ý
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Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the fiscal year ended December 31, 2014.
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o
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the transition period from _____________________to _____________________
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Delaware
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76-0479645
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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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19001 Crescent Springs Drive
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Kingwood, Texas
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77339
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(Address of principal executive offices)
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(Zip Code)
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Common Stock, par value $0.01 per share
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New York Stock Exchange
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Rights to Purchase Series A Junior Participating Preferred Stock
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New York Stock Exchange
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(Title of class)
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(Name of Exchange on Which Registered)
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a smaller reporting company)
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Smaller reporting company
o
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Part I
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item S-K 401(b).
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Part II
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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Part III
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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Part IV
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Item 15.
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•
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the focus on growth and productivity of the small and medium-sized business community in the United States, utilizing outsourcing to concentrate on core competencies
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•
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the need to provide competitive health care and related benefits to attract and retain employees
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•
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the increasing costs associated with health and workers’ compensation insurance coverage, workplace safety programs, employee-related complaints and litigation
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•
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complex regulation of employment issues and the related costs of compliance, including the allocation of time and effort to such functions by owners and key executives
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•
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benefits and payroll administration
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•
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health and workers’ compensation insurance programs
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•
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personnel records management
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•
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employer liability management
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•
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assistance with government compliance
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•
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general HR advice
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•
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employee recruiting and support
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•
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employee performance management
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•
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training and development services
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•
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payroll processing
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•
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payroll tax deposits
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•
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quarterly payroll tax reporting
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•
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employee file maintenance
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•
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unemployment claims processing
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•
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workers’ compensation claims reporting
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•
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a group health plan
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•
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a health savings account program
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•
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a health care flexible spending account plan
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•
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an educational assistance plan
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•
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an adoption assistance plan
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•
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group term life insurance
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•
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group universal life insurance
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•
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accidental death and dismemberment insurance
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•
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short-term and long-term disability insurance
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•
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a 401(k) retirement plan
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•
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cafeteria plans for group health and health savings account contributions
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•
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WebPayroll for the submission, approval and reporting of payroll data
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•
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client-specific payroll information
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•
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employee information, including online check stubs, pay history reports and W-2s
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•
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employee on-boarding including payroll enrollment, policy acknowledgments and employment verification
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•
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employee benefits enrollment and changes
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•
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employee-specific benefits content, including summary plan descriptions and enrollment status
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•
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access to 401(k) plan information through the Retirement Service Center
SM
powered by Insperity
®
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•
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self-service and customizable access to payroll and other data through an interactive reporting environment
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•
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online human resources forms
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•
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best practices human resources management process maps and process overviews
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•
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e-Learning web-based training
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•
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online recruiting services
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•
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links to benefits providers and other key vendors
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•
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answers to frequently asked questions
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•
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drafting and reviewing personnel policies and employee handbooks
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•
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designing job descriptions
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•
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performing prospective employee screening and background investigations
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•
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designing performance appraisal processes and forms
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•
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professional development and issues-oriented training
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•
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employee counseling
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•
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substance abuse awareness training
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•
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outplacement services
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•
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compensation guidance
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•
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Payment of wages and salaries as reported by the client and related tax reporting and remittance (local, state and federal withholding, FICA, FUTA, state unemployment)
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•
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Workers’ compensation compliance, procurement, management and reporting
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•
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Compliance with the Code, COBRA, HIPAA and ERISA (for each employee benefit plan sponsored by Insperity), as well as monitoring changes in other governmental laws and regulations governing the employer/employee relationship and updating the client when necessary
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•
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Offering benefits under Insperity-sponsored employee benefit plans that comply with PPACA requirements
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•
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Employee benefits administration of plans sponsored solely by Insperity
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•
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Payment, through Insperity, of commissions, bonuses, vacations, paid time off, sick pay, paid leaves of absence and severance payments
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•
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Payment and related tax reporting and remittance of non-qualified deferred compensation and equity-based compensation
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•
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Ownership and protection of all client intellectual property rights
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•
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Compliance with OSHA regulations, EPA regulations, FLSA, FMLA, WARN, USERRA and state and local equivalents and compliance with government contracting provisions
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•
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Compliance with federal, state and local pay or play health care mandates and all such other similar federal, state and local legislation
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•
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Compliance with the National Labor Relations Act (“NLRA”), including all organizing efforts and expenses related to a collective bargaining agreement and related benefits
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•
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Professional licensing requirements, fidelity bonding and professional liability insurance
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•
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Products produced and/or services provided
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•
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COBRA, HIPAA, PPACA and ERISA compliance for client-sponsored benefit plans
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•
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Implementation of policies and practices relating to the employee/employer relationship
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•
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Compliance with all federal, state and local employment laws, including, but not limited to Title VII of the Civil Rights Act of 1964, ADEA, Title I of ADA, the Consumer Credit Protection Act and immigration laws and regulations
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Revenue Change
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% of Total Revenues
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Northeast
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4.2
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%
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26.0
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%
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Southeast
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6.1
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%
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9.7
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%
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Central
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1.7
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%
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14.5
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%
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Southwest
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3.1
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%
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27.3
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%
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West
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6.8
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%
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22.5
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%
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Industry
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% of Client Base
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Computer and information services
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18
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%
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Management, administration and consulting services
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18
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%
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Finance, insurance and real estate
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13
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%
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Manufacturing
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10
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%
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Wholesale trade
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8
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%
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Engineering, accounting and legal services
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7
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%
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Medical services
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6
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%
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Retail trade
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5
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%
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Not-for-profit and similar organizations
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5
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%
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Construction
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4
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%
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Other
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6
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%
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Initial
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Market
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Sales Offices
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Entry Date
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Houston
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5
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1986
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San Antonio
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1
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1989
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Austin
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1
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1989
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Orlando
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1
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1989
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Dallas/Fort Worth
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4
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1993
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Atlanta
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2
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1994
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Phoenix
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1
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1995
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Chicago
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2
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1995
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Washington D.C.
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2
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1995
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Denver
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2
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1996
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Los Angeles
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5
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1997
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Charlotte
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1
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1997
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St. Louis
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1
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1998
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San Francisco
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3
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1998
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New York
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3
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1999
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Maryland
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2
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2000
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New Jersey
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2
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2000
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San Diego
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1
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2001
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Boston
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2
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2001
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Minneapolis
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2
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2002
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Raleigh
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1
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2006
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Kansas City
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1
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2007
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Columbus
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1
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2010
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Nashville
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1
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2011
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Philadelphia
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1
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2012
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•
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market size, in terms of small and medium-sized businesses engaged in selected industries that meet our risk profile
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•
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market receptivity to PEO services, including the regulatory environment and relevant history with other PEO providers
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•
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existing relationships within a given market, such as vendor or client relationships
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•
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expansion cost issues, such as advertising and overhead costs
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•
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direct cost issues that bear on our effectiveness in controlling and managing the cost of our services, such as workers’ compensation and health insurance costs, unemployment risks and various legal and other factors
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•
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a comparison of the services we offer to alternatives available to small and medium-sized businesses in the relevant market, such as the cost to the target clients of procuring services directly or through other PEOs
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•
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long-term strategy issues, such as the general perception of markets and our estimate of the long-term revenue growth potential of the market
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•
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worksite employee enrollment
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•
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human resources management
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•
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benefits and defined contribution plan administration
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•
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payroll processing
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•
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client invoicing and collection
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•
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management information and reporting
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•
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sales bid calculations
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•
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a 401(k) retirement plan
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•
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cafeteria plans under Code Section 125
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•
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a group health plan, which includes medical, dental, vision and prescription drug coverage, as well as a work-life program
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•
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a health savings account program
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•
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a welfare benefits plan, which includes life, disability and accidental death and dismemberment coverage
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•
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a health care flexible spending account plan
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•
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an educational assistance program
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•
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an adoption assistance program
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•
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a commuter benefits program
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•
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the employer’s degree of behavioral control (the extent of instructions, training and the nature of the work)
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•
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the financial control or the economic aspects of the relationship
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•
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the intended relationship of the parties (whether employee benefits are provided, whether any contracts exist, whether services are ongoing or for a project, whether there are any penalties for discharge/termination, and the frequency of the business activity)
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•
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withholding of income tax requirements governed by Code Section 3401, et seq.
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•
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obligations under FICA, governed by Code Section 3101, et seq.
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•
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obligations under FUTA, governed by Code Section 3301, et seq.
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•
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payment of the salaries and wages for work performed by worksite employees, regardless of whether the client timely pays us the associated service fee
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•
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withholding and payment of federal and state payroll taxes with respect to wages and salaries reported by Insperity
|
•
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providing benefits to worksite employees even if our costs to provide such benefits exceed the fees the client pays us
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•
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income tax withholding requirements
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•
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FICA
|
•
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FUTA
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Name
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Age
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Position
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Paul J. Sarvadi
|
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58
|
|
Chairman of the Board and Chief Executive Officer
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Richard G. Rawson
|
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66
|
|
President
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A. Steve Arizpe
|
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57
|
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Executive Vice President of Client Services and Chief Operating Officer
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Jay E. Mincks
|
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61
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|
Executive Vice President of Sales and Marketing
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Douglas S. Sharp
|
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53
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Senior Vice President of Finance, Chief Financial Officer and Treasurer
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Daniel D. Herink
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48
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Senior Vice President of Legal, General Counsel and Secretary
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2014
|
|
High
|
|
Low
|
|
Dividends
per Share |
|
||||||
First Quarter
|
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$
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36.09
|
|
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$
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27.01
|
|
|
$
|
0.17
|
|
|
Second Quarter
|
|
33.51
|
|
|
30.13
|
|
|
0.19
|
|
|
|||
Third Quarter
|
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33.46
|
|
|
27.34
|
|
|
0.19
|
|
|
|||
Fourth Quarter
|
|
34.62
|
|
|
27.16
|
|
|
2.19
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|
(1)
|
|||
|
|
|
|
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|
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|
||||||
2013
|
|
|
|
|
|
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|
||||||
First Quarter
|
|
$
|
34.20
|
|
|
$
|
27.04
|
|
|
$
|
0.17
|
|
|
Second Quarter
|
|
31.80
|
|
|
26.44
|
|
|
0.17
|
|
|
|||
Third Quarter
|
|
37.80
|
|
|
30.36
|
|
|
0.17
|
|
|
|||
Fourth Quarter
|
|
39.69
|
|
|
32.67
|
|
|
0.17
|
|
|
(1)
|
Includes a
$2.00
per share special dividend
|
Period
|
|
Total Number of Shares Purchased
(1)
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Program
(1)
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|
Maximum Number of Shares that may yet be Purchased under the Program
(1)
|
|||||
10/01/2014 – 10/31/2014
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
768,765
|
|
11/01/2014 – 11/30/2014
|
|
—
|
|
|
—
|
|
|
—
|
|
|
768,765
|
|
|
12/01/2014 – 12/31/2014
|
|
—
|
|
|
—
|
|
|
—
|
|
|
768,765
|
|
|
Total
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
|
|
(1)
|
Our Board of Directors has authorized a program to repurchase shares of our outstanding common stock. During the three months ended
December 31, 2014
, no shares were repurchased under the program and no shares were withheld to satisfy tax withholding obligations for the vesting of restricted stock awards. Unless terminated early by resolution of the Board of Directors, the repurchase program will expire when we have repurchased all shares authorized for repurchase under the repurchase program.
|
|
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12/09
|
|
|
12/10
|
|
|
12/11
|
|
|
12/12
|
|
|
12/13
|
|
|
12/14
|
|
|
|
|
|
|
|
|
|
|
|
|
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||||||
Insperity, Inc.
|
|
100.00
|
|
|
127.12
|
|
|
112.53
|
|
|
153.01
|
|
|
173.49
|
|
|
177.12
|
|
S&P Smallcap 600
|
|
100.00
|
|
|
126.31
|
|
|
127.59
|
|
|
148.42
|
|
|
209.74
|
|
|
221.81
|
|
S&P 1500 Composite Human Resources and Employment Services
|
|
100.00
|
|
|
118.51
|
|
|
98.54
|
|
|
110.68
|
|
|
198.47
|
|
|
198.80
|
|
|
|
Year ended December 31,
|
||||||||||||||||||
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
||||||||||
|
|
(in thousands, except per share and statistical data)
|
||||||||||||||||||
Income Statement Data:
|
|
|
||||||||||||||||||
Revenues
(1)
|
|
$
|
2,357,788
|
|
|
$
|
2,256,112
|
|
|
$
|
2,158,824
|
|
|
$
|
1,976,219
|
|
|
$
|
1,719,752
|
|
Gross profit
|
|
403,805
|
|
|
393,251
|
|
|
382,221
|
|
|
351,775
|
|
|
298,536
|
|
|||||
Operating income
|
|
47,474
|
|
(2)
|
56,223
|
|
(3)
|
67,494
|
|
(3)
|
57,314
|
|
|
37,060
|
|
|||||
Net income
|
|
28,004
|
|
|
32,032
|
|
(4)
|
40,402
|
|
|
30,470
|
|
(5)
|
22,440
|
|
|||||
Diluted net income per share of common stock
|
|
1.05
|
|
(6)
|
1.25
|
|
|
1.56
|
|
(6)
|
1.16
|
|
|
0.86
|
|
|||||
Adjusted net income
(7)
|
|
30,321
|
|
|
35,670
|
|
|
42,862
|
|
|
34,963
|
|
|
22,440
|
|
|||||
Adjusted diluted net income per share of common stock
(7)
|
|
1.19
|
|
|
1.39
|
|
|
1.67
|
|
|
1.33
|
|
|
0.86
|
|
|||||
Adjusted EBITDA
(7)
|
|
84,124
|
|
|
92,303
|
|
|
100,899
|
|
|
82,198
|
|
|
61,054
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Working capital
|
|
$
|
73,058
|
|
|
$
|
128,630
|
|
|
$
|
115,706
|
|
|
$
|
126,562
|
|
|
$
|
144,479
|
|
Total assets
|
|
796,670
|
|
|
766,560
|
|
|
750,200
|
|
|
712,259
|
|
|
659,845
|
|
|||||
Total stockholders’ equity
|
|
204,096
|
|
|
253,272
|
|
|
240,905
|
|
|
245,207
|
|
|
240,395
|
|
|||||
Cash dividends per share
|
|
2.74
|
|
(8)
|
0.68
|
|
|
1.66
|
|
(8)
|
0.60
|
|
|
0.52
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Statistical Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Average number of worksite employees paid per month during period
|
|
130,718
|
|
|
127,517
|
|
|
125,650
|
|
|
116,839
|
|
|
107,014
|
|
|||||
Revenues per worksite employee per month
(9)
|
|
$
|
1,503
|
|
|
$
|
1,474
|
|
|
$
|
1,432
|
|
|
$
|
1,410
|
|
|
$
|
1,339
|
|
Gross profit per worksite employee per month
|
|
$
|
257
|
|
|
$
|
257
|
|
|
$
|
253
|
|
|
$
|
251
|
|
|
$
|
232
|
|
Operating income per worksite employee per month
|
|
$
|
30
|
|
|
$
|
37
|
|
|
$
|
45
|
|
|
$
|
41
|
|
|
$
|
29
|
|
(1)
|
Gross billings of
$14.187 billion
,
$13.462 billion
,
$12.992 billion
,
$11.700 billion
and
$10.169 billion
, less worksite employee payroll cost of
$11.829 billion
,
$11.206 billion
,
$10.833 billion
,
$9.724 billion
and
$8.449 billion
, respectively.
|
(2)
|
Includes a non-cash impairment charge in the second quarter of 2014 of
$2.5 million
. Please read
Note 5
to the Consolidated Financial Statements, “
Goodwill and Other Intangible Assets
,” for additional information. Also includes a non-cash charge in the fourth quarter of 2014 of
$1.2 million
. Please read
Note 1
to the Consolidated Financial Statements, “
Accounting Policies
,” for additional information.
|
(3)
|
Includes non-cash impairment charges of
$3.3 million
and
$4.2 million
in the fourth quarters of 2013 and 2012, respectively. Please read
Note 5
to the Consolidated Financial Statements, “
Goodwill and Other Intangible Assets
,” for additional information.
|
(4)
|
Includes a non-cash impairment charge in the second quarter of 2013 of
$2.7 million
, please read
Note 6
to the Consolidated Financial Statements, “
Other Assets
,” for additional information. Also includes a $2.0 million tax benefit in the fourth quarter of 2013 related to tax years 2009 through 2012, please read
Note 9
to the Consolidated Financial Statements, “
Income Taxes
,” for additional information.
|
(5)
|
Includes the impact of a $4.4 million pre-tax loss related to the exchange of an aircraft, and a
$3.1 million
pre-tax loss related to a settlement with the State of California.
|
(6)
|
Includes the impact of dividends exceeding earnings under the two-class method, resulting in a
$0.05
and $0.01 earnings per share decrease in 2014 and 2012, respectively. Please read
Note 12
, “
Net Income Per Share
,” for additional information.
|
(7)
|
These are non-GAAP measures used by management to analyze the Company’s performance. Please read Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures” for a reconciliation of the non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP.
|
(8)
|
Includes a
$2.00
and $1.00 per share special dividend paid in the fourth quarters of 2014 and 2012, respectively.
|
(9)
|
Gross billings of
$9,044
,
$8,797
,
$8,617
,
$8,345
and
$7,919
per worksite employee per month, less payroll cost of
$7,541
,
$7,323
,
$7,185
,
$6,935
and
$6,580
per worksite employee per month, respectively.
|
•
|
employment-related taxes (“payroll taxes”)
|
•
|
costs of employee benefit plans
|
•
|
workers’ compensation costs
|
•
|
Salaries, wages and payroll taxes
– Salaries, wages and payroll taxes are primarily a function of the number of corporate employees, their associated average pay and any additional incentive compensation. Our corporate employees include client services, sales and marketing, benefits, legal, finance, information technology, administrative support personnel and those associated with our SBUs.
|
•
|
Stock-based compensation
– Our stock-based compensation relates to the recognition of non-cash compensation expense over the vesting period of restricted stock awards.
|
•
|
Commissions –
Commissions expense consists primarily of amounts paid to sales managers and BPAs. Commissions are based on the number of new accounts sold and a percentage of revenue generated by such personnel.
|
•
|
Advertising
– Advertising expense primarily consists of media advertising and other business promotions in our current and anticipated sales markets, including the Insperity Invitational
™
presented by UnitedHealthcare
®
sponsorship.
|
•
|
General and administrative expenses –
Our general and administrative expenses primarily include:
|
•
|
rent expenses related to our service centers and sales offices
|
•
|
outside professional service fees related to legal, consulting and accounting services
|
•
|
administrative costs, such as postage, printing and supplies
|
•
|
employee travel and training expenses
|
•
|
technology and facility repairs and maintenance costs
|
•
|
Depreciation and amortization –
Depreciation and amortization expense is primarily a function of our capital investments in corporate facilities, service centers, sales offices, technology infrastructure and that associated with our acquisitions.
|
•
|
Impairment charges –
Non-cash expense associated with the decline in fair value of long-lived and intangible assets, including goodwill. Please read
Note 1
“
Accounting Policies
” and
Note 5
“
Goodwill and Other Intangible Assets
” to the Consolidated Financial Statements for additional information.
|
•
|
Benefits costs
– We provide group health insurance coverage to our worksite employees through a national network of carriers including United, UnitedHealthcare of California, Kaiser Permanente, Blue Shield of California, HMSA BlueCross BlueShield of Hawaii, Unity Health Plan and Tufts, all of which provide fully insured policies or service contracts.
|
Change in
Completion Rate and Annual Trend
|
|
Change in
Benefits Costs
(in thousands) |
|
Change in
Net Income
(in thousands) |
||||
(2.5)%
|
|
$
|
(12,948
|
)
|
|
$
|
7,640
|
|
(1.0)%
|
|
(5,180
|
)
|
|
3,056
|
|
||
1.0%
|
|
5,180
|
|
|
(3,056
|
)
|
||
2.5%
|
|
12,948
|
|
|
(7,640
|
)
|
•
|
Workers’ compensation costs
– Since October 1, 2007, our workers’ compensation coverage has been provided through our arrangement with ACE. Under the ACE Program, we bear the economic burden for the first $1 million layer of claims per occurrence, and effective October 1, 2010, we also bear the economic burden for a maximum aggregate amount of $5 million per policy year for claim amounts that exceed the first $1 million. ACE bears the economic burden for all claims in excess of these levels. The ACE Program is a fully insured policy whereby ACE has the responsibility to pay all claims incurred under the policy regardless of whether we satisfy our responsibilities. Our coverage from September 1, 2003 through September 30, 2007 was provided through selected member insurance companies of American International Group, Inc.
|
Change in Loss Development Rate
|
|
Change in Workers’ Compensation Costs
(in thousands) |
|
Change in
Net Income
(in thousands) |
||||
(5.0)%
|
|
$
|
(2,721
|
)
|
|
$
|
1,600
|
|
(2.5)%
|
|
(1,360
|
)
|
|
800
|
|
||
2.5%
|
|
1,360
|
|
|
(800
|
)
|
||
5.0%
|
|
2,721
|
|
|
(1,600
|
)
|
•
|
Contingent liabilities
– We accrue and disclose contingent liabilities in our Consolidated Financial Statements in accordance with ASC 450-10,
Contingencies
. GAAP requires accrual of contingent liabilities that are considered probable to occur and that can be reasonably estimated. For contingent liabilities that are considered reasonably possible to occur, financial statement disclosure is required, including the range of possible loss if it can be reasonably determined. From time to time we disclose in our financial statements issues that we believe are reasonably possible to occur, although we cannot determine the range of possible loss in all cases. As issues develop, we evaluate the probability of future loss and the potential range of such losses. If such evaluation were to determine that a loss was probable and the loss could be reasonably estimated, we would be required to accrue our estimated loss, which would reduce net income in the period that such determination was made.
|
•
|
Deferred taxes
– We have recorded a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. While we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, our ability to realize our deferred tax assets could change from our current estimates. If we determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, an adjustment to reduce the valuation allowance would increase net income in the period that such determination is made. Likewise, should we determine that we will not be able to realize all or part of our net deferred tax assets in the future, an adjustment to increase the valuation allowance would reduce net income in the period such determination is made.
|
•
|
Allowance for doubtful accounts
– We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our clients to pay their comprehensive service fees. We believe that the success of our business is heavily dependent on our ability to collect these comprehensive service fees for several reasons, including:
|
•
|
the fact that we are at risk for the payment of our direct costs and worksite employee payroll costs regardless of whether our clients pay their comprehensive service fees
|
•
|
the large volume and dollar amount of transactions we process
|
•
|
the periodic and recurring nature of payroll, upon which the comprehensive service fees are based
|
•
|
Property and equipment
– Our property and equipment relate primarily to our facilities and related improvements, furniture and fixtures, computer hardware and software and capitalized software development costs. These costs are depreciated or amortized over the estimated useful lives of the assets. If we determine that the useful lives of these assets will be shorter than we currently estimate, our depreciation and amortization expense could be accelerated, which would decrease net income in the periods of such a determination. In addition, we periodically evaluate these costs for impairment. If events or circumstances were to indicate that any of our long-lived assets might be impaired, we would assess recoverability based on the estimated undiscounted future cash flows to be generated from the applicable asset. In addition, we may record an impairment loss, which would reduce net income, to the extent that the carrying value of the asset exceeded the fair value of the asset. Fair value is generally determined using an estimate of discounted future net cash flows from operating activities or upon disposal of the asset. Please read
Note 1
to the Consolidation Financial Statements, “
Accounting Policies
,” for additional information.
|
•
|
Goodwill and other intangibles –
Goodwill is tested for impairment on an annual basis and between annual tests in certain circumstances, and is written down when impaired. Purchased intangible assets other than goodwill are amortized over their useful lives unless these lives are determined to be indefinite. Our purchased intangible assets are carried at cost less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets, which ranges from
three
to
10 years
. Please read
Note 5
to the Consolidated Financial Statements, “
Goodwill and Other Intangible Assets
,” for additional information.
|
|
|
Year ended December 31,
|
|||||||||
|
|
2014
|
|
2013
|
|
% Change
|
|||||
|
|
(in thousands, except per share and statistical data)
|
|||||||||
Revenues (gross billings of $14.187 billion and $13.462 billion, less worksite employee payroll cost of $11.829 billion and $11.206 billion, respectively)
|
|
$
|
2,357,788
|
|
|
$
|
2,256,112
|
|
|
4.5
|
%
|
Gross profit
|
|
403,805
|
|
|
393,251
|
|
|
2.7
|
%
|
||
Operating expenses
|
|
356,331
|
|
(1)
|
337,028
|
|
(2)
|
5.7
|
%
|
||
Operating income
|
|
47,474
|
|
|
56,223
|
|
|
(15.6
|
)%
|
||
Other income (expense)
|
|
153
|
|
|
(2,491
|
)
|
(3)
|
(106.1
|
)%
|
||
Net income
|
|
28,004
|
|
|
32,032
|
|
(4)
|
(12.6
|
)%
|
||
Diluted net income per share of common stock
|
|
1.05
|
|
(5)
|
1.25
|
|
|
(16.0
|
)%
|
||
Adjusted net income
(6)
|
|
30,321
|
|
|
35,670
|
|
|
(15.0
|
)%
|
||
Adjusted diluted net income per share of common stock
(6)
|
|
1.19
|
|
|
1.39
|
|
|
(14.4
|
)%
|
||
Adjusted EBITDA
(6)
|
|
84,124
|
|
|
92,303
|
|
|
(8.9
|
)%
|
||
|
|
|
|
|
|
|
|||||
Statistical Data:
|
|
|
|
|
|
|
|
|
|
||
Average number of worksite employees paid per month
|
|
130,718
|
|
|
127,517
|
|
|
2.5
|
%
|
||
Revenues per worksite employee per month
(7)
|
|
$
|
1,503
|
|
|
$
|
1,474
|
|
|
2.0
|
%
|
Gross profit per worksite employee per month
|
|
257
|
|
|
257
|
|
|
—
|
|
||
Operating expenses per worksite employee per month
|
|
227
|
|
|
220
|
|
|
3.2
|
%
|
||
Operating income per worksite employee per month
|
|
30
|
|
|
37
|
|
|
(18.9
|
)%
|
||
Net income per worksite employee per month
|
|
18
|
|
|
21
|
|
|
(14.3
|
)%
|
(1)
|
Includes a non-cash impairment charge in the second quarter of 2014 of
$2.5 million
. Please read
Note 5
to the Consolidated Financial Statements, “
Goodwill and Other Intangible Assets
,” for additional information. Also includes a non-cash charge in the fourth quarter of 2014 of
$1.2 million
. Please read
Note 1
to the Consolidated Financial Statements, “
Accounting Policies
,” for additional information.
|
(2)
|
Includes a non-cash impairment charge in the fourth quarter of 2013 of
$3.3 million
. Please read
Note 5
to the Consolidated Financial Statements, “
Goodwill and Other Intangible Assets
,” for additional information.
|
(3)
|
Includes a non-cash impairment charge in the second quarter of 2013 of
$2.7 million
. Please read
Note 6
to the Consolidated Financial Statements, “
Other Assets
,” for additional information.
|
(4)
|
Includes a $2.0 million tax benefit in the fourth quarter of 2013 related to tax years 2009 through 2012. Please read
Note 9
to the Consolidated Financial Statements, “
Income Taxes
,” for additional information.
|
(5)
|
Includes the impact of dividends exceeding earnings under the two-class method, resulting in
$0.05
earnings per share decrease in 2014. Please read
Note 12
, “
Net Income Per Share
,” for additional information.
|
(6)
|
Please read Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures” for a reconciliation of the non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with GAAP.
|
(7)
|
Gross billings of
$9,044
and
$8,797
per worksite employee per month, less payroll cost of
$7,541
and
$7,323
per worksite employee per month, respectively.
|
|
|
Year ended December 31,
|
|
Year ended December 31,
|
|||||||||||||
|
|
2014
|
|
2013
|
|
% Change
|
|
2014
|
|
2013
|
|||||||
|
|
(in thousands)
|
|
(% of total revenue)
|
|||||||||||||
Northeast
|
|
$
|
601,526
|
|
|
$
|
577,280
|
|
|
4.2
|
%
|
|
26.0
|
%
|
|
26.0
|
%
|
Southeast
|
|
225,709
|
|
|
212,664
|
|
|
6.1
|
%
|
|
9.7
|
%
|
|
9.6
|
%
|
||
Central
|
|
334,669
|
|
|
329,110
|
|
|
1.7
|
%
|
|
14.5
|
%
|
|
14.8
|
%
|
||
Southwest
|
|
632,356
|
|
|
613,175
|
|
|
3.1
|
%
|
|
27.3
|
%
|
|
27.6
|
%
|
||
West
|
|
521,139
|
|
|
488,047
|
|
|
6.8
|
%
|
|
22.5
|
%
|
|
22.0
|
%
|
||
|
|
2,315,399
|
|
|
2,220,276
|
|
|
4.3
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
||
Other revenue
(1)
|
|
42,389
|
|
|
35,836
|
|
|
18.3
|
%
|
|
|
|
|
|
|
||
Total revenue
|
|
$
|
2,357,788
|
|
|
$
|
2,256,112
|
|
|
4.5
|
%
|
|
|
|
|
|
|
•
|
Benefits costs –
The cost of group health insurance and related employee benefits
increased
$12
per worksite employee per month, or
2.4%
, on a per covered employee basis compared to
2013
. The percentage of worksite employees covered under our health insurance plan was
71.7%
in
2014
and
72.1%
in
2013
. Please read “—Critical Accounting Policies and Estimates – Benefits Costs” for a discussion of our accounting for health insurance costs.
|
•
|
Workers’ compensation costs –
Workers’ compensation costs
increased
25.2%
, or
$8
per worksite employee per month, compared to
2013
. As a percentage of non-bonus payroll cost, workers’ compensation costs
increased
to
0.67%
in
2014
from
0.55%
in
2013
. During
2014
, we recorded reductions in workers’ compensation costs of
$2.9 million
, or
0.03%
of non-bonus payroll costs, for changes in estimated losses related to prior reporting periods, compared to
$9.3 million
, or
0.09%
of non-bonus payroll costs in
2013
. The
2014
period costs include the impact of a
1.0%
discount rate used to accrue workers’ compensation loss claims, compared to a
0.8%
discount rate used in the
2013
period. Please read “—Critical Accounting Policies and Estimates – Workers’ Compensation Costs” for a discussion of our accounting for workers’ compensation costs.
|
•
|
Payroll tax costs
– Payroll taxes
increased
4.0%
, or
$7
per worksite employee per month, compared to
2013
, due primarily to a
5.6%
increase
in total payroll cost in
2014
offset by lower state unemployment tax rates. Payroll taxes as a percentage of payroll cost
decreased
to
6.93%
in
2014
compared to
7.04%
in
2013
.
|
|
|
Year ended December 31
,
|
|
Year ended December 31
,
|
||||||||||||||||||
|
|
2014
|
|
2013
|
|
% Change
|
|
2014
|
|
2013
|
|
% Change
|
||||||||||
|
|
(in thousands)
|
|
(per worksite employee per month)
|
||||||||||||||||||
Salaries, wages and payroll taxes
|
|
$
|
200,118
|
|
|
$
|
181,444
|
|
|
10.3
|
%
|
|
$
|
127
|
|
|
$
|
119
|
|
|
6.7
|
%
|
Stock–based compensation
|
|
11,053
|
|
|
11,103
|
|
|
(0.5
|
)%
|
|
7
|
|
|
7
|
|
|
—
|
|
||||
Commissions
|
|
15,285
|
|
|
14,581
|
|
|
4.8
|
%
|
|
10
|
|
|
9
|
|
|
11.1
|
%
|
||||
Advertising
|
|
22,183
|
|
|
23,795
|
|
|
(6.8
|
)%
|
|
14
|
|
|
16
|
|
|
(12.5
|
)%
|
||||
General and administrative expenses
|
|
82,618
|
|
|
81,699
|
|
|
1.1
|
%
|
|
53
|
|
|
53
|
|
|
—
|
|
||||
Impairment charges
|
|
3,687
|
|
|
3,342
|
|
|
10.3
|
%
|
|
2
|
|
|
2
|
|
|
—
|
|
||||
Depreciation and amortization
|
|
21,387
|
|
|
21,064
|
|
|
1.5
|
%
|
|
14
|
|
|
14
|
|
|
—
|
|
||||
Total operating expenses
|
|
$
|
356,331
|
|
|
$
|
337,028
|
|
|
5.7
|
%
|
|
$
|
227
|
|
|
$
|
220
|
|
|
3.2
|
%
|
•
|
Salaries, wages and payroll taxes of corporate and sales staff
increased
10.3%
, or
$8
per worksite employee per month, compared to
2013
, primarily due to a
2.5%
rise in headcount and increased incentive compensation. Our incentive compensation expense accounted for approximately one half of the 10% year over year increase. The increase in incentive compensation expense during 2014 was the result of achieving our corporate incentive goals during the year; whereas our corporate incentive goals were not achieved during 2013.
|
•
|
Stock-based compensation
decreased
0.5%
, but remained flat on a per worksite employee per month basis, compared to
2013
. The stock-based compensation expense represents amortization of restricted stock awards granted to employees and the annual stock grant made to non-employee directors. Please read
Note 1
to the Consolidated Financial Statements, “
Accounting Policies
,” for additional information.
|
•
|
Commissions expense
increased
4.8%
, or
$1
per worksite employee per month, compared to
2013
.
|
•
|
Advertising costs
decreased
6.8%
, or
$2
per worksite employee per month, compared to
2013
, primarily due to decreased spending on radio, print media and television advertising.
|
•
|
General and administrative expenses
increased
1.1%
, but remained
flat
on a per worksite employee per month basis, compared to 2013. The increase was primarily due to professional services costs related to our investment in Human Capital Management technology, offset by decreases in travel and training.
|
•
|
Depreciation and amortization expense
increased
1.5%
, but remained flat on a per worksite employee per month basis compared to
2013
.
|
|
|
Year ended December 31,
|
|||||||||
|
|
2013
|
|
2012
|
|
% Change
|
|||||
|
|
(in thousands, except per share and statistical data)
|
|||||||||
Revenues (gross billings of $13.462 billion and $12.992 billion, less worksite employee payroll cost of $11.206 billion and $10.833 billion, respectively)
|
|
$
|
2,256,112
|
|
|
$
|
2,158,824
|
|
|
4.5
|
%
|
Gross profit
|
|
393,251
|
|
|
382,221
|
|
|
2.9
|
%
|
||
Operating expenses
(1)
|
|
337,028
|
|
|
314,727
|
|
|
7.1
|
%
|
||
Operating income
|
|
56,223
|
|
|
67,494
|
|
|
(16.7
|
)%
|
||
Other income (expense)
|
|
(2,491
|
)
|
(2)
|
796
|
|
|
(412.9
|
)%
|
||
Net income
|
|
32,032
|
|
(3)
|
40,402
|
|
|
(20.7
|
)%
|
||
Diluted net income per share of common stock
|
|
1.25
|
|
|
1.56
|
|
(4)
|
(19.9
|
)%
|
||
Adjusted net income
(5)
|
|
35,670
|
|
|
42,862
|
|
|
(16.8
|
)%
|
||
Adjusted diluted net income per share of common stock
(5)
|
|
1.39
|
|
|
1.67
|
|
|
(16.8
|
)%
|
||
Adjusted EBITDA
(5)
|
|
92,303
|
|
|
100,899
|
|
|
(8.5
|
)%
|
||
|
|
|
|
|
|
|
|||||
Statistical Data:
|
|
|
|
|
|
|
|
||||
Average number of worksite employees paid per month
|
|
127,517
|
|
|
125,650
|
|
|
1.5
|
%
|
||
Revenues per worksite employee per month
(6)
|
|
$
|
1,474
|
|
|
$
|
1,432
|
|
|
2.9
|
%
|
Gross profit per worksite employee per month
|
|
257
|
|
|
253
|
|
|
1.6
|
%
|
||
Operating expenses per worksite employee per month
|
|
220
|
|
|
208
|
|
|
5.8
|
%
|
||
Operating income per worksite employee per month
|
|
37
|
|
|
45
|
|
|
(17.8
|
)%
|
||
Net income per worksite employee per month
|
|
21
|
|
|
27
|
|
|
(22.2
|
)%
|
(1)
|
Includes non-cash impairment charges of $3.3 million and $4.2 million in the fourth quarters of 2013 and 2012, respectively. Please read
Note 5
to the Consolidated Financial Statements, “
Goodwill and Other Intangible Assets
,” for additional information.
|
(2)
|
Includes a non-cash impairment charge in the second quarter of 2013 of
$2.7 million
. Please read
Note 6
to the Consolidated Financial Statements, “
Other Assets
,” for additional information.
|
(3)
|
Includes a $2.0 million tax benefit in the fourth quarter of 2013 related to tax years 2009 through 2012. Please read
Note 9
to the Consolidated Financial Statements, “
Income Taxes
,” for additional information.
|
(4)
|
Includes the impact of dividends exceeding earnings under the two-class method, resulting in a $0.01 earnings per share decrease in 2012. Please read
Note 12
, “
Net Income Per Share
,” for additional information.
|
(5)
|
Please read Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations –Non-GAAP Financial Measures” for additional information.
|
(6)
|
Gross billings of
$8,797
and
$8,617
per worksite employee per month, less payroll cost of
$7,323
and
$7,185
per worksite employee per month, respectively.
|
|
|
Year ended December 31,
|
|
Year ended December 31,
|
|||||||||||||
|
|
2013
|
|
2012
|
|
% Change
|
|
2013
|
|
2012
|
|||||||
|
|
(in thousands)
|
|
(% of total revenue)
|
|||||||||||||
Northeast
|
|
$
|
577,280
|
|
|
$
|
560,455
|
|
|
3.0
|
%
|
|
26.0
|
%
|
|
26.3
|
%
|
Southeast
|
|
212,664
|
|
|
198,049
|
|
|
7.4
|
%
|
|
9.6
|
%
|
|
9.3
|
%
|
||
Central
|
|
329,110
|
|
|
312,373
|
|
|
5.4
|
%
|
|
14.8
|
%
|
|
14.7
|
%
|
||
Southwest
|
|
613,175
|
|
|
595,379
|
|
|
3.0
|
%
|
|
27.6
|
%
|
|
28.0
|
%
|
||
West
|
|
488,047
|
|
|
461,427
|
|
|
5.8
|
%
|
|
22.0
|
%
|
|
21.7
|
%
|
||
|
|
2,220,276
|
|
|
2,127,683
|
|
|
4.4
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
||
Other revenue
(1)
|
|
35,836
|
|
|
31,141
|
|
|
15.1
|
%
|
|
|
|
|
|
|
||
Total revenue
|
|
$
|
2,256,112
|
|
|
$
|
2,158,824
|
|
|
4.5
|
%
|
|
|
|
|
|
|
•
|
Benefits costs –
The cost of group health insurance and related employee benefits increased
$29
per worksite employee per month, or
4.7%
, on a per covered employee basis compared to
2012
. The percentage of worksite employees covered under our health insurance plan was
72.1%
in both
2013
and
2012
. Please read “—Critical Accounting Policies and Estimates – Benefits Costs” for a discussion of our accounting for health insurance costs.
|
•
|
Workers’ compensation costs –
Workers’ compensation costs increased
6.3%
, or
$2
per worksite employee per month compared to
2012
. As a percentage of non-bonus payroll cost, workers’ compensation costs increased to
0.55%
in
2013
|
•
|
Payroll tax costs
– Payroll taxes increased
3.2%
, or
$9
per worksite employee per month compared to
2012
, due primarily to a
3.4%
increase in total payroll cost in
2013
and a $2.9 million, or $2 per worksite employee per month credit recognized in 2012 related to a Pennsylvania tax matter. Payroll taxes as a percentage of payroll cost decreased to
7.04%
in
2013
compared to
7.05%
in
2012
.
|
|
|
Year ended December 31
,
|
|
Year ended December 31,
|
||||||||||||||||||
|
|
2013
|
|
2012
|
|
% Change
|
|
2013
|
|
2012
|
|
% Change
|
||||||||||
|
|
(in thousands)
|
|
(per worksite employee per month)
|
||||||||||||||||||
Salaries, wages and payroll taxes
|
|
$
|
181,444
|
|
|
$
|
168,807
|
|
|
7.5
|
%
|
|
$
|
119
|
|
|
$
|
112
|
|
|
6.3
|
%
|
Stock–based compensation
|
|
11,103
|
|
|
9,814
|
|
|
13.1
|
%
|
|
7
|
|
|
7
|
|
|
—
|
|
||||
Commissions
|
|
14,581
|
|
|
14,515
|
|
|
0.5
|
%
|
|
9
|
|
|
10
|
|
|
(10.0
|
)%
|
||||
Advertising
|
|
23,795
|
|
|
21,586
|
|
|
10.2
|
%
|
|
16
|
|
|
14
|
|
|
14.3
|
%
|
||||
General and administrative expenses
|
|
81,699
|
|
|
77,564
|
|
|
5.3
|
%
|
|
53
|
|
|
50
|
|
|
6.0
|
%
|
||||
Impairment charges
|
|
3,342
|
|
|
4,191
|
|
|
(20.3
|
)%
|
|
2
|
|
|
3
|
|
|
(33.3
|
)%
|
||||
Depreciation and amortization
|
|
21,064
|
|
|
18,250
|
|
|
15.4
|
%
|
|
14
|
|
|
12
|
|
|
16.7
|
%
|
||||
Total operating expenses
|
|
$
|
337,028
|
|
|
$
|
314,727
|
|
|
7.1
|
%
|
|
$
|
220
|
|
|
$
|
208
|
|
|
5.8
|
%
|
•
|
Salaries, wages and payroll taxes of corporate and sales staff
increased
7.5%
, or
$7
per worksite employee per month compared to
2012
, primarily due to a 6.4% rise in headcount, which includes additions in Business Performance Advisors, service and technology personnel.
|
•
|
Stock-based compensation
increased
13.1%
, but remained flat on a per worksite employee per month basis compared to
2012
, due primarily to an increase in the weighted average market value on the date of grant associated with restricted stock awards. The stock-based compensation expense represents amortization of restricted stock awards granted to employees and the annual stock grant made to non-employee directors. Please read
Note 1
to the Consolidated Financial Statements, “
Accounting Policies
,” for additional information.
|
•
|
Commissions expense
increased
0.5%
, but decreased $1 on a per worksite employee per month basis, compared to
2012
.
|
•
|
Advertising costs
increased
10.2%
, or
$2
per worksite employee per month compared to
2012
, primarily due to increased spending on health care reform-related advertising and business promotions.
|
•
|
General and administrative expenses
increased
5.3%
, or
$3
per worksite employee per month, primarily due to increased travel, training, utilities, and repairs and maintenance, partially offset by reductions in professional services.
|
•
|
Depreciation and amortization expense
increased
15.4%
, or
$2
per worksite employee per month compared to
2012
, primarily due to investments in our technology infrastructure and amortization associated with our Strategic Business investments.
|
|
|
Year ended December 31,
|
||||||||||
|
|
2014
|
|
2013
|
|
2012
|
||||||
|
|
(in thousands, except per
worksite employee)
|
||||||||||
Payroll cost (GAAP)
|
|
$
|
11,829,133
|
|
|
$
|
11,205,652
|
|
|
$
|
10,832,966
|
|
Less: bonus payroll cost
|
|
1,509,010
|
|
|
1,274,575
|
|
|
1,326,442
|
|
|||
Non-bonus payroll cost
|
|
$
|
10,320,123
|
|
|
$
|
9,931,077
|
|
|
$
|
9,506,524
|
|
|
|
|
|
|
|
|
||||||
Payroll cost per worksite employee (GAAP)
|
|
$
|
7,541
|
|
|
$
|
7,323
|
|
|
$
|
7,185
|
|
Less: Bonus payroll cost per worksite employee
|
|
962
|
|
|
833
|
|
|
880
|
|
|||
Non-bonus payroll cost per worksite employee
|
|
$
|
6,579
|
|
|
$
|
6,490
|
|
|
$
|
6,305
|
|
|
|
Year-ended December 31,
|
||||||||||||||||||
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Net income (GAAP)
|
|
$
|
28,004
|
|
|
$
|
32,032
|
|
|
$
|
40,402
|
|
|
$
|
30,470
|
|
|
$
|
22,440
|
|
Income tax expense
|
|
19,623
|
|
|
21,700
|
|
|
27,888
|
|
|
20,305
|
|
|
15,581
|
|
|||||
Interest expense
|
|
370
|
|
|
383
|
|
|
354
|
|
|
108
|
|
|
—
|
|
|||||
Depreciation and amortization
|
|
21,387
|
|
|
21,064
|
|
|
18,250
|
|
|
15,218
|
|
|
14,907
|
|
|||||
EBITDA
|
|
69,384
|
|
|
75,179
|
|
|
86,894
|
|
|
66,101
|
|
|
52,928
|
|
|||||
Impairment charges
|
|
3,687
|
|
|
6,021
|
|
|
4,191
|
|
|
—
|
|
|
—
|
|
|||||
Stock-based compensation
|
|
11,053
|
|
|
11,103
|
|
|
9,814
|
|
|
8,601
|
|
|
8,126
|
|
|||||
Non-operational items
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,496
|
|
|
—
|
|
|||||
Adjusted EBITDA
|
|
$
|
84,124
|
|
|
$
|
92,303
|
|
|
$
|
100,899
|
|
|
$
|
82,198
|
|
|
$
|
61,054
|
|
|
|
Year-ended December 31,
|
||||||||||||||||||
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Net income (GAAP)
|
|
$
|
28,004
|
|
|
$
|
32,032
|
|
|
$
|
40,402
|
|
|
$
|
30,470
|
|
|
$
|
22,440
|
|
Impairment charges, net of tax
|
|
2,317
|
|
|
5,620
|
|
|
2,460
|
|
|
—
|
|
|
—
|
|
|||||
Non-operational items, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,493
|
|
|
—
|
|
|||||
Tax credit
|
|
—
|
|
|
(1,982
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Adjusted net income
|
|
$
|
30,321
|
|
|
$
|
35,670
|
|
|
$
|
42,862
|
|
|
$
|
34,963
|
|
|
$
|
22,440
|
|
|
|
Year-ended December 31,
|
||||||||||||||||||
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Diluted net income per share of common stock (GAAP)
|
|
$
|
1.05
|
|
|
$
|
1.25
|
|
|
$
|
1.56
|
|
|
$
|
1.16
|
|
|
$
|
0.86
|
|
Impairment charges, net of tax
|
|
0.09
|
|
|
0.22
|
|
|
0.10
|
|
|
—
|
|
|
—
|
|
|||||
Impact of dividends exceeding earnings
|
|
0.05
|
|
|
—
|
|
|
0.01
|
|
|
—
|
|
|
—
|
|
|||||
Non-operational items, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.17
|
|
|
—
|
|
|||||
Impact of tax credit
|
|
—
|
|
|
(0.08
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Adjusted diluted net income per share of common stock
|
|
$
|
1.19
|
|
|
$
|
1.39
|
|
|
$
|
1.67
|
|
|
$
|
1.33
|
|
|
$
|
0.86
|
|
•
|
Timing of client payments / payroll levels –
We typically collect our comprehensive service fee, along with the client’s payroll funding, from clients at least one day prior to the payment of worksite employee payrolls and associated payroll taxes. Therefore, the last business day of a reporting period has a substantial impact on our reporting of operating cash flows. For example, many worksite employees are paid on Fridays and at month-end; therefore, operating cash flows decrease in the reporting periods that end on a Friday. In the year ended
December 31, 2014
, the last business day of the reporting period ended on a
Wednesday
, client prepayments were
$87.9 million
and accrued worksite employee payroll was
$192.4 million
. In the year ended
December 31, 2013
, which ended on a
Tuesday
, client prepayments were
$24.5 million
and accrued worksite employee payroll was
$173.8 million
.
|
•
|
Workers’ compensation plan funding
– Under our workers’ compensation insurance arrangements, we make monthly payments to the carriers comprised of premium costs and funds to be set aside for payment of future claims (“claim funds”). These pre-determined amounts are stipulated in our agreements with the carriers and are based primarily on anticipated worksite employee payroll levels and workers’ compensation loss rates during the policy year. Changes in payroll levels from those that were anticipated in the arrangements can result in changes in the amount of the cash payments, which will impact our reporting of operating cash flows. Our claim funds paid, based upon anticipated worksite employee payroll levels and workers’ compensation loss rates, were
$58.3 million
in
2014
and
$50.0 million
in
2013
. However, our estimates of workers’ compensation loss costs were
$54.0 million
and
$41.7 million
in
2014
and
2013
, respectively. During 2014 and 2013, we paid the insurance carrier an additional
$7.2 million
and
$5.0 million
, respectively in claim funds for prior policy years, which resulted in a decrease to working capital.
|
•
|
Medical plan funding –
Our health care contract with United establishes participant cash funding rates 90 days in advance of the beginning of a reporting quarter. Therefore, changes in the participation level of the United Plan have a direct impact on our operating cash flows. In addition, changes to the funding rates, which are determined solely by United based primarily upon recent claim history and anticipated cost trends, also have a significant impact on our operating cash flows. Since inception of the United plan, premiums paid and owed to United have exceeded Plan Costs, resulting in an
$23.5 million
surplus,
$14.5 million
of which is reflected as a current asset, and
$9.0 million
of which is reflected as a long-term asset on our Consolidated Balance Sheets at
December 31, 2014
. The premiums owed to United at
December 31, 2014
, were
$15.0 million
, which is included in accrued health insurance costs, a current liability, on our Consolidated Balance Sheets.
|
•
|
Operating results
– Our net income has a significant impact on our operating cash flows. Our net income decreased
12.6%
to
$28.0 million
in
2014
from
$32.0 million
in
2013
. Please read “Results of Operations
– Year Ended
December 31, 2014
Compared to Year Ended
December 31, 2013
.
”
|
|
|
|
|
Less than
|
|
|
|
|
|
More than
|
||||||||||
Contractual obligations
|
|
Total
|
|
1 Year
|
|
1-3 Years
|
|
3-5 Years
|
|
5 Years
|
||||||||||
Non-cancelable operating leases
|
|
$
|
50,042
|
|
|
$
|
13,364
|
|
|
$
|
20,355
|
|
|
$
|
11,011
|
|
|
$
|
5,312
|
|
Purchase obligations
(1)
|
|
29,397
|
|
|
10,224
|
|
|
12,078
|
|
|
4,402
|
|
|
2,693
|
|
|||||
Other long-term liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accrued workers’ compensation claim costs
(2)
|
|
136,088
|
|
|
58,031
|
|
|
37,368
|
|
|
24,840
|
|
|
15,849
|
|
|||||
Total contractual cash obligations
|
|
$
|
215,527
|
|
|
$
|
81,619
|
|
|
$
|
69,801
|
|
|
$
|
40,253
|
|
|
$
|
23,854
|
|
(1)
|
The table includes purchase obligations associated with non-cancelable contracts individually greater than $100,000 and one year.
|
(2)
|
Accrued workers’ compensation claim costs include the short and long-term amounts. For more information, please read, “Critical Accounting Policies and Estimates – Workers’ Compensation Costs.”
|
|
|
Principal
Maturities
|
|
Coupon
Interest Rate
|
|
Effective
Yield
|
||||
2015
|
|
$
|
12,895
|
|
|
4.72
|
%
|
|
0.19
|
%
|
2016
|
|
13,775
|
|
|
5.18
|
%
|
|
0.37
|
%
|
|
2017
|
|
1,135
|
|
|
5.05
|
%
|
|
0.58
|
%
|
|
Total
|
|
$
|
27,805
|
|
|
|
|
|
|
|
Fair Market Value
|
|
$
|
28,631
|
|
|
|
|
|
|
|
|
3.1
|
Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form S-1 (No. 33-96952)).
|
|
3.2
|
Certificate of Ownership and Merger dated March 3, 2011 (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 10-Q for the quarter ended March 31, 2011).
|
|
3.3
|
Amended and Restated Bylaws of Insperity, Inc. dated February 17, 2014 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on February 18, 2014).
|
|
3.4
|
Certificate of Designation of Series A Junior Participating Preferred Stock setting forth the terms of the Preferred Stock (included as Exhibit A to the Rights Agreement).
|
|
4.1
|
Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-1 (No. 33-96952)).
|
|
4.2
|
Rights Agreement dated as of November 13, 2007 between Insperity, Inc. and Mellon Investor Services, LLC, as Rights Agent (the “Rights Agreement”) (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on November 16, 2007).
|
|
4.3
|
Form of Rights Certificate (included as Exhibit B to the Rights Agreement).
|
|
10.1†
|
Insperity, Inc. 2001 Incentive Plan, as amended and restated (incorporated by reference to Appendix A to the Registrant’s definitive proxy statement on Schedule 14A filed on March 18, 2009 (No. 1-13998)).
|
|
10.2†
|
Form of Incentive Stock Option Agreement (2001 Plan – 3 year vesting) (incorporated by reference to Exhibit 10.8 to the Registrant’s Form 10-K for the year ended December 31, 2004).
|
|
10.3†
|
Form of Incentive Stock Option Agreement (2001 Plan – 5 year vesting) (incorporated by reference to Exhibit 10.9 to the Registrant’s Form 10-K for the year ended December 31, 2004).
|
|
10.4†
|
Form of Director Stock Option Agreement (Annual Grant) (incorporated by reference to Exhibit 10.11 to the Registrant’s Form 10-K for the year ended December 31, 2004).
|
|
10.5†
|
Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10.12 to the Registrant’s Form 10-K for the year ended December 31, 2004).
|
|
10.6†
|
Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended September 30, 2012).
|
|
10.7†
|
Form of Director Stock Option Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended September 30, 2012).
|
|
10.8†
|
Form of Director Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q for the quarter ended September 30, 2012).
|
|
10.9
|
Insperity, Inc. Nonqualified Stock Option Plan (incorporated by reference to Exhibit 99.6 to the Registrant’s Registration Statement on Form S-8 (No. 333-85151)).
|
|
10.10
|
First Amendment to Insperity, Inc. Nonqualified Stock Option Plan, effective August 7, 2001 (incorporated by reference to Exhibit 10.8 to the Registrant’s Form 10-K for the year ended December 31, 2002).
|
|
10.11
|
Second Amendment to Insperity, Inc. Nonqualified Stock Option Plan, effective January 28, 2003 (incorporated by reference to Exhibit 10.9 to the Registrant’s Form 10-K for the year ended December 31, 2002).
|
|
10.12†
|
Directors Compensation Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 10-Q for the quarter ended September 30, 2012).
|
|
10.13†
|
Board of Directors Compensation Arrangements (incorporated by reference to the Registrant’s Form 8-K dated February 7, 2005).
|
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
*
|
Filed herewith.
|
|
**
|
Furnished with this report.
|
(1)
|
Attached as exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Operations for the years ended
December 31, 2014
,
2013
and
2012
; (ii) the Consolidated Balance Sheets at
December 31, 2014
and
2013
; (iii) the Consolidated Statements of Comprehensive Income for the years ended
December 31, 2014
,
2013
and
2012
; (iv) the Consolidated Statements of Stockholders’ Equity for the years ended
December 31, 2014
,
2013
and
2012
; and (v) the Consolidated Statements of Cash Flows for the years ended
December 31, 2014
,
2013
and
2012
.
|
†
|
Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K.
|
(+)
|
Confidential treatment has been requested for this exhibit and confidential portions have been filed with the Securities and Exchange Commission.
|
|
INSPERITY, INC.
|
|
|
|
|
|
By
:
|
/s/ Douglas S. Sharp
|
|
|
Douglas S. Sharp
|
|
|
Senior
Vice President of Finance
|
|
|
Chief Financial Officer and Treasurer
|
Signature
|
|
Title
|
|
|
|
|
|
|
/s/ Paul J. Sarvadi
|
|
Chairman of the Board, Chief Executive Officer
|
Paul J. Sarvadi
|
|
and Director
|
|
|
(Principal Executive Officer)
|
|
|
|
/s/ Richard G. Rawson
|
|
President and Director
|
Richard G. Rawson
|
|
|
|
|
|
|
|
|
/s/ Douglas S. Sharp
|
|
Senior Vice President of Finance
|
Douglas S. Sharp
|
|
Chief Financial Officer and Treasurer
|
|
|
(Principal Financial Officer)
|
|
|
|
*
|
|
Director
|
Michael W. Brown
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
Jack M. Fields
,
Jr.
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
Eli Jones
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
Carol R. Kaufman
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
Paul S. Lattanzio
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
Austin P. Young
|
|
|
|
|
|
|
|
|
* By: /s/ Daniel D. Herink
|
|
|
Daniel D. Herink, attorney-in-fact
|
|
|
Report of Independent Registered Public Accounting Firm
|
F-2
|
|
|
Management’s Report on Internal Control
|
F-3
|
|
|
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
|
F-4
|
|
|
Consolidated Balance Sheets as of December 31, 2014 and 2013
|
F-5
|
|
|
Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012
|
F-7
|
|
|
Consolidated Statements of Comprehensive Income for the years ended December 31, 2014, 2013 and 2012
|
F-8
|
|
|
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2014, 2013 and 2012
|
F-9
|
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012
|
F-10
|
|
|
Notes to Consolidated Financial Statements
|
F-12
|
|
/s/ Ernst & Young LLP
|
/s/ Paul J. Sarvadi
|
|
/s/ Douglas S. Sharp
|
Paul J. Sarvadi
|
|
Douglas S. Sharp
|
Chairman of the Board and
|
|
Senior Vice President of Finance
|
Chief Executive Officer
|
|
Chief Financial Officer and Treasurer
|
|
/s/ Ernst & Young LLP
|
|
|
December 31, 2014
|
|
December 31, 2013
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
276,456
|
|
|
$
|
225,755
|
|
Restricted cash
|
|
44,040
|
|
|
51,928
|
|
||
Marketable securities
|
|
28,631
|
|
|
46,340
|
|
||
Accounts receivable, net:
|
|
|
|
|
|
|
||
Trade
|
|
12,010
|
|
|
7,453
|
|
||
Unbilled
|
|
160,154
|
|
|
199,628
|
|
||
Other
|
|
2,952
|
|
|
2,928
|
|
||
Prepaid insurance
|
|
21,301
|
|
|
10,638
|
|
||
Other current assets
|
|
17,649
|
|
|
12,053
|
|
||
Income taxes receivable
|
|
—
|
|
|
409
|
|
||
Deferred income taxes
|
|
6,316
|
|
|
8,185
|
|
||
Total current assets
|
|
569,509
|
|
|
565,317
|
|
||
|
|
|
|
|
||||
Property and equipment:
|
|
|
|
|
|
|
||
Land
|
|
5,214
|
|
|
4,115
|
|
||
Buildings and improvements
|
|
70,471
|
|
|
67,939
|
|
||
Computer hardware and software
|
|
89,204
|
|
|
85,241
|
|
||
Software development costs
|
|
41,314
|
|
|
38,522
|
|
||
Furniture and fixtures
|
|
38,604
|
|
|
36,479
|
|
||
Aircraft
|
|
35,879
|
|
|
35,879
|
|
||
|
|
280,686
|
|
|
268,175
|
|
||
Accumulated depreciation and amortization
|
|
(196,341
|
)
|
|
(181,760
|
)
|
||
Total property and equipment, net
|
|
84,345
|
|
|
86,415
|
|
||
|
|
|
|
|
||||
Other assets:
|
|
|
|
|
|
|
||
Prepaid health insurance
|
|
9,000
|
|
|
9,000
|
|
||
Deposits – health insurance
|
|
3,700
|
|
|
3,700
|
|
||
Deposits – workers’ compensation
|
|
113,934
|
|
|
81,878
|
|
||
Goodwill and other intangible assets, net
|
|
14,457
|
|
|
18,434
|
|
||
Other assets
|
|
1,725
|
|
|
1,816
|
|
||
Total other assets
|
|
142,816
|
|
|
114,828
|
|
||
Total assets
|
|
$
|
796,670
|
|
|
$
|
766,560
|
|
|
|
December 31, 2014
|
|
December 31, 2013
|
||||
Current liabilities:
|
|
|
|
|
||||
Accounts payable
|
|
$
|
4,674
|
|
|
$
|
2,678
|
|
Payroll taxes and other payroll deductions payable
|
|
176,341
|
|
|
165,604
|
|
||
Accrued worksite employee payroll cost
|
|
192,396
|
|
|
173,801
|
|
||
Accrued health insurance costs
|
|
18,329
|
|
|
5,103
|
|
||
Accrued workers’ compensation costs
|
|
45,592
|
|
|
52,930
|
|
||
Accrued corporate payroll and commissions
|
|
32,644
|
|
|
21,611
|
|
||
Other accrued liabilities
|
|
22,444
|
|
|
14,960
|
|
||
Income tax payable
|
|
4,031
|
|
|
—
|
|
||
Total current liabilities
|
|
496,451
|
|
|
436,687
|
|
||
|
|
|
|
|
||||
Noncurrent liabilities:
|
|
|
|
|
|
|
||
Accrued workers’ compensation costs
|
|
92,048
|
|
|
68,905
|
|
||
Deferred income taxes
|
|
4,075
|
|
|
7,696
|
|
||
Total noncurrent liabilities
|
|
96,123
|
|
|
76,601
|
|
||
|
|
|
|
|
||||
Commitments and contingencies
|
|
|
|
|
|
|
||
|
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
|
|
|
||
Preferred stock, par value $0.01 per share:
|
|
|
|
|
|
|
||
Shares authorized – 20,000
|
|
|
|
|
|
|
||
Shares issued and outstanding – none
|
|
—
|
|
|
—
|
|
||
Common stock, par value $0.01 per share:
|
|
|
|
|
|
|
||
Shares authorized – 60,000
|
|
|
|
|
|
|
||
Shares issued – 30,758 at December 31, 2014 and 2013
|
|
308
|
|
|
308
|
|
||
Additional paid-in capital
|
|
137,769
|
|
|
135,653
|
|
||
Treasury stock, at cost – 5,425 and 5,175 at December 31, 2014 and 2013, respectively
|
|
(148,465
|
)
|
|
(138,688
|
)
|
||
Accumulated other comprehensive income, net of tax
|
|
3
|
|
|
29
|
|
||
Retained earnings
|
|
214,481
|
|
|
255,970
|
|
||
Total stockholders’ equity
|
|
204,096
|
|
|
253,272
|
|
||
Total liabilities and stockholders’ equity
|
|
$
|
796,670
|
|
|
$
|
766,560
|
|
|
|
Year ended December 31,
|
||||||||||
|
|
2014
|
|
2013
|
|
2012
|
||||||
Revenues (gross billings of $14.187 billion, $13.462 billion and $12.992 billion,
less worksite employee payroll cost of $11.829 billion, $11.206 billion and $10.833 billion, respectively) |
|
$
|
2,357,788
|
|
|
$
|
2,256,112
|
|
|
$
|
2,158,824
|
|
Direct costs:
|
|
|
|
|
|
|
|
|
|
|||
Payroll taxes, benefits and workers’ compensation costs
|
|
1,953,983
|
|
|
1,862,861
|
|
|
1,776,603
|
|
|||
Gross profit
|
|
403,805
|
|
|
393,251
|
|
|
382,221
|
|
|||
|
|
|
|
|
|
|
||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|||
Salaries, wages and payroll taxes
|
|
200,118
|
|
|
181,444
|
|
|
168,807
|
|
|||
Stock-based compensation
|
|
11,053
|
|
|
11,103
|
|
|
9,814
|
|
|||
Commissions
|
|
15,285
|
|
|
14,581
|
|
|
14,515
|
|
|||
Advertising
|
|
22,183
|
|
|
23,795
|
|
|
21,586
|
|
|||
General and administrative expenses
|
|
82,618
|
|
|
81,699
|
|
|
77,564
|
|
|||
Impairment charges
|
|
3,687
|
|
|
3,342
|
|
|
4,191
|
|
|||
Depreciation and amortization
|
|
21,387
|
|
|
21,064
|
|
|
18,250
|
|
|||
|
|
356,331
|
|
|
337,028
|
|
|
314,727
|
|
|||
Operating income
|
|
47,474
|
|
|
56,223
|
|
|
67,494
|
|
|||
|
|
|
|
|
|
|
||||||
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|||
Interest, net
|
|
106
|
|
|
158
|
|
|
609
|
|
|||
Other, net
|
|
47
|
|
|
(2,649
|
)
|
|
187
|
|
|||
|
|
|
|
|
|
|
||||||
Income before income tax expense
|
|
47,627
|
|
|
53,732
|
|
|
68,290
|
|
|||
|
|
|
|
|
|
|
||||||
Income tax expense
|
|
19,623
|
|
|
21,700
|
|
|
27,888
|
|
|||
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
28,004
|
|
|
$
|
32,032
|
|
|
$
|
40,402
|
|
|
|
|
|
|
|
|
||||||
Less distributed and undistributed earnings allocated to participating securities
|
|
(2,002
|
)
|
|
(916
|
)
|
|
(1,224
|
)
|
|||
|
|
|
|
|
|
|
||||||
Net income allocated to common shares
|
|
$
|
26,002
|
|
|
$
|
31,116
|
|
|
$
|
39,178
|
|
|
|
|
|
|
|
|
||||||
Basic net income per share of common stock
|
|
$
|
1.05
|
|
|
$
|
1.25
|
|
|
$
|
1.57
|
|
|
|
|
|
|
|
|
||||||
Diluted net income per share of common stock
|
|
$
|
1.05
|
|
|
$
|
1.25
|
|
|
$
|
1.56
|
|
|
|
Year ended December 31,
|
||||||||||
|
|
2014
|
|
2013
|
|
2012
|
||||||
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
28,004
|
|
|
$
|
32,032
|
|
|
$
|
40,402
|
|
|
|
|
|
|
|
|
||||||
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
||||||
Unrealized gain (loss) on available-for-sale securities, net of tax
|
|
(26
|
)
|
|
13
|
|
|
(8
|
)
|
|||
|
|
|
|
|
|
|
||||||
Comprehensive income
|
|
$
|
27,978
|
|
|
$
|
32,045
|
|
|
$
|
40,394
|
|
|
|
Common Stock
Issued
|
|
Additional Paid-In Capital
|
|
Treasury Stock
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Retained Earnings
|
|
|
|||||||||||||||
|
|
Shares
|
|
Amount
|
|
|
|
|
|
Total
|
|||||||||||||||||
Balance at December 31, 2011
|
|
30,839
|
|
|
$
|
309
|
|
|
$
|
135,871
|
|
|
$
|
(134,647
|
)
|
|
$
|
24
|
|
|
$
|
243,650
|
|
|
$
|
245,207
|
|
Purchase of treasury stock, at cost
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,773
|
)
|
|
—
|
|
|
—
|
|
|
(13,773
|
)
|
||||||
Repurchase of common stock
|
|
(81
|
)
|
|
(1
|
)
|
|
(3,161
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,162
|
)
|
||||||
Exercise of stock options
|
|
—
|
|
|
—
|
|
|
(1,630
|
)
|
|
3,879
|
|
|
—
|
|
|
—
|
|
|
2,249
|
|
||||||
Income tax benefit from stock-based compensation, net
|
|
—
|
|
|
—
|
|
|
1,751
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,751
|
|
||||||
Stock-based compensation expense
|
|
—
|
|
|
—
|
|
|
289
|
|
|
9,525
|
|
|
—
|
|
|
—
|
|
|
9,814
|
|
||||||
Other
|
|
—
|
|
|
—
|
|
|
87
|
|
|
1,066
|
|
|
—
|
|
|
—
|
|
|
1,153
|
|
||||||
Dividends paid
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(42,728
|
)
|
|
(42,728
|
)
|
||||||
Unrealized loss on marketable securities, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
(8
|
)
|
||||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40,402
|
|
|
40,402
|
|
||||||
Balance at December 31, 2012
|
|
30,758
|
|
|
$
|
308
|
|
|
$
|
133,207
|
|
|
$
|
(133,950
|
)
|
|
$
|
16
|
|
|
$
|
241,324
|
|
|
$
|
240,905
|
|
Purchase of treasury stock, at cost
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17,229
|
)
|
|
—
|
|
|
—
|
|
|
(17,229
|
)
|
||||||
Exercise of stock options
|
|
—
|
|
|
—
|
|
|
(790
|
)
|
|
2,238
|
|
|
—
|
|
|
—
|
|
|
1,448
|
|
||||||
Income tax benefit from stock-based compensation, net
|
|
—
|
|
|
—
|
|
|
1,259
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,259
|
|
||||||
Stock-based compensation expense
|
|
—
|
|
|
—
|
|
|
1,798
|
|
|
9,305
|
|
|
—
|
|
|
—
|
|
|
11,103
|
|
||||||
Other
|
|
—
|
|
|
—
|
|
|
179
|
|
|
948
|
|
|
—
|
|
|
—
|
|
|
1,127
|
|
||||||
Dividends paid
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17,386
|
)
|
|
(17,386
|
)
|
||||||
Unrealized gain on marketable securities, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
13
|
|
||||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32,032
|
|
|
32,032
|
|
||||||
Balance at December 31, 2013
|
|
30,758
|
|
|
$
|
308
|
|
|
$
|
135,653
|
|
|
$
|
(138,688
|
)
|
|
$
|
29
|
|
|
$
|
255,970
|
|
|
$
|
253,272
|
|
Purchase of treasury stock, at cost
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(20,769
|
)
|
|
—
|
|
|
—
|
|
|
(20,769
|
)
|
||||||
Exercise of stock options
|
|
—
|
|
|
—
|
|
|
(180
|
)
|
|
459
|
|
|
—
|
|
|
—
|
|
|
279
|
|
||||||
Income tax benefit from stock-based compensation, net
|
|
—
|
|
|
—
|
|
|
488
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
488
|
|
||||||
Stock-based compensation expense
|
|
—
|
|
|
—
|
|
|
1,592
|
|
|
9,461
|
|
|
—
|
|
|
—
|
|
|
11,053
|
|
||||||
Other
|
|
—
|
|
|
—
|
|
|
216
|
|
|
1,072
|
|
|
—
|
|
|
—
|
|
|
1,288
|
|
||||||
Dividends paid
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(69,493
|
)
|
|
(69,493
|
)
|
||||||
Unrealized loss on marketable securities, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(26
|
)
|
|
—
|
|
|
(26
|
)
|
||||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
28,004
|
|
|
28,004
|
|
||||||
Balance at December 31, 2014
|
|
30,758
|
|
|
$
|
308
|
|
|
$
|
137,769
|
|
|
$
|
(148,465
|
)
|
|
$
|
3
|
|
|
$
|
214,481
|
|
|
$
|
204,096
|
|
|
|
Year ended December 31,
|
||||||||||
|
|
2014
|
|
2013
|
|
2012
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
28,004
|
|
|
$
|
32,032
|
|
|
$
|
40,402
|
|
Adjustments to reconcile net income to net cash provided by operating
activities: |
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization
|
|
21,387
|
|
|
21,064
|
|
|
18,250
|
|
|||
Impairment charges
|
|
3,687
|
|
|
6,021
|
|
|
4,191
|
|
|||
Amortization of marketable securities
|
|
1,891
|
|
|
2,119
|
|
|
2,295
|
|
|||
Stock-based compensation
|
|
11,053
|
|
|
11,103
|
|
|
9,814
|
|
|||
Deferred income taxes
|
|
(1,733
|
)
|
|
(2,288
|
)
|
|
(5,743
|
)
|
|||
Changes in operating assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
|
|
|||
Restricted cash
|
|
7,888
|
|
|
(4,779
|
)
|
|
(2,412
|
)
|
|||
Accounts receivable
|
|
34,893
|
|
|
(19,623
|
)
|
|
(19,453
|
)
|
|||
Prepaid insurance
|
|
(10,663
|
)
|
|
4,982
|
|
|
5,680
|
|
|||
Other current assets
|
|
(5,596
|
)
|
|
(2,402
|
)
|
|
1,837
|
|
|||
Other assets
|
|
(32,013
|
)
|
|
(18,091
|
)
|
|
(12,991
|
)
|
|||
Accounts payable
|
|
1,996
|
|
|
(982
|
)
|
|
(1,425
|
)
|
|||
Payroll taxes and other payroll deductions payable
|
|
10,737
|
|
|
(12,930
|
)
|
|
9,922
|
|
|||
Accrued worksite employee payroll expense
|
|
18,595
|
|
|
23,731
|
|
|
19,753
|
|
|||
Accrued health insurance costs
|
|
13,226
|
|
|
(8,839
|
)
|
|
4,515
|
|
|||
Accrued workers’ compensation costs
|
|
15,805
|
|
|
7,815
|
|
|
7,418
|
|
|||
Accrued corporate payroll, commissions and other accrued liabilities
|
|
18,517
|
|
|
556
|
|
|
2,353
|
|
|||
Income taxes payable/receivable
|
|
4,039
|
|
|
(4,825
|
)
|
|
6,392
|
|
|||
Total adjustments
|
|
113,709
|
|
|
2,632
|
|
|
50,396
|
|
|||
Net cash provided by operating activities
|
|
141,713
|
|
|
34,664
|
|
|
90,798
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|||
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|||
Purchases
|
|
(69,578
|
)
|
|
(54,756
|
)
|
|
(30,680
|
)
|
|||
Proceeds from maturities
|
|
28,494
|
|
|
15,201
|
|
|
32,619
|
|
|||
Proceeds from dispositions
|
|
56,880
|
|
|
8,026
|
|
|
35,891
|
|
|||
Investments and acquisitions, net of cash acquired
|
|
—
|
|
|
—
|
|
|
(2,410
|
)
|
|||
Property and equipment:
|
|
|
|
|
|
|
|
|
|
|||
Purchases
|
|
(19,124
|
)
|
|
(11,562
|
)
|
|
(17,631
|
)
|
|||
Proceeds from dispositions
|
|
122
|
|
|
57
|
|
|
69
|
|
|||
Net cash provided by (used in) investing activities
|
|
(3,206
|
)
|
|
(43,034
|
)
|
|
17,858
|
|
|
|
Year ended December 31,
|
||||||||||
|
|
2014
|
|
2013
|
|
2012
|
||||||
Cash flows from financing activities:
|
|
|
|
|
|
|
||||||
Purchase of treasury stock
|
|
$
|
(20,769
|
)
|
|
$
|
(17,229
|
)
|
|
$
|
(13,773
|
)
|
Repurchase of common stock
|
|
—
|
|
|
—
|
|
|
(3,162
|
)
|
|||
Dividends paid
|
|
(69,493
|
)
|
|
(17,386
|
)
|
|
(42,728
|
)
|
|||
Proceeds from the exercise of stock options
|
|
279
|
|
|
1,448
|
|
|
2,249
|
|
|||
Income tax benefit from stock-based compensation
|
|
889
|
|
|
1,621
|
|
|
2,316
|
|
|||
Other
|
|
1,288
|
|
|
1,127
|
|
|
(222
|
)
|
|||
Net cash used in financing activities
|
|
(87,806
|
)
|
|
(30,419
|
)
|
|
(55,320
|
)
|
|||
|
|
|
|
|
|
|
||||||
Net increase (decrease) in cash and cash equivalents
|
|
50,701
|
|
|
(38,789
|
)
|
|
53,336
|
|
|||
Cash and cash equivalents at beginning of year
|
|
225,755
|
|
|
264,544
|
|
|
211,208
|
|
|||
Cash and cash equivalents at end of year
|
|
$
|
276,456
|
|
|
$
|
225,755
|
|
|
$
|
264,544
|
|
|
|
|
|
|
|
|
||||||
Supplemental disclosures:
|
|
|
|
|
|
|
|
|
|
|||
Cash paid for income taxes, net
|
|
$
|
16,429
|
|
|
$
|
27,191
|
|
|
$
|
24,924
|
|
1.
|
Accounting Policies
|
Buildings and improvements
|
|
5-30 years
|
Computer hardware and software
|
|
1-5 years
|
Software development costs
|
|
3-5 years
|
Furniture and fixtures
|
|
5-7 years
|
Aircraft
|
|
15-20 years
|
|
|
Year ended December 31,
|
||||||
|
|
2014
|
|
2013
|
||||
|
|
(in thousands)
|
||||||
Beginning balance
|
|
$
|
120,833
|
|
|
$
|
111,685
|
|
Accrued claims
|
|
55,971
|
|
|
42,900
|
|
||
Present value discount
|
|
(1,998
|
)
|
|
(1,169
|
)
|
||
Paid claims
|
|
(38,718
|
)
|
|
(32,583
|
)
|
||
Ending balance
|
|
$
|
136,088
|
|
|
$
|
120,833
|
|
|
|
|
|
|
||||
Current portion of accrued claims
|
|
$
|
44,040
|
|
|
$
|
51,928
|
|
Long-term portion of accrued claims
|
|
92,048
|
|
|
68,905
|
|
||
|
|
$
|
136,088
|
|
|
$
|
120,833
|
|
2.
|
Cash, Cash Equivalents and Marketable Securities
|
|
|
December 31,
|
||||||
|
|
2014
|
|
2013
|
||||
|
|
(in thousands)
|
||||||
Overnight holdings:
|
|
|
|
|
||||
Money market funds (cash equivalents)
|
|
$
|
271,840
|
|
|
$
|
192,040
|
|
Investment holdings:
|
|
|
|
|
|
|
||
Money market funds (cash equivalents)
|
|
14,125
|
|
|
42,913
|
|
||
Marketable securities
|
|
28,631
|
|
|
46,340
|
|
||
|
|
314,596
|
|
|
281,293
|
|
||
Cash held in demand accounts
|
|
20,369
|
|
|
23,054
|
|
||
Outstanding checks
|
|
(29,878
|
)
|
|
(32,252
|
)
|
||
Total cash, cash equivalents and marketable securities
|
|
$
|
305,087
|
|
|
$
|
272,095
|
|
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
276,456
|
|
|
$
|
225,755
|
|
Marketable securities
|
|
28,631
|
|
|
46,340
|
|
||
|
|
$
|
305,087
|
|
|
$
|
272,095
|
|
•
|
Level 1 - quoted prices in active markets using identical assets
|
•
|
Level 2 - significant other observable inputs, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other observable inputs
|
•
|
Level 3 - significant unobservable inputs
|
|
|
Fair Value Measurements
|
||||||||||||||
|
|
|
|
(in thousands)
|
|
|
||||||||||
|
|
December 31,
2014 |
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Money market funds
|
|
$
|
285,965
|
|
|
$
|
285,965
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Municipal bonds
|
|
28,631
|
|
|
—
|
|
|
28,631
|
|
|
—
|
|
||||
Total
|
|
$
|
314,596
|
|
|
$
|
285,965
|
|
|
$
|
28,631
|
|
|
$
|
—
|
|
|
|
Fair Value Measurements
|
||||||||||||||
|
|
|
|
(in thousands)
|
|
|
||||||||||
|
|
December 31,
2013 |
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Money market funds
|
|
$
|
234,953
|
|
|
$
|
234,953
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Municipal bonds
|
|
46,340
|
|
|
—
|
|
|
46,340
|
|
|
—
|
|
||||
Total
|
|
$
|
281,293
|
|
|
$
|
234,953
|
|
|
$
|
46,340
|
|
|
$
|
—
|
|
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair Value
|
||||||||
|
|
|
|
(in thousands)
|
|
|
||||||||||
December 31, 2014
|
|
|
|
|
|
|
|
|
||||||||
Municipal bonds
|
|
$
|
28,626
|
|
|
$
|
16
|
|
|
$
|
(11
|
)
|
|
$
|
28,631
|
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Municipal bonds
|
|
$
|
46,290
|
|
|
$
|
51
|
|
|
$
|
(1
|
)
|
|
$
|
46,340
|
|
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
||||
|
|
(in thousands)
|
||||||
Less than one year
|
|
$
|
12,728
|
|
|
$
|
12,737
|
|
One to five years
|
|
15,898
|
|
|
15,894
|
|
||
Total
|
|
$
|
28,626
|
|
|
$
|
28,631
|
|
3.
|
Accounts Receivable
|
|
|
December 31,
|
||||||
|
|
2014
|
|
2013
|
||||
|
|
(in thousands)
|
||||||
Accrued worksite employee payroll cost
|
|
$
|
192,396
|
|
|
$
|
173,801
|
|
Unbilled revenues
|
|
55,645
|
|
|
50,286
|
|
||
Customer prepayments
|
|
(87,887
|
)
|
|
(24,459
|
)
|
||
Unbilled accounts receivable
|
|
$
|
160,154
|
|
|
$
|
199,628
|
|
4.
|
Deposits
|
5.
|
Goodwill and Other Intangible Assets
|
|
|
December 31, 2013
|
|
Twelve Months Ended
December 31, 2014 |
|
December 31, 2014
|
||||||||||
|
|
Balance
|
|
Impairment
|
|
Amortization Expense
|
|
Balance
|
||||||||
|
|
(in thousands)
|
||||||||||||||
Gross carrying amount:
|
|
|
|
|
|
|
|
|
||||||||
Trademarks
|
|
$
|
1,230
|
|
|
$
|
(1,010
|
)
|
|
$
|
—
|
|
|
$
|
220
|
|
Customer relationships
|
|
7,784
|
|
|
(1,392
|
)
|
|
—
|
|
|
6,392
|
|
||||
Aggregate goodwill acquired:
|
|
|
|
|
|
|
|
|
||||||||
Goodwill
|
|
21,156
|
|
|
—
|
|
|
—
|
|
|
21,156
|
|
||||
Total
|
|
$
|
30,170
|
|
|
$
|
(2,402
|
)
|
|
$
|
—
|
|
|
$
|
27,768
|
|
|
|
|
|
|
|
|
|
|
||||||||
Accumulated amortization:
|
|
|
|
|
|
|
|
|
||||||||
Trademarks
|
|
$
|
(680
|
)
|
|
$
|
695
|
|
|
$
|
(77
|
)
|
|
$
|
(62
|
)
|
Customer relationships
|
|
(4,340
|
)
|
|
976
|
|
|
(1,415
|
)
|
|
(4,779
|
)
|
||||
Accumulated impairment:
|
|
|
|
|
|
|
|
|
||||||||
Goodwill
|
|
(6,716
|
)
|
|
(1,754
|
)
|
|
—
|
|
|
(8,470
|
)
|
||||
Total
|
|
$
|
(11,736
|
)
|
|
$
|
(83
|
)
|
|
$
|
(1,492
|
)
|
|
$
|
(13,311
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Net carrying amount:
|
|
|
|
|
|
|
|
|
||||||||
Trademarks
|
|
$
|
550
|
|
|
$
|
(315
|
)
|
|
$
|
(77
|
)
|
|
$
|
158
|
|
Customer relationships
|
|
3,444
|
|
|
(416
|
)
|
|
(1,415
|
)
|
|
1,613
|
|
||||
Goodwill
|
|
14,440
|
|
|
(1,754
|
)
|
|
—
|
|
|
12,686
|
|
||||
Total goodwill and other intangible assets
|
|
$
|
18,434
|
|
|
$
|
(2,485
|
)
|
|
$
|
(1,492
|
)
|
|
$
|
14,457
|
|
6.
|
Other Assets
|
7.
|
Acquisitions
|
8.
|
Revolving Credit Facility
|
9.
|
Income Taxes
|
|
|
December 31,
|
||||||
|
|
2014
|
|
2013
|
||||
|
|
(in thousands)
|
||||||
Deferred tax liabilities:
|
|
|
|
|
||||
Prepaid assets
|
|
$
|
(9,291
|
)
|
|
$
|
(5,084
|
)
|
Depreciation
|
|
(8,083
|
)
|
|
(8,937
|
)
|
||
Software development costs
|
|
(2,252
|
)
|
|
(2,739
|
)
|
||
Total deferred tax liabilities
|
|
(19,626
|
)
|
|
(16,760
|
)
|
||
|
|
|
|
|
||||
Deferred tax assets:
|
|
|
|
|
|
|
||
Accrued incentive compensation
|
|
7,204
|
|
|
3,909
|
|
||
Net operating loss carryforward
|
|
1,556
|
|
|
1,773
|
|
||
Workers’ compensation accruals
|
|
6,308
|
|
|
5,568
|
|
||
Accrued rent
|
|
1,058
|
|
|
1,008
|
|
||
Stock-based compensation
|
|
3,615
|
|
|
3,742
|
|
||
Intangibles
|
|
1,575
|
|
|
837
|
|
||
Minority investment impairment
|
|
1,003
|
|
|
991
|
|
||
Other
|
|
551
|
|
|
412
|
|
||
Total deferred tax assets
|
|
22,870
|
|
|
18,240
|
|
||
Valuation allowance
|
|
(1,003
|
)
|
|
(991
|
)
|
||
Total net deferred tax assets
|
|
21,867
|
|
|
17,249
|
|
||
|
|
|
|
|
||||
Net deferred tax assets
|
|
$
|
2,241
|
|
|
$
|
489
|
|
|
|
|
|
|
||||
Net current deferred tax assets
|
|
$
|
6,316
|
|
|
$
|
8,185
|
|
Net noncurrent deferred tax liabilities
|
|
(4,075
|
)
|
|
(7,696
|
)
|
||
|
|
$
|
2,241
|
|
|
$
|
489
|
|
|
|
Year ended December 31,
|
||||||||||
|
|
2014
|
|
2013
|
|
2012
|
||||||
|
|
(in thousands)
|
||||||||||
Current income tax expense:
|
|
|
|
|
|
|
||||||
Federal
|
|
$
|
18,034
|
|
|
$
|
20,476
|
|
|
$
|
29,280
|
|
State
|
|
3,322
|
|
|
3,512
|
|
|
4,351
|
|
|||
Total current income tax expense
|
|
21,356
|
|
|
23,988
|
|
|
33,631
|
|
|||
Deferred income tax (benefit) expense:
|
|
|
|
|
|
|
|
|
|
|||
Federal
|
|
(1,764
|
)
|
|
(2,258
|
)
|
|
(5,363
|
)
|
|||
State
|
|
31
|
|
|
(30
|
)
|
|
(380
|
)
|
|||
Total deferred income tax benefit
|
|
(1,733
|
)
|
|
(2,288
|
)
|
|
(5,743
|
)
|
|||
Total income tax expense
|
|
$
|
19,623
|
|
|
$
|
21,700
|
|
|
$
|
27,888
|
|
|
|
Year ended December 31,
|
||||||||||
|
|
2014
|
|
2013
|
|
2012
|
||||||
|
|
(in thousands)
|
||||||||||
Expected income tax expense at 35%
|
|
$
|
16,670
|
|
|
$
|
18,806
|
|
|
$
|
23,901
|
|
State income taxes, net of federal benefit
|
|
2,204
|
|
|
2,286
|
|
|
2,497
|
|
|||
Nondeductible expenses
|
|
1,939
|
|
|
1,993
|
|
|
1,663
|
|
|||
Section 199 benefits
|
|
(592
|
)
|
|
(2,531
|
)
|
|
—
|
|
|||
Expense Management non-cash impairment
|
|
—
|
|
|
797
|
|
|
—
|
|
|||
Valuation allowance related to TRE impairment
|
|
—
|
|
|
938
|
|
|
—
|
|
|||
Research and development credit
|
|
(455
|
)
|
|
(534
|
)
|
|
—
|
|
|||
Other, net
|
|
(143
|
)
|
|
(55
|
)
|
|
(173
|
)
|
|||
Reported total income tax expense
|
|
$
|
19,623
|
|
|
$
|
21,700
|
|
|
$
|
27,888
|
|
10.
|
Stockholders’ Equity
|
|
|
2014
|
|
2013
|
||||
|
|
(amounts per share)
|
||||||
First quarter
|
|
$
|
0.17
|
|
|
$
|
0.17
|
|
Second quarter
|
|
0.19
|
|
|
0.17
|
|
||
Third quarter
|
|
0.19
|
|
|
0.17
|
|
||
Fourth quarter
|
|
2.19
|
|
(1)
|
0.17
|
|
11.
|
Incentive Plans
|
|
|
Shares
|
|
Weighted Average Exercise Price Per Share
|
|
Weighted Average Remaining Contractual Life
|
|
Aggregate Intrinsic Value
|
|||||
|
|
(in thousands)
|
|
|
|
(in years)
|
|
(in thousands)
|
|||||
Outstanding - December 31, 2013
|
|
61
|
|
|
$
|
24.24
|
|
|
|
|
|
||
Granted
|
|
—
|
|
|
—
|
|
|
|
|
|
|||
Exercised
|
|
(18
|
)
|
|
15.28
|
|
|
|
|
|
|||
Canceled
|
|
—
|
|
|
—
|
|
|
|
|
|
|||
Outstanding - December 31, 2014
|
|
43
|
|
|
28.04
|
|
|
5.3
|
|
$
|
253
|
|
|
Exercisable - December 31, 2014
|
|
43
|
|
|
28.04
|
|
|
5.3
|
|
$
|
253
|
|
|
|
Shares
|
|
Weighted Average Grant Date Fair Value
|
|||
|
|
(in thousands)
|
|
|
|||
Non-vested - December 31, 2013
|
|
740
|
|
|
$
|
29.66
|
|
Granted
|
|
410
|
|
|
28.22
|
|
|
Vested
|
|
(382
|
)
|
|
29.79
|
|
|
Canceled/Forfeited
|
|
(28
|
)
|
|
28.45
|
|
|
Non-vested - December 31, 2014
|
|
740
|
|
|
28.84
|
|
12.
|
Net Income Per Share
|
|
|
Year ended December 31,
|
||||||||||
|
|
2014
|
|
2013
|
|
2012
|
||||||
|
|
(in thousands)
|
||||||||||
Net income
|
|
$
|
28,004
|
|
|
$
|
32,032
|
|
|
$
|
40,402
|
|
Less distributed and undistributed earnings allocated to participating securities
|
|
(2,002
|
)
|
|
(916
|
)
|
|
(1,224
|
)
|
|||
Net income allocated to common shares
|
|
$
|
26,002
|
|
|
$
|
31,116
|
|
|
$
|
39,178
|
|
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding
|
|
24,708
|
|
|
24,850
|
|
|
25,007
|
|
|||
Incremental shares from assumed conversions of common stock options
|
|
4
|
|
|
22
|
|
|
60
|
|
|||
Adjusted weighted average common shares outstanding
|
|
24,712
|
|
|
24,872
|
|
|
25,067
|
|
|||
|
|
|
|
|
|
|
||||||
Potentially dilutive securities not included in weighted average share
calculation due to anti-dilutive effect |
|
4
|
|
|
8
|
|
|
29
|
|
13.
|
Leases
|
|
|
Operating
Leases
|
||
|
|
(in thousands)
|
||
2015
|
|
$
|
13,364
|
|
2016
|
|
11,821
|
|
|
2017
|
|
8,534
|
|
|
2018
|
|
6,822
|
|
|
2019
|
|
4,189
|
|
|
Thereafter
|
|
5,312
|
|
|
Total minimum lease payments
|
|
$
|
50,042
|
|
14.
|
Commitments and Contingencies
|
2015
|
|
$
|
10,224
|
|
2016
|
|
7,899
|
|
|
2017
|
|
4,179
|
|
|
2018
|
|
2,628
|
|
|
2019
|
|
1,774
|
|
|
Thereafter
|
|
2,693
|
|
|
Total obligations
|
|
$
|
29,397
|
|
15.
|
Quarterly Financial Data (Unaudited)
|
|
|
Quarter ended
|
|
||||||||||||||||||
|
|
March 31
|
|
June 30
|
|
|
|
Sept. 30
|
|
|
|
Dec. 31
|
|
||||||||
|
|
(in thousands, except per share amounts)
|
|
||||||||||||||||||
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Revenues
|
|
$
|
636,999
|
|
|
$
|
564,621
|
|
|
|
|
$
|
560,303
|
|
|
|
|
$
|
595,865
|
|
|
Gross profit
|
|
106,176
|
|
|
95,453
|
|
|
|
|
100,817
|
|
|
|
|
101,359
|
|
|
||||
Operating income
|
|
16,591
|
|
|
3,414
|
|
(1)
|
|
14,460
|
|
|
|
|
13,009
|
|
(2)
|
|||||
Net income
|
|
9,564
|
|
|
1,891
|
|
|
|
|
8,385
|
|
|
|
|
8,164
|
|
|
||||
Basic net income per share
|
|
0.37
|
|
|
0.07
|
|
|
|
|
0.33
|
|
|
|
|
0.27
|
|
(3)
|
||||
Diluted net income per share
|
|
0.37
|
|
|
0.07
|
|
|
|
|
0.33
|
|
|
|
|
0.27
|
|
(3)
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Revenues
|
|
$
|
611,836
|
|
|
$
|
547,274
|
|
|
|
|
$
|
539,869
|
|
|
|
|
$
|
557,133
|
|
|
Gross profit
|
|
108,118
|
|
|
97,746
|
|
|
|
|
97,409
|
|
|
|
|
89,978
|
|
|
||||
Operating income
|
|
22,009
|
|
|
10,228
|
|
|
|
|
17,112
|
|
|
|
|
6,874
|
|
(4)
|
||||
Net income
|
|
13,173
|
|
|
3,488
|
|
(5)
|
|
10,082
|
|
|
|
|
5,289
|
|
(6)
|
|||||
Basic net income per share
|
|
0.51
|
|
|
0.14
|
|
|
|
|
0.39
|
|
|
|
|
0.21
|
|
|
||||
Diluted net income per share
|
|
0.51
|
|
|
0.14
|
|
|
|
|
0.39
|
|
|
|
|
0.21
|
|
|
(1)
|
Includes a non-cash impairment charge in the second quarter of 2014 of
$2.5 million
. Please read
Note 5
, “
Goodwill and Other Intangible Assets
,” for additional information.
|
(2)
|
Includes a
$1.2 million
non-cash charge in the fourth quarter of 2014. Please read
Note 1
to the Consolidated Financial Statements, “
Accounting Policies
,” for additional information.
|
(3)
|
Includes the impact of dividends exceeding earnings under the two-class method, resulting in a
$0.05
earnings per share decrease in the fourth quarter of 2014. Please read
Note 12
, “
Net Income Per Share
,” for additional information.
|
(4)
|
Includes a non-cash impairment charge in the fourth quarter of 2013 of
$3.3 million
. Please read
Note 5
, “
Goodwill and Other Intangible Assets
,” for additional information.
|
(5)
|
Includes a non-cash impairment charge in the second quarter of 2013 of
$2.7 million
. Please read
Note 6
to the Consolidated Financial Statements, “
Other Assets
,” for additional information.
|
(6)
|
Includes a $2.0 million tax benefit related to tax years 2009 through 2012. Please read
Note 9
to the Consolidated Financial Statements, “
Income Taxes
,” for additional information.
|
|
Level I
|
Level II
|
Level III
|
Level IV
|
LIBOR Margin
|
1.75%
|
2.00%
|
2.25%
|
2.50%
|
Alternate Base Rate Margin
|
0.00%
|
0.00%
|
0.25%
|
0.50%
|
C
|
Form of Guaranty Agreement
|
D
|
Annex "I" (Commitments)
|
Name of Lender
|
Percentage Share as of
February 6, 2015
|
Commitment Amounts as of
February 6, 2015
|
•
|
Insperity Holdings, Inc., a Delaware corporation and wholly owned subsidiary of Insperity, Inc.
|
•
|
Insperity Enterprises, Inc., a Texas corporation and wholly owned subsidiary of Insperity Holdings, Inc.
|
•
|
Administaff Partnerships Holding, Inc., a Delaware corporation and wholly owned subsidiary of Insperity Holdings, Inc.
|
•
|
Insperity Captive Insurance Companies Limited, a Bermuda corporation and wholly owned subsidiary of Administaff Partnerships Holding, Inc.
|
•
|
Insperity Business Services, L.P., a Delaware limited partnership, with Insperity Holdings, Inc. being a 1% general partner and Administaff Partnerships Holding, Inc. being a 99% limited partner.
|
•
|
Insperity Retirement Services, L.P., a Delaware limited partnership, with Insperity Holdings, Inc. being a 1% general partner and Administaff Partnerships Holding, Inc. being a 99% limited partner.
|
•
|
Insperity Services, L.P., a Delaware limited partnership, with Insperity Holdings, Inc. being a 1% general partner and Administaff Partnerships Holding, Inc. being a 99% limited partner.
|
•
|
Administaff Partnerships Holding II, Inc., a Delaware corporation and wholly owned subsidiary of Insperity Services, L.P.
|
•
|
Insperity GP, Inc., a Delaware corporation and wholly owned subsidiary of Insperity Services, L.P.
|
•
|
Insperity Support Services, L.P., a Delaware limited partnership, with Insperity GP, Inc. being a 1% general partner and Administaff Partnerships Holding II, Inc. being a 99% limited partner.
|
•
|
Administaff Companies, Inc., a Delaware corporation and wholly owned subsidiary of Insperity Holdings, Inc.
|
•
|
Administaff Partnerships Holding III, Inc., a Delaware corporation and wholly owned subsidiary of Administaff Companies, Inc.
|
•
|
Insperity PEO Services, L.P., a Delaware limited partnership, with Administaff Companies, Inc. being a 1% general partner and Administaff Partnerships Holding III, Inc. being a 99% limited partner.
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Insperity Insurance Services, L.L.C., a Delaware limited liability company and wholly owned subsidiary of Insperity PEO Services, L.P.
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Insperity Employment Screening, L.L.C, a Delaware limited liability company and wholly owned subsidiary of Insperity Holdings, Inc.
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Insperity Expense Management, Inc. a California corporation and wholly owned subsidiary of Insperity Holdings, Inc.
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Insperity Payroll Services, L.L.C., a Delaware limited liability company and wholly owned subsidiary of Insperity Business Services, L.P.
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(1)
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Registration Statement (Form S-8 No.333-181569) pertaining to the Insperity, Inc. 2012 Incentive Plan,
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(2)
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Registration Statements (Form S-8 No. 333-159007, 333-140602, 333-66344) pertaining to the Insperity, Inc. 2001 Incentive Plan,
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(3)
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Registration Statement (Form S-8 No. 333-151275) pertaining to the Insperity, Inc. 2008 Employee Stock Purchase Plan,
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(4)
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Registration Statement (Form S-8 No. 333-118790) pertaining to the Insperity, Inc. Directors Compensation Plan, and
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(5)
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Registration Statements (Form S-8 Nos. 333-85151, 333-66342) pertaining to the Insperity, Inc. Non-Qualified Stock Option Plan;
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/s/Ernst & Young LLP
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Houston, Texas
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February 10, 2015
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/s/ M. W. Brown
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January 9, 2015
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Michael W. Brown
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Date
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/s/ Jack Fields
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February 8, 2015
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Jack M. Fields
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Date
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/s/ Eli Jones
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January 26, 2015
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Eli Jones
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Date
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/s/ Carol R. Kaufman
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January 8, 2015
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Carol R. Kaufman
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Date
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/s/ Paul Lattanzio
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February 6, 2015
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Paul S. Lattanzio
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Date
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/s/ Austin P. Young
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January 8, 2015
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Austin P. Young
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Date
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1.
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I have reviewed this annual report on Form 10-K of Insperity, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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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
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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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.
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/s/ Paul J. Sarvadi
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Paul J. Sarvadi
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Chairman of the Board and Chief Executive Officer
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1.
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I have reviewed this annual report on Form 10-K of Insperity, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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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
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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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.
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/s/ Douglas S. Sharp
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Douglas S. Sharp
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Senior Vice President of Finance,
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Chief Financial Officer and Treasurer
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/s/ Paul J. Sarvadi
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Paul J. Sarvadi
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Chairman of the Board and Chief Executive Officer
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February 10, 2015
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/s/ Douglas S. Sharp
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Douglas S. Sharp
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Senior Vice President of Finance,
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Chief Financial Officer and Treasurer
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February 10, 2015
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