|
TriNet HR I, Inc.
|
|
Accord
|
|
Oklahoma
|
TriNet HR III, Inc.
|
|
TriNet
|
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California
|
TriNet HR III-A, Inc.
|
|
TriNet
|
|
Delaware
|
TriNet HR III-B, Inc.
|
|
TriNet
|
|
Delaware
|
TriNet HR IV, LLC
|
|
Ambrose
|
|
New York
|
TriNet HR XI, Inc.
|
|
|
|
Delaware
|
TriNet Insurance Services, Inc.
|
|
|
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California
|
TriNet Professional Employer Services, Inc.
|
|
|
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Delaware
|
TriNet USA, Inc.
|
|
|
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Delaware
|
TXSUB-64, Inc.
|
|
|
|
Texas
|
(a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
(a)
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all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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(b)
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any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ Burton M. Goldfield
|
|
|
Burton M. Goldfield
|
|
|
President and Chief Executive Officer
|
|
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(a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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(a)
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all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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(b)
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any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ Richard Beckert
|
|
|
Richard Beckert
|
|
|
Chief Financial Officer
|
|
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(1)
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The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
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February 27, 2018
|
|
/s/ Burton M. Goldfield
|
|
|
|
|
Burton M. Goldfield
|
|
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
/s/ Richard Beckert
|
Date:
|
|
February 27, 2018
|
|
Richard Beckert
|
|
|
|
|
Chief Financial Officer
|