ý
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
|
For the quarterly period ended June 30, 2016.
|
o
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
|
For the transition period from _______________ to _______________
|
Delaware
|
|
76-0479645
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
|
|
|
19001 Crescent Springs Drive
|
|
|
Kingwood, Texas
|
|
77339
|
(Address of principal executive offices)
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|
(Zip Code)
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Large accelerated filer
ý
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Accelerated filer
o
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Non-accelerated filer
o
|
Smaller reporting company
o
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TABLE OF CONTENTS
|
|
|
|
|
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Part I
|
|
|
|
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Item 1.
|
||
|
|
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Item 2.
|
||
|
|
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Item 3.
|
||
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Item 4.
|
||
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Part II
|
||
|
|
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Item 1.
|
||
|
|
|
Item 1a.
|
||
|
|
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Item 2.
|
||
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|
|
Item 6.
|
|
|
June 30,
2016 |
|
December 31, 2015
|
||||
|
|
(Unaudited)
|
|
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
271,573
|
|
|
$
|
269,538
|
|
Restricted cash
|
|
41,226
|
|
|
37,418
|
|
||
Marketable securities
|
|
1,881
|
|
|
9,875
|
|
||
Accounts receivable, net:
|
|
|
|
|
|
|
||
Trade
|
|
3,977
|
|
|
7,691
|
|
||
Unbilled
|
|
236,422
|
|
|
190,715
|
|
||
Other
|
|
4,613
|
|
|
2,259
|
|
||
Prepaid insurance
|
|
26,545
|
|
|
7,417
|
|
||
Other current assets
|
|
18,554
|
|
|
17,135
|
|
||
Income taxes receivable
|
|
6,690
|
|
|
—
|
|
||
Total current assets
|
|
611,481
|
|
|
542,048
|
|
||
|
|
|
|
|
||||
Property and equipment:
|
|
|
|
|
|
|
||
Land
|
|
5,214
|
|
|
5,214
|
|
||
Buildings and improvements
|
|
77,715
|
|
|
70,273
|
|
||
Computer hardware and software
|
|
93,458
|
|
|
90,654
|
|
||
Software development costs
|
|
48,634
|
|
|
45,762
|
|
||
Furniture, fixtures and other
|
|
40,195
|
|
|
39,919
|
|
||
|
|
265,216
|
|
|
251,822
|
|
||
Accumulated depreciation and amortization
|
|
(197,545
|
)
|
|
(190,063
|
)
|
||
Total property and equipment, net
|
|
67,671
|
|
|
61,759
|
|
||
|
|
|
|
|
||||
Other assets:
|
|
|
|
|
|
|
||
Prepaid health insurance
|
|
9,000
|
|
|
9,000
|
|
||
Deposits – health insurance
|
|
4,700
|
|
|
3,700
|
|
||
Deposits – workers’ compensation
|
|
130,731
|
|
|
136,462
|
|
||
Goodwill and other intangible assets, net
|
|
13,338
|
|
|
13,588
|
|
||
Deferred income taxes, net
|
|
7,562
|
|
|
16,976
|
|
||
Other assets
|
|
2,012
|
|
|
1,379
|
|
||
Total other assets
|
|
167,343
|
|
|
181,105
|
|
||
Total assets
|
|
$
|
846,495
|
|
|
$
|
784,912
|
|
|
|
June 30,
2016 |
|
December 31,
2015 |
||||
|
|
(Unaudited)
|
|
|
||||
Current liabilities:
|
|
|
|
|
||||
Accounts payable
|
|
$
|
3,546
|
|
|
$
|
5,381
|
|
Payroll taxes and other payroll deductions payable
|
|
141,213
|
|
|
205,393
|
|
||
Accrued worksite employee payroll cost
|
|
277,376
|
|
|
161,917
|
|
||
Accrued health insurance costs
|
|
26,920
|
|
|
13,643
|
|
||
Accrued workers’ compensation costs
|
|
43,294
|
|
|
39,053
|
|
||
Accrued corporate payroll and commissions
|
|
24,375
|
|
|
39,103
|
|
||
Other accrued liabilities
|
|
24,823
|
|
|
20,250
|
|
||
Income taxes payable
|
|
—
|
|
|
2,971
|
|
||
Total current liabilities
|
|
541,547
|
|
|
487,711
|
|
||
|
|
|
|
|
||||
Noncurrent liabilities:
|
|
|
|
|
|
|||
Accrued workers’ compensation costs
|
|
135,681
|
|
|
124,746
|
|
||
Long-term debt
|
|
104,400
|
|
|
—
|
|
||
Total noncurrent liabilities
|
|
240,081
|
|
|
124,746
|
|
||
|
|
|
|
|
||||
Commitments and contingencies
|
|
|
|
|
|
|
||
|
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
|
|
|
||
Common stock
|
|
277
|
|
|
308
|
|
||
Additional paid-in capital
|
|
4,428
|
|
|
144,701
|
|
||
Treasury stock, at cost
|
|
(205,018
|
)
|
|
(205,325
|
)
|
||
Retained earnings
|
|
265,180
|
|
|
232,771
|
|
||
Total stockholders’ equity
|
|
64,867
|
|
|
172,455
|
|
||
Total liabilities and stockholders’ equity
|
|
$
|
846,495
|
|
|
$
|
784,912
|
|
|
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
||||||||||||
|
|
2016
|
|
2015
|
2016
|
|
2015
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Revenues (gross billings of $4.163 billion, $3.703 billion, $8.727 billion and $7.643 billion less worksite employee payroll cost of $3.456 billion, $3.075 billion, $7.217 billion and $6.316 billion, respectively)
|
|
$
|
707,332
|
|
|
$
|
627,838
|
|
$
|
1,509,740
|
|
|
$
|
1,327,317
|
|
|
|
|
|
|
|
|
|
||||||||
Direct costs:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Payroll taxes, benefits and workers’ compensation costs
|
|
594,073
|
|
|
523,619
|
|
1,246,465
|
|
|
1,093,238
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Gross profit
|
|
113,259
|
|
|
104,219
|
|
263,275
|
|
|
234,079
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries, wages and payroll taxes
|
|
55,998
|
|
|
50,234
|
|
114,013
|
|
|
106,982
|
|
||||
Stock-based compensation
|
|
4,761
|
|
|
4,041
|
|
8,336
|
|
|
6,464
|
|
||||
Commissions
|
|
4,335
|
|
|
4,103
|
|
8,616
|
|
|
8,407
|
|
||||
Advertising
|
|
6,712
|
|
|
6,883
|
|
9,759
|
|
|
10,064
|
|
||||
General and administrative expenses
|
|
21,254
|
|
|
20,838
|
|
45,038
|
|
|
45,430
|
|
||||
Impairment charges and other
|
|
—
|
|
|
1,313
|
|
—
|
|
|
11,120
|
|
||||
Depreciation and amortization
|
|
4,176
|
|
|
4,590
|
|
8,447
|
|
|
9,875
|
|
||||
|
|
97,236
|
|
|
92,002
|
|
194,209
|
|
|
198,342
|
|
||||
Operating income
|
|
16,023
|
|
|
12,217
|
|
69,066
|
|
|
35,737
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income
|
|
293
|
|
|
84
|
|
592
|
|
|
191
|
|
||||
Interest expense
|
|
(650
|
)
|
|
(124
|
)
|
(1,287
|
)
|
|
(224
|
)
|
||||
Income before income tax expense
|
|
15,666
|
|
|
12,177
|
|
68,371
|
|
|
35,704
|
|
||||
Income tax expense
|
|
5,953
|
|
|
4,863
|
|
25,965
|
|
|
14,603
|
|
||||
Net income
|
|
$
|
9,713
|
|
|
$
|
7,314
|
|
$
|
42,406
|
|
|
$
|
21,101
|
|
|
|
|
|
|
|
|
|
||||||||
Less distributed and undistributed earnings allocated to participating securities
|
|
(229
|
)
|
|
(179
|
)
|
(962
|
)
|
|
(521
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Net income allocated to common shares
|
|
$
|
9,484
|
|
|
$
|
7,135
|
|
$
|
41,444
|
|
|
$
|
20,580
|
|
|
|
|
|
|
|
|
|
||||||||
Basic net income per share of common stock
|
|
$
|
0.45
|
|
|
$
|
0.29
|
|
$
|
1.98
|
|
|
$
|
0.83
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted net income per share of common stock
|
|
$
|
0.45
|
|
|
$
|
0.29
|
|
$
|
1.98
|
|
|
$
|
0.83
|
|
|
|
Common Stock Issued
|
|
Additional Paid-In Capital
|
|
Treasury Stock
|
|
Retained Earnings
|
|
Total
|
|||||||||||||
|
|
Shares
|
|
Amount
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2015
|
|
30,758
|
|
|
$
|
308
|
|
|
$
|
144,701
|
|
|
$
|
(205,325
|
)
|
|
$
|
232,771
|
|
|
$
|
172,455
|
|
Purchase of treasury stock, at cost
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,790
|
)
|
|
—
|
|
|
(4,790
|
)
|
|||||
Repurchase of common stock
|
|
(3,014
|
)
|
|
(31
|
)
|
|
(144,232
|
)
|
|
—
|
|
|
—
|
|
|
(144,263
|
)
|
|||||
Stock-based compensation expense
|
|
—
|
|
|
—
|
|
|
3,689
|
|
|
4,647
|
|
|
—
|
|
|
8,336
|
|
|||||
Other
|
|
—
|
|
|
—
|
|
|
270
|
|
|
450
|
|
|
—
|
|
|
720
|
|
|||||
Dividends paid
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,997
|
)
|
|
(9,997
|
)
|
|||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
42,406
|
|
|
42,406
|
|
|||||
Balance at June 30, 2016
|
|
27,744
|
|
|
$
|
277
|
|
|
$
|
4,428
|
|
|
$
|
(205,018
|
)
|
|
$
|
265,180
|
|
|
$
|
64,867
|
|
|
|
Six Months Ended
June 30, |
||||||
|
|
2016
|
|
2015
|
||||
Cash flows from operating activities:
|
|
|
|
|
||||
Net income
|
|
$
|
42,406
|
|
|
$
|
21,101
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
||
Depreciation and amortization
|
|
8,447
|
|
|
9,875
|
|
||
Impairment charges and other
|
|
—
|
|
|
11,120
|
|
||
Amortization of marketable securities
|
|
52
|
|
|
629
|
|
||
Stock-based compensation
|
|
8,336
|
|
|
6,464
|
|
||
Deferred income taxes
|
|
9,414
|
|
|
(5,250
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
||
Restricted cash
|
|
(3,808
|
)
|
|
(4,847
|
)
|
||
Accounts receivable
|
|
(44,347
|
)
|
|
(90,515
|
)
|
||
Prepaid insurance
|
|
(19,128
|
)
|
|
4,842
|
|
||
Other current assets
|
|
(1,419
|
)
|
|
2,127
|
|
||
Other assets
|
|
4,104
|
|
|
3,136
|
|
||
Accounts payable
|
|
(1,835
|
)
|
|
(2,291
|
)
|
||
Payroll taxes and other payroll deductions payable
|
|
(64,180
|
)
|
|
(53,466
|
)
|
||
Accrued worksite employee payroll expense
|
|
115,459
|
|
|
35,695
|
|
||
Accrued health insurance costs
|
|
13,277
|
|
|
(12,045
|
)
|
||
Accrued workers’ compensation costs
|
|
15,176
|
|
|
12,139
|
|
||
Accrued corporate payroll, commissions and other accrued liabilities
|
|
(11,627
|
)
|
|
(7,349
|
)
|
||
Income taxes payable/receivable
|
|
(9,661
|
)
|
|
(2,844
|
)
|
||
Total adjustments
|
|
18,260
|
|
|
(92,580
|
)
|
||
Net cash provided by (used in) operating activities
|
|
60,666
|
|
|
(71,479
|
)
|
||
|
|
|
|
|
||||
Cash flows from investing activities:
|
|
|
|
|
|
|
||
Marketable securities:
|
|
|
|
|
|
|
||
Purchases
|
|
(310
|
)
|
|
(5,379
|
)
|
||
Proceeds from dispositions
|
|
7,268
|
|
|
6,877
|
|
||
Proceeds from maturities
|
|
990
|
|
|
4,851
|
|
||
Property and equipment:
|
|
|
|
|
||||
Purchases
|
|
(12,647
|
)
|
|
(5,850
|
)
|
||
Net cash provided by (used in) investing activities
|
|
(4,699
|
)
|
|
499
|
|
|
|
Six Months Ended
June 30, |
||||||
|
|
2016
|
|
2015
|
||||
Cash flows from financing activities:
|
|
|
|
|
||||
Purchase of treasury stock
|
|
$
|
(4,790
|
)
|
|
$
|
(31,370
|
)
|
Repurchase of common stock
|
|
(144,263
|
)
|
|
—
|
|
||
Dividends paid
|
|
(9,997
|
)
|
|
(10,407
|
)
|
||
Proceeds from the exercise of stock options
|
|
—
|
|
|
374
|
|
||
Income tax benefit from stock-based compensation
|
|
—
|
|
|
2,972
|
|
||
Borrowings under long-term debt agreement
|
|
124,400
|
|
|
—
|
|
||
Principal repayments
|
|
(20,000
|
)
|
|
—
|
|
||
Other
|
|
718
|
|
|
683
|
|
||
Net cash used in financing activities
|
|
(53,932
|
)
|
|
(37,748
|
)
|
||
|
|
|
|
|
||||
Net increase (decrease) in cash and cash equivalents
|
|
2,035
|
|
|
(108,728
|
)
|
||
Cash and cash equivalents at beginning of period
|
|
269,538
|
|
|
276,456
|
|
||
Cash and cash equivalents at end of period
|
|
$
|
271,573
|
|
|
$
|
167,728
|
|
1.
|
Basis of Presentation
|
2.
|
Accounting Policies
|
|
|
Six Months Ended
June 30, |
||||||
|
|
2016
|
|
2015
|
||||
|
|
(in thousands)
|
||||||
|
|
|
|
|
||||
Beginning balance, January 1,
|
|
$
|
162,184
|
|
|
$
|
136,088
|
|
Accrued claims
|
|
35,045
|
|
|
32,720
|
|
||
Present value discount
|
|
(1,274
|
)
|
|
(1,189
|
)
|
||
Paid claims
|
|
(19,038
|
)
|
|
(19,794
|
)
|
||
Ending balance
|
|
$
|
176,917
|
|
|
$
|
147,825
|
|
|
|
|
|
|
||||
Current portion of accrued claims
|
|
$
|
41,236
|
|
|
$
|
48,887
|
|
Long-term portion of accrued claims
|
|
135,681
|
|
|
98,938
|
|
||
|
|
$
|
176,917
|
|
|
$
|
147,825
|
|
3.
|
Cash, Cash Equivalents and Marketable Securities
|
|
|
June 30,
2016 |
|
December 31,
2015 |
||||
|
|
(in thousands)
|
||||||
Overnight Holdings
|
|
|
|
|
||||
Money market funds (cash equivalents)
|
|
$
|
233,080
|
|
|
$
|
247,720
|
|
Investment Holdings
|
|
|
|
|
|
|
||
Money market funds (cash equivalents)
|
|
24,010
|
|
|
26,048
|
|
||
Marketable securities
|
|
1,881
|
|
|
9,875
|
|
||
|
|
258,971
|
|
|
283,643
|
|
||
Cash held in demand accounts
|
|
24,666
|
|
|
19,377
|
|
||
Outstanding checks
|
|
(10,183
|
)
|
|
(23,607
|
)
|
||
Total cash, cash equivalents and marketable securities
|
|
$
|
273,454
|
|
|
$
|
279,413
|
|
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
271,573
|
|
|
$
|
269,538
|
|
Marketable securities
|
|
1,881
|
|
|
9,875
|
|
||
Total cash, cash equivalents and marketable securities
|
|
$
|
273,454
|
|
|
$
|
279,413
|
|
•
|
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)
|
||||||||||||||
|
|
June 30,
2016 |
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
|
$
|
257,090
|
|
|
$
|
257,090
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Municipal bonds
|
|
1,881
|
|
|
—
|
|
|
1,881
|
|
|
—
|
|
||||
Total
|
|
$
|
258,971
|
|
|
$
|
257,090
|
|
|
$
|
1,881
|
|
|
$
|
—
|
|
|
|
Fair Value Measurements
|
||||||||||||||
|
|
(in thousands)
|
||||||||||||||
|
|
December 31,
2015 |
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
|
$
|
273,768
|
|
|
$
|
273,768
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Municipal bonds
|
|
9,875
|
|
|
—
|
|
|
9,875
|
|
|
—
|
|
||||
Total
|
|
$
|
283,643
|
|
|
$
|
273,768
|
|
|
$
|
9,875
|
|
|
$
|
—
|
|
|
|
Amortized
Cost |
|
Gross
Unrealized Gains |
|
Gross
Unrealized Losses |
|
Estimated
Fair Value |
||||||||
|
|
|
|
(in thousands)
|
|
|
||||||||||
June 30, 2016
|
|
|
|
|
|
|
|
|
||||||||
Municipal bonds
|
|
$
|
1,879
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
1,881
|
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Municipal bonds
|
|
$
|
9,875
|
|
|
$
|
3
|
|
|
$
|
(3
|
)
|
|
$
|
9,875
|
|
|
|
Amortized
Cost |
|
Estimated
Fair Value |
||||
|
|
(in thousands)
|
||||||
|
|
|
|
|
||||
Less than one year
|
|
$
|
1,351
|
|
|
$
|
1,351
|
|
One to five years
|
|
528
|
|
|
530
|
|
||
Total
|
|
$
|
1,879
|
|
|
$
|
1,881
|
|
4.
|
Impairment Charges and Other
|
5.
|
Long-Term Debt
|
6.
|
Stockholders' Equity
|
|
|
2016
|
|
2015
|
||||
|
|
(amounts per share)
|
||||||
|
|
|
|
|
||||
First quarter
|
|
$
|
0.22
|
|
|
$
|
0.19
|
|
Second quarter
|
|
0.25
|
|
|
0.22
|
|
7.
|
Long-Term Incentive Program
|
|
|
Number of Performance Units at Target
|
|
Weighted Average Grant Date Fair Value
|
|
Maximum Shares Eligible to Receive
|
||||
|
|
|
|
|
|
|
||||
Unvested - December 31, 2015
|
|
100,900
|
|
|
$
|
52.80
|
|
|
183,401
|
|
Granted
|
|
118,525
|
|
|
59.13
|
|
|
237,050
|
|
|
Vested
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Canceled
|
|
(2,550
|
)
|
|
52.80
|
|
|
(4,635
|
)
|
|
Unvested - June 30, 2016
|
|
216,875
|
|
|
56.26
|
|
|
415,816
|
|
8.
|
Net Income per Share
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
|
(in thousands)
|
||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net income
|
|
$
|
9,713
|
|
|
$
|
7,314
|
|
|
$
|
42,406
|
|
|
$
|
21,101
|
|
Less distributed and undistributed earnings allocated to participating securities
|
|
(229
|
)
|
|
(179
|
)
|
|
(962
|
)
|
|
(521
|
)
|
||||
Net income allocated to common shares
|
|
$
|
9,484
|
|
|
$
|
7,135
|
|
|
$
|
41,444
|
|
|
$
|
20,580
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding
|
|
20,869
|
|
|
24,766
|
|
|
20,921
|
|
|
24,741
|
|
||||
Incremental shares from assumed conversions of common stock options
|
|
15
|
|
|
7
|
|
|
10
|
|
|
8
|
|
||||
Adjusted weighted average common shares outstanding
|
|
20,884
|
|
|
24,773
|
|
|
20,931
|
|
|
24,749
|
|
9.
|
Commitments and Contingencies
|
|
|
Three Months Ended
June 30, |
|||||||||
|
|
2016
|
|
2015
|
|
% Change
|
|||||
|
|
(in thousands, except per share and
statistical data) |
|||||||||
|
|
|
|
|
|
|
|||||
Revenues (gross billings of $4.163 billion and $3.703 billion, less worksite employee payroll cost of $3.456 billion and $2.716 billion, respectively)
|
|
$
|
707,332
|
|
|
$
|
627,838
|
|
|
12.7
|
%
|
Gross profit
|
|
113,259
|
|
|
104,219
|
|
|
8.7
|
%
|
||
Operating expenses
|
|
97,236
|
|
|
92,002
|
|
(1)
|
5.7
|
%
|
||
Operating income
|
|
16,023
|
|
|
12,217
|
|
|
31.2
|
%
|
||
Other expense
|
|
(357
|
)
|
|
(40
|
)
|
|
—
|
|
||
Net income
|
|
9,713
|
|
|
7,314
|
|
|
32.8
|
%
|
||
Diluted net income per share of common stock
|
|
0.45
|
|
|
0.29
|
|
|
55.2
|
%
|
||
Adjusted net income
(2)
|
|
12,864
|
|
|
10,771
|
|
|
19.4
|
%
|
||
Adjusted diluted net income per share of common stock
(2)
|
|
0.60
|
|
|
0.42
|
|
|
42.9
|
%
|
||
Adjusted EBITDA
(2)
|
|
25,576
|
|
|
22,643
|
|
|
13.0
|
%
|
||
|
|
|
|
|
|
|
|||||
Statistical Data:
|
|
|
|
|
|
|
|
|
|
||
Average number of worksite employees paid per month
|
|
163,521
|
|
|
143,131
|
|
|
14.2
|
%
|
||
Revenues per worksite employee per month
(3)
|
|
$
|
1,442
|
|
|
$
|
1,462
|
|
|
(1.4
|
)%
|
Gross profit per worksite employee per month
|
|
231
|
|
|
243
|
|
|
(4.9
|
)%
|
||
Operating expenses per worksite employee per month
|
|
198
|
|
|
215
|
|
|
(7.9
|
)%
|
||
Operating income per worksite employee per month
|
|
33
|
|
|
28
|
|
|
17.9
|
%
|
||
Net income per worksite employee per month
|
|
20
|
|
|
17
|
|
|
17.6
|
%
|
(1)
|
Includes non-cash impairment and other charges of $1.3 million, or an after-tax effect of $0.03 per share in the 2015 period. Please read
Note 4
to the Consolidated Financial Statements, “
Impairment Charges and Other
,” for additional information.
|
(2)
|
Please read “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.
|
(3)
|
Gross billings of
$8,485
and
$8,623
per worksite employee per month, less payroll cost of
$7,043
and
$7,161
per worksite employee per month, respectively.
|
|
|
Three Months Ended
June 30, |
|
Three Months Ended
June 30, |
|||||||||||||
|
|
2016
|
|
2015
|
|
% Change
|
|
2016
|
|
2015
|
|||||||
|
|
(in thousands)
|
|
(% of total revenue)
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||
Northeast
|
|
$
|
179,505
|
|
|
$
|
159,834
|
|
|
12.3
|
%
|
|
25.8
|
%
|
|
26.0
|
%
|
Southeast
|
|
76,270
|
|
|
62,984
|
|
|
21.1
|
%
|
|
11.0
|
%
|
|
10.2
|
%
|
||
Central
|
|
111,502
|
|
|
94,212
|
|
|
18.4
|
%
|
|
16.0
|
%
|
|
15.3
|
%
|
||
Southwest
|
|
166,523
|
|
|
157,586
|
|
|
5.7
|
%
|
|
24.0
|
%
|
|
25.6
|
%
|
||
West
|
|
160,932
|
|
|
141,302
|
|
|
13.9
|
%
|
|
23.2
|
%
|
|
22.9
|
%
|
||
|
|
694,732
|
|
|
615,918
|
|
|
12.8
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
||
Other revenue
(1)
|
|
12,600
|
|
|
11,920
|
|
|
5.7
|
%
|
|
|
|
|
||||
Total revenue
|
|
$
|
707,332
|
|
|
$
|
627,838
|
|
|
12.7
|
%
|
|
|
|
|
•
|
Benefits costs
– The cost of group health insurance and related employee benefits
decreased
$2
per worksite employee per month, but
increased
1.9%
on a cost per covered employee basis, compared to the
second
quarter of
2015
. Included in
2016
benefits costs is a charge of
$1.7 million
, or
$3
per worksite employee per month, for changes in estimated claims run-off related to prior periods. The percentage of worksite employees covered under our health insurance plans was
69.0%
in the
2016
period compared to
70.5%
in the
2015
period. Please read
Note 2
to the Consolidated Financial Statements, “
Accounting Policies
– Health Insurance Costs,” for a discussion of our accounting for health insurance costs.
|
•
|
Workers’ compensation costs
– Workers’ compensation costs
increased
8.1%
in part due to a
15.1%
increase
in the average non-bonus payroll, but
decreased
$2
on a per worksite employee per month basis, compared to the
second
quarter of
2015
. In the
second
quarter of
2016
, we recorded reductions in workers’ compensation costs of
$1.8 million
, or
0.05%
of non-bonus payroll costs, for changes in estimated losses related to prior reporting periods. As a percentage of non-bonus payroll cost, workers’ compensation costs were
0.64%
in the
2016
period compared to
0.68%
in the
2015
period. Please read
Note 2
to the Consolidated Financial Statements, “
Accounting Policies
– Workers’ Compensation Costs,” for a discussion of our accounting for workers’ compensation costs.
|
•
|
Payroll tax costs
– Payroll taxes increased
13.8%
in part due to a
12.4%
increase
in payroll costs, but decreased
$2
on a per worksite employee per month basis, compared to the
second
quarter of
2015
. Payroll taxes as a percentage of payroll costs were
7.1%
in
2016
and
7.0%
in
2015
.
|
|
|
Three Months Ended
June 30, |
|
Three Months Ended
June 30, |
||||||||||||||||||
|
|
2016
|
|
2015
|
|
% Change
|
|
2016
|
|
2015
|
|
% Change
|
||||||||||
|
|
(in thousands)
|
|
(per worksite employee per month)
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Salaries, wages and payroll taxes
|
|
$
|
55,998
|
|
|
$
|
50,234
|
|
|
11.5
|
%
|
|
$
|
114
|
|
|
$
|
117
|
|
|
(2.6
|
)%
|
Stock-based compensation
|
|
4,761
|
|
|
4,041
|
|
|
17.8
|
%
|
|
10
|
|
|
9
|
|
|
11.1
|
%
|
||||
Commissions
|
|
4,335
|
|
|
4,103
|
|
|
5.7
|
%
|
|
9
|
|
|
10
|
|
|
(10.0
|
)%
|
||||
Advertising
|
|
6,712
|
|
|
6,883
|
|
|
(2.5
|
)%
|
|
14
|
|
|
17
|
|
|
(17.6
|
)%
|
||||
General and administrative expenses
|
|
21,254
|
|
|
20,838
|
|
|
2.0
|
%
|
|
42
|
|
|
48
|
|
|
(12.5
|
)%
|
||||
Impairment charges and other
|
|
—
|
|
|
1,313
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
||||
Depreciation and amortization
|
|
4,176
|
|
|
4,590
|
|
|
(9.0
|
)%
|
|
9
|
|
|
11
|
|
|
(18.2
|
)%
|
||||
Total operating expenses
|
|
$
|
97,236
|
|
|
$
|
92,002
|
|
|
5.7
|
%
|
|
$
|
198
|
|
|
$
|
215
|
|
|
(7.9
|
)%
|
•
|
Salaries, wages and payroll taxes of corporate and sales staff
increased
11.5%
, but
decreased
$3
on a per worksite employee per month basis, compared to the
2015
period. This increase was primarily due to a
5.3%
increase
in corporate headcount, including a 9.6% increase in the number of Business Performance Advisors.
|
•
|
Stock-based compensation
increased
17.8%
, or
$1
per worksite employee per month, compared to the
2015
period. This increase was primarily due to awards issued under the Insperity, Inc. Long-Term Incentive Program (the “LTIP”). Please read
Note 7
to the Consolidated Financial Statements, “
Long-Term Incentive Program
,” for additional information.
|
•
|
Commissions expense
increased
5.7%
, but
decreased
$1
on a per worksite employee per month basis, compared to the
2015
period, primarily due to commissions associated with our PEO HR Outsourcing solutions.
|
•
|
Advertising costs
decreased
2.5%
, or
$3
per worksite employee per month, compared to the
2015
period.
|
•
|
General and administrative expenses, which includes
$0.3 million
in stockholder advisory expenses in the
2016
period,
increased
2.0%
, but
decreased
$6
on a per worksite employee per month basis, compared to the
2015
period. The increase was primarily due to increased travel and training expenses, offset in part by decreased professional fees and the elimination of repair and maintenance costs associated with the two aircraft sold in July 2015. Please read
Note 4
to the Consolidated Financial Statements, “
Impairment Charges and Other
,” for additional information.
|
•
|
Depreciation and amortization expense
decreased
9.0%
, or
$2
per worksite employee per month, compared to the
2015
period, primarily due to certain acquired assets becoming fully depreciated in 2015.
|
|
|
Six Months Ended
June 30, |
|||||||||
|
|
2016
|
|
2015
|
|
% Change
|
|||||
|
|
(in thousands, except per share and statistical data)
|
|||||||||
|
|
|
|
|
|
|
|||||
Revenues (gross billings of $8.727 billion and $7.643 billion, less worksite employee payroll cost of $7.217 billion and $6.316 billion, respectively)
|
|
$
|
1,509,740
|
|
|
$
|
1,327,317
|
|
|
13.7
|
%
|
Gross profit
|
|
263,275
|
|
|
234,079
|
|
|
12.5
|
%
|
||
Operating expenses
|
|
194,209
|
|
|
198,342
|
|
(1)
|
(2.1
|
)%
|
||
Operating income
|
|
69,066
|
|
|
35,737
|
|
|
93.3
|
%
|
||
Other expense
|
|
(695
|
)
|
|
(33
|
)
|
|
—
|
|
||
Net income
|
|
42,406
|
|
|
21,101
|
|
|
101.0
|
%
|
||
Diluted net income per share of common stock
|
|
1.98
|
|
|
0.83
|
|
|
138.6
|
%
|
||
Adjusted net income
(2)
|
|
47,775
|
|
|
32,407
|
|
|
47.4
|
%
|
||
Adjusted diluted net income per share of common stock
(2)
|
|
2.23
|
|
|
1.28
|
|
|
74.2
|
%
|
||
Adjusted EBITDA
(2)
|
|
86,764
|
|
|
64,933
|
|
|
33.6
|
%
|
||
|
|
|
|
|
|
|
|||||
Statistical Data:
|
|
|
|
|
|
|
|
|
|
||
Average number of worksite employees paid per month
|
|
160,956
|
|
|
140,545
|
|
|
14.5
|
%
|
||
Revenues per worksite employee per month
(3)
|
|
$
|
1,563
|
|
|
$
|
1,574
|
|
|
(0.7
|
)%
|
Gross profit per worksite employee per month
|
|
273
|
|
|
278
|
|
|
(1.8
|
)%
|
||
Operating expenses per worksite employee per month
|
|
201
|
|
|
236
|
|
|
(14.8
|
)%
|
||
Operating income per worksite employee per month
|
|
72
|
|
|
42
|
|
|
71.4
|
%
|
||
Net income per worksite employee per month
|
|
44
|
|
|
25
|
|
|
76.0
|
%
|
(1)
|
Includes non-cash impairment and other charges $11.1 million, or an after-tax effect of $0.26 per share in the
2015
period. Please read
Note 4
to the Consolidated Financial Statements, “
Impairment Charges and Other
,” for additional information.
|
(2)
|
Please read “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.
|
(3)
|
Gross billings of
$9,036
and
$9,064
per worksite employee per month, less payroll cost of
$7,473
and
$7,490
per worksite employee per month, respectively.
|
|
|
Six Months Ended
June 30, |
|
Six Months Ended
June 30, |
|||||||||||||
|
|
2016
|
|
2015
|
|
% Change
|
|
2016
|
|
2015
|
|||||||
|
|
(in thousands)
|
|
(% of total revenue)
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||
Northeast
|
|
$
|
388,160
|
|
|
$
|
344,196
|
|
|
12.8
|
%
|
|
26.1
|
%
|
|
26.4
|
%
|
Southeast
|
|
157,539
|
|
|
129,546
|
|
|
21.6
|
%
|
|
10.6
|
%
|
|
9.9
|
%
|
||
Central
|
|
238,508
|
|
|
198,829
|
|
|
20.0
|
%
|
|
16.1
|
%
|
|
15.2
|
%
|
||
Southwest
|
|
355,833
|
|
|
334,233
|
|
|
6.5
|
%
|
|
24.0
|
%
|
|
25.6
|
%
|
||
West
|
|
344,644
|
|
|
297,396
|
|
|
15.9
|
%
|
|
23.2
|
%
|
|
22.9
|
%
|
||
|
|
1,484,684
|
|
|
1,304,200
|
|
|
13.8
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
||
Other revenue
(1)
|
|
25,056
|
|
|
23,117
|
|
|
8.4
|
%
|
|
|
|
|
||||
Total revenue
|
|
$
|
1,509,740
|
|
|
$
|
1,327,317
|
|
|
13.7
|
%
|
|
|
|
|
•
|
Benefits costs
– The cost of group health insurance and related employee benefits
increased
$1
per worksite employee per month, or
2.1%
on a cost per covered employee basis, compared to the first
six
months of
2015
. Included in
2016
benefits costs is a charge of
$3.7 million
, or
$4
per worksite employee per month, for changes in estimated claim run-off related to prior periods. The percentage of worksite employees covered under our health insurance plans was
69.6%
in
|
•
|
Workers’ compensation costs
– Workers’ compensation costs
increased
9.2%
in part due to a
15.9%
increase in the average non-bonus payroll, but
decreased
$2
on a per worksite employee per month basis, compared to the first
six
months of
2015
. In the first
six
months of
2016
, we recorded reductions in workers’ compensation costs of
$2.6 million
, or
0.04%
of non-bonus payroll costs, for changes in estimated losses related to prior reporting periods. As a percentage of non-bonus payroll cost, workers’ compensation costs were
0.66%
in the
2016
period compared to
0.70%
in the
2015
period. Please read
Note 2
to the Consolidated Financial Statements, “
Accounting Policies
– Workers’ Compensation Costs,” for a discussion of our accounting for workers’ compensation costs.
|
•
|
Payroll tax costs
– Payroll taxes
increased
14.0%
in part due to a
14.3%
increase
in payroll costs, but
decreased
$3
on a per worksite employee per month basis, compared to the first
six
months of
2015
. Payroll taxes as a percentage of payroll costs were
7.9%
in both the
2016
2015
periods.
|
|
|
Six Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||
|
|
2016
|
|
2015
|
|
% Change
|
|
2016
|
|
2015
|
|
% Change
|
||||||||||
|
|
(in thousands)
|
|
(per worksite employee per month)
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Salaries, wages and payroll taxes
|
|
$
|
114,013
|
|
|
$
|
106,982
|
|
|
6.6
|
%
|
|
$
|
118
|
|
|
$
|
127
|
|
|
(7.1
|
)%
|
Stock-based compensation
|
|
8,336
|
|
|
6,464
|
|
|
29.0
|
%
|
|
9
|
|
|
8
|
|
|
12.5
|
%
|
||||
Commissions
|
|
8,616
|
|
|
8,407
|
|
|
2.5
|
%
|
|
9
|
|
|
10
|
|
|
(10.0
|
)%
|
||||
Advertising
|
|
9,759
|
|
|
10,064
|
|
|
(3.0
|
)%
|
|
10
|
|
|
13
|
|
|
(23.1
|
)%
|
||||
General and administrative expenses
|
|
45,038
|
|
|
45,430
|
|
|
(0.9
|
)%
|
|
46
|
|
|
53
|
|
|
(13.2
|
)%
|
||||
Impairment charges and other
|
|
—
|
|
|
11,120
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|
—
|
|
||||
Depreciation and amortization
|
|
8,447
|
|
|
9,875
|
|
|
(14.5
|
)%
|
|
9
|
|
|
12
|
|
|
(25.0
|
)%
|
||||
Total operating expenses
|
|
$
|
194,209
|
|
|
$
|
198,342
|
|
|
(2.1
|
)%
|
|
$
|
201
|
|
|
$
|
236
|
|
|
(14.8
|
)%
|
•
|
Salaries, wages and payroll taxes of corporate and sales staff
increased
6.6%
, but
decreased
$9
on a per worksite employee per month basis, compared to the
2015
period. This increase was primarily due to a
4.8%
increase in corporate headcount, including an 11.6% increase in the number of Business Performance Advisors.
|
•
|
Stock-based compensation
increased
29.0%
, or
$1
per worksite employee per month, compared to the
2015
period. This increase was primarily due to awards issued under the LTIP. Please read
Note 7
to the Consolidated Financial Statements, “
Long-Term Incentive Program
,” for additional information.
|
•
|
Commissions expense
increased
2.5%
, but decreased
$1
on a per worksite employee per month basis, compared to the
2015
period, primarily due to commissions associated with our PEO HR Outsourcing solutions.
|
•
|
Advertising costs
decreased
3.0%
, or
$3
per worksite employee per month, compared to the
2015
period.
|
•
|
General and administrative expenses, which includes
$0.3 million
in stockholder advisory expenses in the
2016
period,
decreased
0.9%
, or
$7
per worksite employee per month compared to the
2015
period. This decrease was due in part to lower consulting and professional fees.
|
•
|
Depreciation and amortization expense
decreased
14.5%
, or
$3
per worksite employee per month compared to the
2015
period, primarily due to certain acquired assets becoming fully depreciated in 2015 and the sale of our two aircraft in 2015, which eliminated the depreciation on those assets. Please read
Note 4
to the Consolidated Financial Statements, “
Impairment Charges and Other
,” for additional information.
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||
|
|
2016
|
|
2015
|
|
% Change
|
|
2016
|
|
2015
|
|
% Change
|
||||||||||
|
|
(in thousands, except per worksite employee per month data)
|
||||||||||||||||||||
GAAP to non-GAAP reconciliation:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Payroll cost (GAAP)
|
|
$
|
3,455,077
|
|
|
$
|
3,074,892
|
|
|
12.4
|
%
|
|
$
|
7,217,142
|
|
|
$
|
6,315,874
|
|
|
14.3
|
%
|
Less: Bonus payroll cost
|
|
213,224
|
|
|
257,367
|
|
|
(17.2
|
)%
|
|
795,537
|
|
|
775,870
|
|
|
2.5
|
%
|
||||
Non-bonus payroll cost
|
|
$
|
3,241,853
|
|
|
$
|
2,817,525
|
|
|
15.1
|
%
|
|
$
|
6,421,605
|
|
|
$
|
5,540,004
|
|
|
15.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Payroll cost per worksite employee per month (GAAP)
|
|
$
|
7,043
|
|
|
$
|
7,161
|
|
|
(1.6
|
)%
|
|
$
|
7,473
|
|
|
$
|
7,490
|
|
|
(0.2
|
)%
|
Less: Bonus payroll cost per worksite employee per month
|
|
436
|
|
|
599
|
|
|
(27.2
|
)%
|
|
824
|
|
|
920
|
|
|
(10.4
|
)%
|
||||
Non-bonus payroll cost per worksite employee per month
|
|
$
|
6,607
|
|
|
$
|
6,562
|
|
|
0.7
|
%
|
|
$
|
6,649
|
|
|
$
|
6,570
|
|
|
1.2
|
%
|
|
|
June 30,
2016 |
|
December 31,
2015 |
||||
|
|
(in thousands)
|
||||||
|
|
|
|
|
||||
Cash, cash equivalents and marketable securities (GAAP)
|
|
$
|
273,454
|
|
|
$
|
279,413
|
|
Less: Amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions
|
|
121,437
|
|
|
185,719
|
|
||
Customer prepayments
|
|
100,728
|
|
|
17,037
|
|
||
Adjusted cash, cash equivalents and marketable securities
|
|
$
|
51,289
|
|
|
$
|
76,657
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||
|
|
2016
|
|
2015
|
|
% Change
|
|
2016
|
|
2015
|
|
% Change
|
||||||||||
|
|
(in thousands, except per worksite employee per month data)
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating expenses (GAAP)
|
|
$
|
97,236
|
|
|
$
|
92,002
|
|
|
5.7
|
%
|
|
$
|
194,209
|
|
|
$
|
198,342
|
|
|
(2.1
|
)%
|
Less: Impairment charges and other
|
|
—
|
|
|
1,313
|
|
|
—
|
|
|
—
|
|
|
11,120
|
|
|
—
|
|
||||
Stockholder advisory expenses
|
|
323
|
|
|
398
|
|
|
(18.8
|
)%
|
|
323
|
|
|
1,546
|
|
|
(79.1
|
)%
|
||||
Adjusted operating expenses
|
|
$
|
96,913
|
|
|
$
|
90,291
|
|
|
7.3
|
%
|
|
$
|
193,886
|
|
|
$
|
185,676
|
|
|
4.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating expenses per worksite employee per month (GAAP)
|
|
$
|
198
|
|
|
$
|
215
|
|
|
(7.9
|
)%
|
|
$
|
201
|
|
|
$
|
236
|
|
|
(14.8
|
)%
|
Less: Impairment charges and other per worksite employee per month
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|
—
|
|
||||
Stockholder advisory expenses per worksite employee per month
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
||||
Adjusted operating expenses per worksite employee per month
|
|
$
|
197
|
|
|
$
|
211
|
|
|
(6.6
|
)%
|
|
$
|
201
|
|
|
$
|
221
|
|
|
(9.0
|
)%
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||
|
|
2016
|
|
2015
|
|
% Change
|
|
2016
|
|
2015
|
|
% Change
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income (GAAP)
|
|
$
|
9,713
|
|
|
$
|
7,314
|
|
|
32.8
|
%
|
|
$
|
42,406
|
|
|
$
|
21,101
|
|
|
101.0
|
%
|
Income tax expense
|
|
5,953
|
|
|
4,863
|
|
|
22.4
|
%
|
|
25,965
|
|
|
14,603
|
|
|
77.8
|
%
|
||||
Interest expense
|
|
650
|
|
|
124
|
|
|
424.2
|
%
|
|
1,287
|
|
|
224
|
|
|
474.6
|
%
|
||||
Depreciation and amortization
|
|
4,176
|
|
|
4,590
|
|
|
(9.0
|
)%
|
|
8,447
|
|
|
9,875
|
|
|
(14.5
|
)%
|
||||
EBITDA
|
|
20,492
|
|
|
16,891
|
|
|
21.3
|
%
|
|
78,105
|
|
|
45,803
|
|
|
70.5
|
%
|
||||
Impairment charges and other
|
|
—
|
|
|
1,313
|
|
|
—
|
|
|
—
|
|
|
11,120
|
|
|
—
|
|
||||
Stock-based compensation
|
|
4,761
|
|
|
4,041
|
|
|
17.8
|
%
|
|
8,336
|
|
|
6,464
|
|
|
29.0
|
%
|
||||
Stockholder advisory expenses
|
|
323
|
|
|
398
|
|
|
(18.8
|
)%
|
|
323
|
|
|
1,546
|
|
|
(79.1
|
)%
|
||||
Adjusted EBITDA
|
|
$
|
25,576
|
|
|
$
|
22,643
|
|
|
13.0
|
%
|
|
$
|
86,764
|
|
|
$
|
64,933
|
|
|
33.6
|
%
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||
|
|
2016
|
|
2015
|
|
% Change
|
|
2016
|
|
2015
|
|
% Change
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income (GAAP)
|
|
$
|
9,713
|
|
|
$
|
7,314
|
|
|
32.8
|
%
|
|
$
|
42,406
|
|
|
$
|
21,101
|
|
|
101.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Impairment charges and other
|
|
—
|
|
|
1,313
|
|
|
—
|
|
|
—
|
|
|
11,120
|
|
|
—
|
|
||||
Stock-based compensation
|
|
4,761
|
|
|
4,041
|
|
|
17.8
|
%
|
|
8,336
|
|
|
6,464
|
|
|
29.0
|
%
|
||||
Stockholder advisory expenses
|
|
323
|
|
|
398
|
|
|
(18.8
|
)%
|
|
323
|
|
|
1,546
|
|
|
(79.1
|
)%
|
||||
Total non-GAAP adjustments
|
|
5,084
|
|
|
5,752
|
|
|
(11.6
|
)%
|
|
8,659
|
|
|
19,130
|
|
|
(54.7
|
)%
|
||||
Tax effect on non-GAAP adjustments
|
|
(1,933
|
)
|
|
(2,295
|
)
|
|
(15.8
|
)%
|
|
(3,290
|
)
|
|
(7,824
|
)
|
|
(57.9
|
)%
|
||||
Adjusted net income (non-GAAP)
|
|
$
|
12,864
|
|
|
$
|
10,771
|
|
|
19.4
|
%
|
|
$
|
47,775
|
|
|
$
|
32,407
|
|
|
47.4
|
%
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||
|
|
2016
|
|
2015
|
|
% Change
|
|
2016
|
|
2015
|
|
% Change
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Diluted net income per share of common stock (GAAP)
|
|
$
|
0.45
|
|
|
$
|
0.29
|
|
|
55.2
|
%
|
|
$
|
1.98
|
|
|
$
|
0.83
|
|
|
138.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Impairment charges and other
|
|
—
|
|
|
0.05
|
|
|
—
|
|
|
—
|
|
|
0.44
|
|
|
—
|
|
||||
Stock-based compensation
|
|
0.22
|
|
|
0.16
|
|
|
37.5
|
%
|
|
0.39
|
|
|
0.25
|
|
|
56.0
|
%
|
||||
Stockholder advisory expenses
|
|
0.02
|
|
|
0.02
|
|
|
—
|
|
|
0.02
|
|
|
0.06
|
|
|
(66.7
|
)%
|
||||
Total non-GAAP adjustments
|
|
0.24
|
|
|
0.23
|
|
|
4.3
|
%
|
|
0.41
|
|
|
0.75
|
|
|
(45.3
|
)%
|
||||
Tax effect on non-GAAP adjustments
|
|
(0.09
|
)
|
|
(0.10
|
)
|
|
(10.0
|
)%
|
|
(0.16
|
)
|
|
(0.30
|
)
|
|
(46.7
|
)%
|
||||
Adjusted diluted net income per share of common stock
|
|
$
|
0.60
|
|
|
$
|
0.42
|
|
|
42.9
|
%
|
|
$
|
2.23
|
|
|
$
|
1.28
|
|
|
74.2
|
%
|
•
|
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; therefore, operating cash flows decrease in the reporting periods that end on a Friday or a Monday. In the period ended
June 30, 2016
, the last business day of the reporting period was a
Thursday
, client prepayments were
$100.7 million
and accrued worksite employee payroll was
$277.4 million
. In the period ended
June 30, 2015
, the last business day of the reporting period was a
Tuesday
, client prepayments were
$19.4 million
and accrued worksite employee payroll was
$228.1 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 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
$29.5 million
in the first
six
months of
2016
and
$26.7 million
in the first
six
months of
2015
. However, our estimate of workers’ compensation incurred claims was
$33.8 million
in the
2016
period and
$31.5 million
in the
2015
period. During the first
six
months of
2016
and
2015
, we received
$12.8 million
and
$5.3 million
, respectively, for the return of excess claim funds related to the workers’ compensation program. This resulted in an increase 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 solely determined by United based primarily upon recent claim history and anticipated cost trends, also have a significant impact on our operating cash flows. As of
June 30, 2016
, premiums owed and cash funded to United have exceeded the costs of the United plan (the “Plan Costs”), resulting in a
$22.9 million
surplus,
$13.9 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. The premiums, including additional quarterly premium, owed to United at
June 30, 2016
, were
$23.0 million
, which is included in accrued health insurance costs, a current liability, on our Consolidated Balance Sheets. Funding rates, as determined by United, resulted in
$19.4 million
of additional quarterly premium at
June 30, 2016
as compared to
$0.1 million
in additional quarterly premium at
June 30, 2015
.
|
•
|
Operating results
– Our adjusted net income has a significant impact on our operating cash flows. Our adjusted net income
increased
47.4%
to
$47.8 million
in the
six months ended June 30, 2016
, compared to
$32.4 million
in the
six months ended June 30, 2015
, due to higher gross profit. Please read “Results of Operations
–
Six Months Ended June 30, 2016
Compared to
Six Months Ended June 30, 2015
.”
|
Period |
|
Total Number of Shares Purchased
(1)
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Announced Programs
(2)
|
|
Maximum Number of Shares Available for Purchase under Announced Program
(2)
|
|||||
|
|
|
|
|
|
|
|
|
|||||
04/01/2016 – 04/30/2016
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
524,332
|
|
05/01/2016 – 05/31/2016
|
|
329
|
|
|
66.78
|
|
|
—
|
|
|
1,524,332
|
|
|
06/01/2016 – 06/30/2016
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,524,332
|
|
|
Total
|
|
329
|
|
|
$
|
66.78
|
|
|
—
|
|
|
|
(1)
|
During May 2016, 329 shares of restricted stock were withheld to satisfy tax-withholding obligations arising in conjunction with the vesting of restricted stock. The required withholding is calculated using the closing sales price reported by the New York Stock Exchange on the date prior to the applicable vesting date. These shares are not subject to the repurchase program described above.
|
(2)
|
Our Board of Directors (the “Board”) has approved a program to repurchase shares of our outstanding common stock, including an additional
one million
shares authorized for repurchase in May 2016. During the three months ended
June 30, 2016
, no shares were repurchased under the program. As of
June 30, 2016
, we were authorized to repurchase an additional
1,524,332
shares under the program. Unless terminated earlier by resolution of the Board, the repurchase program will expire when we have repurchased all shares authorized for repurchase under the repurchase program.
|
|
(a)
|
List of Exhibits
|
|
10.1
|
|
Agreement dated as of May 18, 2016, by and among Insperity, Inc. and Starboard Value LP and its affiliates (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 19, 2016).
|
10.2(+)
|
*
|
Amendment to the Minimum Premium Financial Agreement, as amended effective January 1, 2015, by and between Insperity Holdings, Inc. and United HealthCare Insurance Company, effective as of January 1, 2016.
|
10.3(+)
|
*
|
Amendment to the Minimum Premium Administrative Services Agreement, as amended effective January 1, 2015, by and between Insperity Holdings, Inc. and United HealthCare Insurance Company, effective as of January 1, 2016.
|
31.1
|
*
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
*
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
**
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2
|
**
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
101.INS
|
*
|
XBRL Instance Document.
(1)
|
101.SCH
|
*
|
XBRL Taxonomy Extension Schema Document.
|
101.CAL
|
*
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
101.DEF
|
*
|
XBRL Extension Definition Linkbase Document.
|
101.LAB
|
*
|
XBRL Taxonomy Extension Label Linkbase Document.
|
101.PRE
|
*
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
____________________________________
|
|
|
|
(+)
|
Confidential treatment has been requested for this exhibit and confidential portions have been filed with the Securities and Exchange Commission.
|
|
|
|
|
|
|
*
|
Filed with this report.
|
|
|
|
|
|
|
**
|
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
three and six
month periods ended
June 30, 2016
and
2015
; (ii) the Consolidated Balance Sheets at
June 30, 2016
and
December 31, 2015
; (iii) the Consolidated Statement of Stockholders’ Equity for the
six
month period ended
June 30, 2016
; (iv) the Consolidated Statements of Cash Flows for the
six
month periods ended
June 30, 2016
and
2015
; and (v) Notes to the Consolidated Financial Statements.
|
|
Insperity, Inc.
|
|
|
|
|
Date: August 1, 2016
|
By:
|
/s/ Douglas S. Sharp
|
|
|
Douglas S. Sharp
|
|
|
Senior Vice President of Finance,
|
|
|
Chief Financial Officer and Treasurer
|
|
|
(Principal Financial Officer)
|
I.
|
The definition of “Policy” for purposes of Section 1(s) of the Agreement shall be as follows:
|
•
|
Effective January 1, 2016: No. *** (Medical *** and ***.) (“Policy'') which policy numbers are amended from time to time in the normal course of business, including all individuals, dependents and/or other persons enrolled in COBRA or state continuation coverage.
|
II.
|
The “Maximum Monthly Employer Benefit Obligation"' (the “MMEBO”) shall be the following:
|
o
|
The Quoted Premium effective January 1, 2016 for each Policy minus the *** effective January l, 2016
|
o
|
The Quoted Premium effective January 1, 2017 for each Policy minus the *** effective January l, 2017
|
o
|
The Quoted Premium effective January 1, 2018 for each Policy minus the *** effective January l, 2018
|
o
|
The Quoted Premium effective January 1, 2019 for each Policy minus the *** effective January l, 2019
|
o
|
The total of the estimated *** and *** and ***, calculated as a fixed dollar amount during the Arrangement Period and trued up in
|
|
2
|
|
•
|
The total of the estimated *** and *** calculated as a fixed dollar amount during the Arrangement Period and trued up in normal course, for each Policy plus the 2017 *** (the ''2017 ***'')
|
o
|
The total of the estimated *** and *** and ***, calculated as a fixed dollar amount during the Arrangement Period and trued up in normal course, for each Policy plus the 2018 *** (the ''2018 ***'')
|
o
|
The total of the estimated *** and *** and ***, calculated as a fixed dollar amount during the Arrangement Period and trued up in normal course, for each Policy plus the 2019 *** (the ''2019 ***'')
|
a.
|
2016
***
:
The *** portion of the 2015 *** will be *** by *** and the *** and *** portion of the 2015 *** will be *** by ***.
|
b.
|
2017
***
:
The 2017 *** will be based on the 2016 *** by:
|
|
3
|
|
V.
|
If *** below the thresholds set forth below, the *** and *** portion of the *** increases by the percentage in the table. Calculation of the "***" is defined in Section VI of this Exhibit D.
|
*** in the *** below
|
***
|
***
|
***
|
***
|
*** Increase
|
***
|
***
|
***
|
***
|
*** Increase
|
|
***
|
***
|
***
|
VI
.
|
For purposes of the table in Section V of this Exhibit D, *** shall be determined each *** based upon the following parameters:
|
•
|
*** is defined to include *** for coverage in the Policy and *** for coverage under *** (*** as ***) policies with Employer, which policies are amended from time to time in the normal course of business, including all ***, *** and/or *** in COBRA or state continuation coverage.
|
•
|
*** shall be measured each January 1st, April 1st, July 1st and October 1st, based upon the *** in effect on the 15th day of the preceding month. The *** as of the 15th of the month preceding each of January 1st, April 1st, July 1st and October 1st, shall be the *** that is used to determine the ***, *** and *** for the *** beginning that immediately following January 1st, April 1st, July 1st, and October 1st. For example, to determine the ***, *** and *** for the *** beginning ***, 2016 and ending ***, 2016, the *** as of December 15, 2015 shall be used.
|
VII
.
|
The applicable year's *** Fee shall be billed separately to Employer. ***, ***, the *** Fee and *** Fee will continue to be a pass through of actual expenses.
|
|
4
|
|
|
5
|
|
|
6
|
|
A.
|
Except as otherwise set forth in this
Exhibit F
, the Company shall have the right to be the exclusive provider of medical and dental coverage for Employees; provided, however, that execution of an agreement between the Company and the Employer with
|
b.
|
If Employer introduces a Competing Vendor, the following provisions shall apply as long as the Company continues to write new group policies in that market:
|
(i.)
|
Employer agrees to *** unilaterally to the Competing Vendor; and
|
(ii.)
|
Existing Clients will be offered a choice at the time of the Client's contract renewal between the Company and Competing Vendor coverage options; and
|
(iii.)
|
The choice between the Company and the Competing Vendor's coverage options shall only be *** at the *** and in no event *** to the ***.
|
d.
|
Company will be notified at least 90 days prior to the introduction of a Competing Vendor into a Market.
|
e.
|
In no event will a Competing Vendor be introduced in the ***, which market includes *** and *** and *** markets. These markets will remain exclusive markets to the Company. If agreed to by both parties, the exclusivity requirement will be modified if changes are mandated by Federal or State law (to the extent not previously addressed in subparagraph (a) to this Section 1).
|
|
2
|
|
f.
|
Notwithstanding any provision of Exhibit F to the contrary, the exclusivity provisions shall not apply to any county where *** following a *** where there is no ***.
|
i.
|
Notwithstanding any provision of Exhibit F to the contrary, the exclusivity provisions shall not apply to prevent Employer from offering *** or another Competing Vendor in ***.
|
j.
|
Notwithstanding any provision of Exhibit F to the contrary, the exclusivity provisions shall not apply to prevent Employer from offering alternative *** coverage (but not *** coverage) through *** or *** in ***.
|
k.
|
Company will be the exclusive Vendor for *** coverage offered in the *** markets. If agreed to by both parties, the exclusivity requirement will be modified if changes are mandated by Federal or State law.
|
l.
|
Where a State or municipality requires issuance of small business policies directly to Clients and/or Employees, Employer will not be subject to this exclusivity provision for those Clients and/or Employees. This section does not prohibit a Client or Employee from selecting coverage in a Federal, State or private exchange, provided that *** the Client or Employee from selecting coverage in an exchange.
|
m.
|
Employer and Company will work together to find mutually agreeable parameters for any *** ("***") *** by Employer.
|
|
3
|
|
(i.)
|
Employer agrees to *** to the Competing Vendor;
|
(ii.)
|
Existing Clients will be offered a choice at the time of the Client's contract renewal between the Company and Competing Vendor coverage options; and
|
(iii.)
|
The choice between the Company and the Competing Vendor's coverage options shall only be *** at the *** and in no event *** to the ***.
|
D.
|
Alternate Vendors
|
a.
|
Cooperate in good faith to ease the exclusivity provisions of the Agreement to accommodate a *** offering competitive with the marketplace, however, such easing shall be to the extent minimally necessary to achieve a competitive offering;
|
b.
|
Restrict any *** offering to *** at the ***;
|
|
4
|
|
c.
|
Maintain the existing Agreement for the remainder of the term of the Agreement.
|
|
5
|
|
|
6
|
|
f .
|
"PPO" means any product for network coverage that is not an HMO, the HMO Substitute or an EPO.
|
g.
|
"EPO" means a product issued by a licensed "insurance company" and offered as a network only or lock in product
|
i.
|
''***" means that either (i) the Company and the Employer agree or (ii) an independent consultant chosen by mutual agreement of the parties has determined, that Company's network in a Market has been ***. In order to determine if there is a ***, the consultant shall apply reasonable criteria to determine that both (a) the *** imposes a *** to the Employer's ability to add new clients in the market; and (b) the addition of a new vendor *** the Employer's *** in adding new clients in the market All fees and expenses of any such consultant shall be paid by the Employer.
|
|
7
|
|
|
8
|
|
|
9
|
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Insperity, Inc.;
|
|
2.
|
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;
|
|
3.
|
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;
|
|
4.
|
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:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
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
|
|
5.
|
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):
|
|
(a)
|
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
|
|
(b)
|
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.
|
Date: August 1, 2016
|
|
|
|
|
/s/ Paul J. Sarvadi
|
|
Paul J. Sarvadi
|
|
Chairman of the Board and Chief Executive Officer
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Insperity, Inc.;
|
|
2.
|
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;
|
|
3.
|
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;
|
|
4.
|
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:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
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
|
|
5.
|
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):
|
|
(a)
|
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
|
|
(b)
|
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.
|
Date: August 1, 2016
|
|
|
|
|
/s/
Douglas S. Sharp
|
|
Douglas S. Sharp
|
|
Senior Vice President of Finance, Chief Financial Officer and Treasurer
|
|
1.
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/
Paul J. Sarvadi
|
|
Paul J. Sarvadi
|
|
Chairman of the Board and Chief Executive Officer
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August 1, 2016
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1.
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The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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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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August 1, 2016
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