ý
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the quarterly period ended September 30, 2017.
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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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Large accelerated filer
ý
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Accelerated filer
o
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Non-accelerated filer
o
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(Do not check if a Smaller reporting company)
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Smaller reporting company
o
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Emerging growth 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.
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Item 1a.
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Item 2.
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Item 6.
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September 30,
2017 |
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December 31, 2016
|
||||
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(Unaudited)
|
|
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
285,934
|
|
|
$
|
286,034
|
|
Restricted cash
|
|
41,748
|
|
|
42,637
|
|
||
Marketable securities
|
|
1,950
|
|
|
1,851
|
|
||
Accounts receivable, net:
|
|
|
|
|
|
|
||
Trade
|
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3,396
|
|
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13,107
|
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||
Unbilled
|
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295,667
|
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254,999
|
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||
Other
|
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3,228
|
|
|
2,178
|
|
||
Prepaid insurance
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18,978
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15,041
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||
Other current assets
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19,260
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19,526
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Income taxes receivable
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878
|
|
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4,949
|
|
||
Total current assets
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671,039
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640,322
|
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||
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|
||||
Property and equipment:
|
|
|
|
|
|
|
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Land
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6,215
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|
|
5,214
|
|
||
Buildings and improvements
|
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95,162
|
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90,151
|
|
||
Computer hardware and software
|
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101,761
|
|
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97,311
|
|
||
Software development costs
|
|
58,819
|
|
|
51,956
|
|
||
Furniture, fixtures and other
|
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42,509
|
|
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38,483
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||
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304,466
|
|
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283,115
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Accumulated depreciation and amortization
|
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(210,726
|
)
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|
(202,854
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)
|
||
Total property and equipment, net
|
|
93,740
|
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80,261
|
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||||
Other assets:
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|
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Prepaid health insurance
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9,000
|
|
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9,000
|
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Deposits – health insurance
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5,300
|
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4,700
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|
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Deposits – workers’ compensation
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142,821
|
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143,938
|
|
||
Goodwill and other intangible assets, net
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12,783
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13,088
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|
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Deferred income taxes, net
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8,205
|
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|
14,025
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|
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Other assets
|
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4,484
|
|
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1,840
|
|
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Total other assets
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182,593
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186,591
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|
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Total assets
|
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$
|
947,372
|
|
|
$
|
907,174
|
|
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September 30,
2017 |
|
December 31,
2016 |
||||
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(Unaudited)
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|
||||
Current liabilities:
|
|
|
|
|
||||
Accounts payable
|
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$
|
3,070
|
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$
|
4,189
|
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Payroll taxes and other payroll deductions payable
|
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185,456
|
|
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247,766
|
|
||
Accrued worksite employee payroll cost
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256,702
|
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215,214
|
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||
Accrued health insurance costs
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34,543
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26,360
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|
||
Accrued workers’ compensation costs
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44,011
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|
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44,231
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|
||
Accrued corporate payroll and commissions
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34,703
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40,761
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|
||
Other accrued liabilities
|
|
20,856
|
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22,437
|
|
||
Total current liabilities
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579,341
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600,958
|
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|
||||
Noncurrent liabilities:
|
|
|
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|
|||
Accrued workers’ compensation costs
|
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161,691
|
|
|
141,291
|
|
||
Long-term debt
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104,400
|
|
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104,400
|
|
||
Total noncurrent liabilities
|
|
266,091
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|
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245,691
|
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|
||||
Commitments and contingencies
|
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|
||||
Stockholders’ equity:
|
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|
|
|
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|
||
Common stock
|
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277
|
|
|
277
|
|
||
Additional paid-in capital
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20,439
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|
|
9,240
|
|
||
Treasury stock, at cost
|
|
(247,956
|
)
|
|
(227,152
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)
|
||
Retained earnings
|
|
329,180
|
|
|
278,160
|
|
||
Total stockholders’ equity
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101,940
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|
|
60,525
|
|
||
Total liabilities and stockholders’ equity
|
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$
|
947,372
|
|
|
$
|
907,174
|
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Three Months Ended
September 30, |
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Nine Months Ended
September 30, |
||||||||||||
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2017
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2016
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2017
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2016
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||||||||
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||||||||
Revenues (gross billings of $4.898 billion, $4.314 billion, $14.656 billion and $13.040 billion less worksite employee payroll cost of $4.102 billion, $3.611 billion
,
$12.182 billion and $10.828 billion, respectively)
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$
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795,513
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$
|
702,538
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$
|
2,473,729
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$
|
2,212,278
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|
|
|
|
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||||||||
Direct costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Payroll taxes, benefits and workers’ compensation costs
|
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655,547
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|
584,742
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2,043,864
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1,831,207
|
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||||
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||||||||
Gross profit
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139,966
|
|
|
117,796
|
|
|
429,865
|
|
|
381,071
|
|
||||
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|
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|
|
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||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries, wages and payroll taxes
|
|
65,223
|
|
|
56,897
|
|
|
189,138
|
|
|
170,910
|
|
||||
Stock-based compensation
|
|
6,584
|
|
|
4,191
|
|
|
16,390
|
|
|
12,527
|
|
||||
Commissions
|
|
5,675
|
|
|
5,030
|
|
|
15,815
|
|
|
13,646
|
|
||||
Advertising
|
|
3,476
|
|
|
3,540
|
|
|
13,623
|
|
|
13,299
|
|
||||
General and administrative expenses
|
|
24,513
|
|
|
21,318
|
|
|
75,315
|
|
|
66,356
|
|
||||
Depreciation and amortization
|
|
4,696
|
|
|
4,047
|
|
|
13,355
|
|
|
12,494
|
|
||||
|
|
110,167
|
|
|
95,023
|
|
|
323,636
|
|
|
289,232
|
|
||||
Operating income
|
|
29,799
|
|
|
22,773
|
|
|
106,229
|
|
|
91,839
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
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|
||||
Interest income
|
|
1,015
|
|
|
335
|
|
|
2,158
|
|
|
927
|
|
||||
Interest expense
|
|
(894
|
)
|
|
(628
|
)
|
|
(2,320
|
)
|
|
(1,915
|
)
|
||||
Income before income tax expense
|
|
29,920
|
|
|
22,480
|
|
|
106,067
|
|
|
90,851
|
|
||||
Income tax expense
|
|
10,718
|
|
|
8,415
|
|
|
37,219
|
|
|
34,380
|
|
||||
Net income
|
|
$
|
19,202
|
|
|
$
|
14,065
|
|
|
$
|
68,848
|
|
|
$
|
56,471
|
|
|
|
|
|
|
|
|
|
|
||||||||
Less distributed and undistributed earnings allocated to participating securities
|
|
(337
|
)
|
|
(330
|
)
|
|
(1,233
|
)
|
|
(1,283
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Net income allocated to common shares
|
|
$
|
18,865
|
|
|
$
|
13,735
|
|
|
$
|
67,615
|
|
|
$
|
55,188
|
|
|
|
|
|
|
|
|
|
|
||||||||
Basic net income per share of common stock
|
|
$
|
0.92
|
|
|
$
|
0.66
|
|
|
$
|
3.29
|
|
|
$
|
2.64
|
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted net income per share of common stock
|
|
$
|
0.91
|
|
|
$
|
0.66
|
|
|
$
|
3.27
|
|
|
$
|
2.64
|
|
|
|
Common Stock Issued
|
|
Additional Paid-In Capital
|
|
Treasury Stock
|
|
Retained Earnings
|
|
Total
|
|||||||||||||
|
|
Shares
|
|
Amount
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2016
|
|
27,744
|
|
|
$
|
277
|
|
|
$
|
9,240
|
|
|
$
|
(227,152
|
)
|
|
$
|
278,160
|
|
|
$
|
60,525
|
|
Purchase of treasury stock, at cost
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27,172
|
)
|
|
—
|
|
|
(27,172
|
)
|
|||||
Stock-based compensation expense
|
|
—
|
|
|
—
|
|
|
10,553
|
|
|
5,837
|
|
|
—
|
|
|
16,390
|
|
|||||
Other
|
|
—
|
|
|
—
|
|
|
646
|
|
|
531
|
|
|
3
|
|
|
1,180
|
|
|||||
Dividends paid
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17,831
|
)
|
|
(17,831
|
)
|
|||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
68,848
|
|
|
68,848
|
|
|||||
Balance at September 30, 2017
|
|
27,744
|
|
|
$
|
277
|
|
|
$
|
20,439
|
|
|
$
|
(247,956
|
)
|
|
$
|
329,180
|
|
|
$
|
101,940
|
|
|
|
Nine Months Ended
September 30, |
||||||
|
|
2017
|
|
2016
|
||||
Cash flows from operating activities:
|
|
|
|
|
||||
Net income
|
|
$
|
68,848
|
|
|
$
|
56,471
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
||
Depreciation and amortization
|
|
13,355
|
|
|
12,494
|
|
||
Stock-based compensation
|
|
16,390
|
|
|
12,527
|
|
||
Deferred income taxes
|
|
5,820
|
|
|
7,205
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
||
Restricted cash
|
|
889
|
|
|
(4,361
|
)
|
||
Accounts receivable
|
|
(32,007
|
)
|
|
(40,744
|
)
|
||
Prepaid insurance
|
|
(3,937
|
)
|
|
(10,179
|
)
|
||
Other current assets
|
|
266
|
|
|
(1,291
|
)
|
||
Other assets
|
|
(2,078
|
)
|
|
118
|
|
||
Accounts payable
|
|
(1,119
|
)
|
|
(1,347
|
)
|
||
Payroll taxes and other payroll deductions payable
|
|
(62,310
|
)
|
|
(43,317
|
)
|
||
Accrued worksite employee payroll expense
|
|
41,488
|
|
|
40,585
|
|
||
Accrued health insurance costs
|
|
8,183
|
|
|
7,064
|
|
||
Accrued workers’ compensation costs
|
|
20,180
|
|
|
16,172
|
|
||
Accrued corporate payroll, commissions and other accrued liabilities
|
|
(7,639
|
)
|
|
(9,543
|
)
|
||
Income taxes payable/receivable
|
|
4,071
|
|
|
(7,055
|
)
|
||
Total adjustments
|
|
1,552
|
|
|
(21,672
|
)
|
||
Net cash provided by operating activities
|
|
70,400
|
|
|
34,799
|
|
||
|
|
|
|
|
||||
Cash flows from investing activities:
|
|
|
|
|
|
|
||
Marketable securities:
|
|
|
|
|
|
|
||
Purchases
|
|
(1,337
|
)
|
|
(946
|
)
|
||
Proceeds from dispositions
|
|
—
|
|
|
7,269
|
|
||
Proceeds from maturities
|
|
1,181
|
|
|
1,665
|
|
||
Property and equipment:
|
|
|
|
|
||||
Purchases
|
|
(26,518
|
)
|
|
(21,302
|
)
|
||
Net cash used in investing activities
|
|
(26,674
|
)
|
|
(13,314
|
)
|
|
|
Nine Months Ended
September 30, |
||||||
|
|
2017
|
|
2016
|
||||
Cash flows from financing activities:
|
|
|
|
|
||||
Purchase of treasury stock
|
|
$
|
(27,172
|
)
|
|
$
|
(13,913
|
)
|
Repurchase of common stock
|
|
—
|
|
|
(144,263
|
)
|
||
Dividends paid
|
|
(17,831
|
)
|
|
(15,324
|
)
|
||
Proceeds from the exercise of stock options
|
|
—
|
|
|
598
|
|
||
Borrowings under long-term debt agreement
|
|
—
|
|
|
124,400
|
|
||
Principal repayments
|
|
—
|
|
|
(20,000
|
)
|
||
Other
|
|
1,177
|
|
|
1,029
|
|
||
Net cash used in financing activities
|
|
(43,826
|
)
|
|
(67,473
|
)
|
||
|
|
|
|
|
||||
Net decrease in cash and cash equivalents
|
|
(100
|
)
|
|
(45,988
|
)
|
||
Cash and cash equivalents at beginning of period
|
|
286,034
|
|
|
269,538
|
|
||
Cash and cash equivalents at end of period
|
|
$
|
285,934
|
|
|
$
|
223,550
|
|
1.
|
Basis of Presentation
|
2.
|
Accounting Policies
|
|
|
Nine Months Ended
September 30, |
||||||
|
|
2017
|
|
2016
|
||||
|
|
(in thousands)
|
||||||
|
|
|
|
|
||||
Beginning balance, January 1,
|
|
$
|
183,928
|
|
|
$
|
162,174
|
|
Accrued claims
|
|
52,133
|
|
|
46,967
|
|
||
Present value discount
|
|
(3,048
|
)
|
|
(1,785
|
)
|
||
Paid claims
|
|
(29,574
|
)
|
|
(29,537
|
)
|
||
Ending balance
|
|
$
|
203,439
|
|
|
$
|
177,819
|
|
|
|
|
|
|
||||
Current portion of accrued claims
|
|
$
|
41,748
|
|
|
$
|
41,778
|
|
Long-term portion of accrued claims
|
|
161,691
|
|
|
136,041
|
|
||
|
|
$
|
203,439
|
|
|
$
|
177,819
|
|
3.
|
Cash, Cash Equivalents and Marketable Securities
|
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
|
|
(in thousands)
|
||||||
Overnight holdings
|
|
|
|
|
||||
Money market funds (cash equivalents)
|
|
$
|
260,000
|
|
|
$
|
255,091
|
|
Investment holdings
|
|
|
|
|
|
|
||
Money market funds (cash equivalents)
|
|
16,392
|
|
|
28,231
|
|
||
Marketable securities
|
|
1,950
|
|
|
1,851
|
|
||
|
|
278,342
|
|
|
285,173
|
|
||
Cash held in demand accounts
|
|
25,648
|
|
|
25,758
|
|
||
Outstanding checks
|
|
(16,106
|
)
|
|
(23,046
|
)
|
||
Total cash, cash equivalents and marketable securities
|
|
$
|
287,884
|
|
|
$
|
287,885
|
|
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
285,934
|
|
|
$
|
286,034
|
|
Marketable securities
|
|
1,950
|
|
|
1,851
|
|
||
Total cash, cash equivalents and marketable securities
|
|
$
|
287,884
|
|
|
$
|
287,885
|
|
4.
|
Fair Value Measurements
|
•
|
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)
|
||||||||||||||
|
|
September 30,
2017 |
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
|
$
|
276,392
|
|
|
$
|
276,392
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Municipal bonds
|
|
1,950
|
|
|
—
|
|
|
1,950
|
|
|
—
|
|
||||
Total
|
|
$
|
278,342
|
|
|
$
|
276,392
|
|
|
$
|
1,950
|
|
|
$
|
—
|
|
|
|
Fair Value Measurements
|
||||||||||||||
|
|
(in thousands)
|
||||||||||||||
|
|
December 31,
2016 |
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
|
$
|
283,322
|
|
|
$
|
283,322
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Municipal bonds
|
|
1,851
|
|
|
—
|
|
|
1,851
|
|
|
—
|
|
||||
Total
|
|
$
|
285,173
|
|
|
$
|
283,322
|
|
|
$
|
1,851
|
|
|
$
|
—
|
|
5.
|
Long-Term Debt
|
6.
|
Stockholders' Equity
|
|
|
2017
|
|
2016
|
||||
|
|
(amounts per share)
|
||||||
|
|
|
|
|
||||
First quarter
|
|
$
|
0.25
|
|
|
$
|
0.22
|
|
Second quarter
|
|
0.30
|
|
|
0.25
|
|
||
Third quarter
|
|
0.30
|
|
|
0.25
|
|
7.
|
Net Income per Share
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
|
(in thousands)
|
||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net income
|
|
$
|
19,202
|
|
|
$
|
14,065
|
|
|
$
|
68,848
|
|
|
$
|
56,471
|
|
Less distributed and undistributed earnings allocated to participating securities
|
|
(337
|
)
|
|
(330
|
)
|
|
(1,233
|
)
|
|
(1,283
|
)
|
||||
Net income allocated to common shares
|
|
$
|
18,865
|
|
|
$
|
13,735
|
|
|
$
|
67,615
|
|
|
$
|
55,188
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding
|
|
20,473
|
|
|
20,843
|
|
|
20,555
|
|
|
20,895
|
|
||||
Incremental shares from assumed LTIP awards and conversions of common stock options
|
|
148
|
|
|
13
|
|
|
119
|
|
|
11
|
|
||||
Adjusted weighted average common shares outstanding
|
|
20,621
|
|
|
20,856
|
|
|
20,674
|
|
|
20,906
|
|
8.
|
Commitments and Contingencies
|
|
|
Three Months Ended
September 30, |
|||||||||
|
|
2017
|
|
2016
|
|
% Change
|
|||||
|
|
(in thousands, except per share and
statistical data) |
|||||||||
|
|
|
|
|
|
|
|||||
Revenues (gross billings of $4.898 billion and $4.314 billion, less worksite employee payroll cost of $4.102 billion and $3.611 billion, respectively)
|
|
$
|
795,513
|
|
|
$
|
702,538
|
|
|
13.2
|
%
|
Gross profit
|
|
139,966
|
|
|
117,796
|
|
|
18.8
|
%
|
||
Operating expenses
|
|
110,167
|
|
|
95,023
|
|
|
15.9
|
%
|
||
Operating income
|
|
29,799
|
|
|
22,773
|
|
|
30.9
|
%
|
||
Other income (expense)
|
|
121
|
|
|
(293
|
)
|
|
141.3
|
%
|
||
Net income
|
|
19,202
|
|
|
14,065
|
|
|
36.5
|
%
|
||
Diluted net income per share of common stock
|
|
0.91
|
|
|
0.66
|
|
|
37.9
|
%
|
||
Adjusted net income
(1)
|
|
24,081
|
|
|
16,687
|
|
|
44.3
|
%
|
||
Adjusted diluted net income per share of common stock
(1)
|
|
1.14
|
|
|
0.78
|
|
|
46.2
|
%
|
||
Adjusted EBITDA
(1)
|
|
43,112
|
|
|
31,346
|
|
|
37.5
|
%
|
||
|
|
|
|
|
|
|
|||||
Statistical Data:
|
|
|
|
|
|
|
|
|
|
||
Average number of worksite employees paid per month
|
|
186,641
|
|
|
168,909
|
|
|
10.5
|
%
|
||
Revenues per worksite employee per month
(2)
|
|
$
|
1,421
|
|
|
$
|
1,386
|
|
|
2.5
|
%
|
Gross profit per worksite employee per month
|
|
250
|
|
|
232
|
|
|
7.8
|
%
|
||
Operating expenses per worksite employee per month
|
|
197
|
|
|
187
|
|
|
5.3
|
%
|
||
Operating income per worksite employee per month
|
|
53
|
|
|
45
|
|
|
17.8
|
%
|
||
Net income per worksite employee per month
|
|
34
|
|
|
28
|
|
|
21.4
|
%
|
(1)
|
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.
|
(2)
|
Gross billings of
$8,748
and
$8,513
per worksite employee per month, less payroll cost of
$7,327
and
$7,127
per worksite employee per month, respectively.
|
|
|
Three Months Ended
September 30, |
|
Three Months Ended
September 30, |
|||||||||||||
|
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|||||||
|
|
(in thousands)
|
|
(% of total revenue)
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||
Northeast
|
|
$
|
204,318
|
|
|
$
|
178,159
|
|
|
14.7
|
%
|
|
26.1
|
%
|
|
25.8
|
%
|
Southeast
|
|
92,646
|
|
|
78,854
|
|
|
17.5
|
%
|
|
11.8
|
%
|
|
11.4
|
%
|
||
Central
|
|
131,978
|
|
|
111,458
|
|
|
18.4
|
%
|
|
16.9
|
%
|
|
16.2
|
%
|
||
Southwest
|
|
184,572
|
|
|
163,314
|
|
|
13.0
|
%
|
|
23.6
|
%
|
|
23.7
|
%
|
||
West
|
|
169,321
|
|
|
157,772
|
|
|
7.3
|
%
|
|
21.6
|
%
|
|
22.9
|
%
|
||
|
|
782,835
|
|
|
689,557
|
|
|
13.5
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
||
Other revenue
(1)
|
|
12,678
|
|
|
12,981
|
|
|
(2.3
|
)%
|
|
|
|
|
||||
Total revenue
|
|
$
|
795,513
|
|
|
$
|
702,538
|
|
|
13.2
|
%
|
|
|
|
|
•
|
Benefits costs
– The cost of group health insurance and related employee benefits
decreased
$8
per worksite employee per month, or
0.5%
on a cost per covered employee basis, compared to the
third
quarter of
2016
. Included in the
third
quarter of
2017
benefits costs is a reduction of
$5.0 million
, or
$9
per worksite employee per month, for changes in estimated claims run-off related to prior periods. Included in the
third
quarter of
2016
benefits costs is a charge of $2.8 million, or $6 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
68.1%
in the
2017
period compared to
68.5%
in the
2016
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
$6
per worksite employee per month basis, compared to the
third
quarter of
2016
. In the
third
quarter of
2017
, as a result of closing out claims at lower than expected costs, we recorded reductions in workers’ compensation costs of
$2.9 million
, or
0.08%
of non-bonus payroll costs, for changes in estimated losses related to prior reporting periods as compared to a $7.1 million reduction to workers’ compensation costs in
2016
. Also in the third quarter of 2017, we received a premium tax refund from a former carrier of $1.2 million. As a percentage of non-bonus payroll cost, workers’ compensation costs were
0.53%
in the
2017
period compared to
0.46%
in the
2016
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
15.3%
due primarily to a
13.6%
increase
in payroll costs, or
$19
per worksite employee per month, compared to the
third
quarter of
2016
. Payroll taxes as a percentage of payroll costs were
6.3%
in
2017
and
6.2%
in
2016
.
|
|
|
Three Months Ended
September 30, |
|
Three Months Ended
September 30, |
||||||||||||||||||
|
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
||||||||||
|
|
(in thousands)
|
|
(per worksite employee per month)
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Salaries, wages and payroll taxes
|
|
$
|
65,223
|
|
|
$
|
56,897
|
|
|
14.6
|
%
|
|
$
|
116
|
|
|
$
|
112
|
|
|
3.6
|
%
|
Stock-based compensation
|
|
6,584
|
|
|
4,191
|
|
|
57.1
|
%
|
|
12
|
|
|
8
|
|
|
50.0
|
%
|
||||
Commissions
|
|
5,675
|
|
|
5,030
|
|
|
12.8
|
%
|
|
10
|
|
|
10
|
|
|
—
|
|
||||
Advertising
|
|
3,476
|
|
|
3,540
|
|
|
(1.8
|
)%
|
|
6
|
|
|
7
|
|
|
(14.3
|
)%
|
||||
General and administrative expenses
|
|
24,513
|
|
|
21,318
|
|
|
15.0
|
%
|
|
44
|
|
|
42
|
|
|
4.8
|
%
|
||||
Depreciation and amortization
|
|
4,696
|
|
|
4,047
|
|
|
16.0
|
%
|
|
9
|
|
|
8
|
|
|
12.5
|
%
|
||||
Total operating expenses
|
|
$
|
110,167
|
|
|
$
|
95,023
|
|
|
15.9
|
%
|
|
$
|
197
|
|
|
$
|
187
|
|
|
5.3
|
%
|
•
|
Salaries, wages and payroll taxes of corporate and sales staff
increased
$8.3 million
or
14.6%
, or
$4
per worksite employee per month, compared to the
2016
period. This increase was primarily due to a
7.9%
increase
in corporate headcount, which includes an
11.7%
increase in the number of Business Performance Advisors. In addition incentive compensation expense increased as a result of an accrual due to better than anticipated operating results.
|
•
|
Stock-based compensation
increased
$2.4 million
or
57.1%
, or
$4
per worksite employee per month, compared to the
2016
period. This increase was primarily due to performance-based awards issued under our Long-Term Incentive Program.
|
•
|
Commissions expense
increased
$0.6 million
or
12.8%
, but remained flat on a per worksite employee per month basis, compared to the
2016
period, primarily due to commissions associated with growth in our PEO HR Outsourcing solutions worksite employees.
|
•
|
General and administrative expenses
increased
$3.2 million
or
15.0%
, or
$2
per worksite employee per month, compared to the
2016
period. The increase was primarily due to $1.2 million in charitable donations made in the quarter for Hurricane Harvey relief efforts. Excluding these donations, general and administrative expenses per worksite employee per month was $42 in both periods. The remaining increase was due to increased travel and training expenses and third-party software expenses attributable to growth in corporate staff as a result of worksite employee growth.
|
|
|
Nine Months Ended
September 30, |
|||||||||
|
|
2017
|
|
2016
|
|
% Change
|
|||||
|
|
(in thousands, except per share and statistical data)
|
|||||||||
|
|
|
|
|
|
|
|||||
Revenues (gross billings of $14.656 billion and $13.040 billion, less worksite employee payroll cost of $12.182 billion and $10.828 billion, respectively)
|
|
$
|
2,473,729
|
|
|
$
|
2,212,278
|
|
|
11.8
|
%
|
Gross profit
|
|
429,865
|
|
|
381,071
|
|
|
12.8
|
%
|
||
Operating expenses
|
|
323,636
|
|
|
289,232
|
|
|
11.9
|
%
|
||
Operating income
|
|
106,229
|
|
|
91,839
|
|
|
15.7
|
%
|
||
Other expense
|
|
(162
|
)
|
|
(988
|
)
|
|
83.6
|
%
|
||
Net income
|
|
68,848
|
|
|
56,471
|
|
|
21.9
|
%
|
||
Diluted net income per share of common stock
|
|
3.27
|
|
|
2.64
|
|
|
23.9
|
%
|
||
Adjusted net income
(1)
|
|
79,994
|
|
|
64,463
|
|
|
24.1
|
%
|
||
Adjusted diluted net income per share of common stock
(1)
|
|
3.80
|
|
|
3.01
|
|
|
26.2
|
%
|
||
Adjusted EBITDA
(1)
|
|
139,150
|
|
|
118,110
|
|
|
17.8
|
%
|
||
|
|
|
|
|
|
|
|||||
Statistical Data:
|
|
|
|
|
|
|
|
|
|
||
Average number of worksite employees paid per month
|
|
180,424
|
|
|
163,607
|
|
|
10.3
|
%
|
||
Revenues per worksite employee per month
(2)
|
|
$
|
1,523
|
|
|
$
|
1,502
|
|
|
1.4
|
%
|
Gross profit per worksite employee per month
|
|
265
|
|
|
259
|
|
|
2.3
|
%
|
||
Operating expenses per worksite employee per month
|
|
199
|
|
|
197
|
|
|
1.0
|
%
|
||
Operating income per worksite employee per month
|
|
65
|
|
|
62
|
|
|
4.8
|
%
|
||
Net income per worksite employee per month
|
|
42
|
|
|
38
|
|
|
10.5
|
%
|
(1)
|
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.
|
(2)
|
Gross billings of
$9,025
and
$8,856
per worksite employee per month, less payroll cost of
$7,502
and
$7,354
per worksite employee per month, respectively.
|
|
|
Nine Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|||||||||||||
|
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|||||||
|
|
(in thousands)
|
|
(% of total revenue)
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||
Northeast
|
|
$
|
644,703
|
|
|
$
|
566,317
|
|
|
13.8
|
%
|
|
26.5
|
%
|
|
26.0
|
%
|
Southeast
|
|
283,501
|
|
|
236,393
|
|
|
19.9
|
%
|
|
11.6
|
%
|
|
10.9
|
%
|
||
Central
|
|
405,854
|
|
|
349,966
|
|
|
16.0
|
%
|
|
16.7
|
%
|
|
16.1
|
%
|
||
Southwest
|
|
573,773
|
|
|
519,147
|
|
|
10.5
|
%
|
|
23.6
|
%
|
|
23.9
|
%
|
||
West
|
|
527,217
|
|
|
502,417
|
|
|
4.9
|
%
|
|
21.6
|
%
|
|
23.1
|
%
|
||
|
|
2,435,048
|
|
|
2,174,240
|
|
|
12.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
||
Other revenue
(1)
|
|
38,681
|
|
|
38,038
|
|
|
1.7
|
%
|
|
|
|
|
||||
Total revenue
|
|
$
|
2,473,729
|
|
|
$
|
2,212,278
|
|
|
11.8
|
%
|
|
|
|
|
•
|
Benefits costs
– The cost of group health insurance and related employee benefits
increased
$6
per worksite employee per month, or
1.6%
on a cost per covered employee basis, compared to the first
nine
months of
2016
. Included in
2017
benefits costs is a reduction of
$1.1 million
, or
$1
per worksite employee per month for changes in estimated claim run-off related to prior periods. Benefits costs incurred in the first
nine
months of
2016
reflect reductions in estimated claims run-off related to prior periods of
$4.6 million
, or
$3
per worksite employee per month. The percentage of worksite employees covered under our health insurance plans was
68.8%
in the
2017
period compared to
69.2%
in the
2016
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
6.0%
, but decreased
$2
on a per worksite employee per month basis, compared to the first
nine
months of
2016
. In the first
nine
months of
2017
, we recorded reductions in workers’ compensation costs of
$11.0 million
, or
0.10%
of non-bonus payroll costs, for changes in estimated losses related to prior reporting periods. In the first
nine
months of 2016, we recorded reductions in workers’ compensation costs of $9.1 million, or 0.09% 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
0.56%
in the
2017
period compared to
0.59%
in the
2016
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
12.3%
due primarily to a
12.5%
increase
in payroll costs, or
$10
per worksite employee per month, compared to the first
nine
months of
2016
. Payroll taxes as a percentage of payroll costs were
7.3%
in both
2017
and
2016
.
|
|
|
Nine Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||
|
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
||||||||||
|
|
(in thousands)
|
|
(per worksite employee per month)
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Salaries, wages and payroll taxes
|
|
$
|
189,138
|
|
|
$
|
170,910
|
|
|
10.7
|
%
|
|
$
|
116
|
|
|
$
|
116
|
|
|
—
|
|
Stock-based compensation
|
|
16,390
|
|
|
12,527
|
|
|
30.8
|
%
|
|
10
|
|
|
9
|
|
|
11.1
|
%
|
||||
Commissions
|
|
15,815
|
|
|
13,646
|
|
|
15.9
|
%
|
|
10
|
|
|
9
|
|
|
11.1
|
%
|
||||
Advertising
|
|
13,623
|
|
|
13,299
|
|
|
2.4
|
%
|
|
8
|
|
|
9
|
|
|
(11.1
|
)%
|
||||
General and administrative expenses
|
|
75,315
|
|
|
66,356
|
|
|
13.5
|
%
|
|
46
|
|
|
45
|
|
|
2.2
|
%
|
||||
Depreciation and amortization
|
|
13,355
|
|
|
12,494
|
|
|
6.9
|
%
|
|
9
|
|
|
9
|
|
|
—
|
|
||||
Total operating expenses
|
|
$
|
323,636
|
|
|
$
|
289,232
|
|
|
11.9
|
%
|
|
$
|
199
|
|
|
$
|
197
|
|
|
1.0
|
%
|
•
|
Salaries, wages and payroll taxes of corporate and sales staff
increased
$18.2 million
or
10.7%
, but remained
flat
on a per worksite employee per month basis, compared to the
2016
period. This increase was primarily due to a
7.8%
increase in corporate headcount, which includes a
10.9%
increase in the number of Business Performance Advisors and in addition incentive compensation expense increased as a result of an accrual due to better than expected operating results.
|
•
|
Stock-based compensation
increased
$3.9 million
or
30.8%
, or
$1
per worksite employee per month, compared to the
2016
period. This increase was primarily due to performance-based awards issued under our Long-Term Incentive Program.
|
•
|
Commissions expense
increased
$2.2 million
or
15.9%
, or
$1
per worksite employee per month, compared to the
2016
period, primarily due to commissions associated with growth in our PEO HR Outsourcing solutions.
|
•
|
General and administrative expenses
increased
$9.0 million
or
13.5%
, or
$1
per worksite employee per month, compared to the
2016
period. Included in the nine months ended September 2017 is a $1.2 million donation to Hurricane Harvey relief efforts. The remaining increase was due to increased travel and training expenses and third-party software expenses attributable to growth in corporate staff as a result of worksite employee growth.
|
•
|
Depreciation and amortization expense
increased
$0.9 million
or
6.9%
, but remained
flat
on a per worksite employee per month basis, compared to the
2016
period.
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||||||
|
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
||||||||||
|
|
(in thousands, except per worksite employee per month data)
|
||||||||||||||||||||
GAAP to non-GAAP reconciliation:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Payroll cost (GAAP)
|
|
$
|
4,102,820
|
|
|
$
|
3,611,159
|
|
|
13.6
|
%
|
|
$
|
12,181,816
|
|
|
$
|
10,828,301
|
|
|
12.5
|
%
|
Less: Bonus payroll cost
|
|
312,230
|
|
|
255,112
|
|
|
22.4
|
%
|
|
1,233,827
|
|
|
1,050,649
|
|
|
17.4
|
%
|
||||
Non-bonus payroll cost
|
|
$
|
3,790,590
|
|
|
$
|
3,356,047
|
|
|
12.9
|
%
|
|
$
|
10,947,989
|
|
|
$
|
9,777,652
|
|
|
12.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Payroll cost per worksite employee per month (GAAP)
|
|
$
|
7,327
|
|
|
$
|
7,127
|
|
|
2.8
|
%
|
|
$
|
7,502
|
|
|
$
|
7,354
|
|
|
2.0
|
%
|
Less: Bonus payroll cost per worksite employee per month
|
|
557
|
|
|
504
|
|
|
10.5
|
%
|
|
760
|
|
|
714
|
|
|
6.4
|
%
|
||||
Non-bonus payroll cost per worksite employee per month
|
|
$
|
6,770
|
|
|
$
|
6,623
|
|
|
2.2
|
%
|
|
$
|
6,742
|
|
|
$
|
6,640
|
|
|
1.5
|
%
|
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
|
|
(in thousands)
|
||||||
|
|
|
|
|
||||
Cash, cash equivalents and marketable securities (GAAP)
|
|
$
|
287,884
|
|
|
$
|
287,885
|
|
Less: Amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions
|
|
168,334
|
|
|
221,710
|
|
||
Customer prepayments
|
|
14,167
|
|
|
21,256
|
|
||
Adjusted cash, cash equivalents and marketable securities
|
|
$
|
105,383
|
|
|
$
|
44,919
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||||||
|
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
||||||||||
|
|
(in thousands, except per worksite employee per month data)
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating expenses (GAAP)
|
|
$
|
110,167
|
|
|
$
|
95,023
|
|
|
15.9
|
%
|
|
$
|
323,636
|
|
|
$
|
289,232
|
|
|
11.9
|
%
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Charitable donations to Hurricane Harvey relief efforts
|
|
1,218
|
|
|
—
|
|
|
—
|
|
|
1,218
|
|
|
—
|
|
|
—
|
|
||||
Stockholder advisory expenses
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
323
|
|
|
—
|
|
||||
Adjusted operating expenses (non-GAAP)
|
|
$
|
108,949
|
|
|
$
|
95,023
|
|
|
14.7
|
%
|
|
$
|
322,418
|
|
|
$
|
288,909
|
|
|
11.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating expenses per worksite employee per month (GAAP)
|
|
$
|
197
|
|
|
$
|
187
|
|
|
5.3
|
%
|
|
$
|
199
|
|
|
$
|
197
|
|
|
1.0
|
%
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Charitable donations to Hurricane Harvey relief efforts per worksite employee per month
|
|
2
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
||||
Stockholder advisory expenses per worksite employee per month
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Adjusted operating expenses per worksite employee per month (non-GAAP)
|
|
$
|
195
|
|
|
$
|
187
|
|
|
4.3
|
%
|
|
$
|
198
|
|
|
$
|
197
|
|
|
0.5
|
%
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|||||||||||||||||||
|
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
|||||||||||
|
|
(in thousands, except per worksite employee per month data)
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (GAAP)
|
|
$
|
19,202
|
|
|
$
|
14,065
|
|
|
36.5
|
%
|
|
$
|
68,848
|
|
|
$
|
56,471
|
|
|
21.9
|
%
|
|
Income tax expense
|
|
10,718
|
|
|
8,415
|
|
|
27.4
|
%
|
|
37,219
|
|
|
34,380
|
|
|
8.3
|
%
|
|||||
Interest expense
|
|
894
|
|
|
628
|
|
|
42.4
|
%
|
|
2,320
|
|
—
|
|
1,915
|
|
|
21.1
|
%
|
||||
Depreciation and amortization
|
|
4,696
|
|
|
4,047
|
|
|
16.0
|
%
|
|
13,355
|
|
|
12,494
|
|
|
6.9
|
%
|
|||||
EBITDA
|
|
35,510
|
|
|
27,155
|
|
|
30.8
|
%
|
|
121,742
|
|
|
105,260
|
|
|
15.7
|
%
|
|||||
Stock-based compensation
|
|
6,584
|
|
|
4,191
|
|
|
57.1
|
%
|
|
16,390
|
|
|
12,527
|
|
|
30.8
|
%
|
|||||
Charitable donations to Hurricane Harvey relief efforts
|
|
1,218
|
|
|
—
|
|
|
—
|
|
|
1,218
|
|
|
—
|
|
|
—
|
|
|||||
Other
|
|
(200
|
)
|
|
—
|
|
|
—
|
|
|
(200
|
)
|
|
—
|
|
|
—
|
|
|||||
Stockholder advisory expenses
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
323
|
|
|
—
|
|
|||||
Adjusted EBITDA
|
|
$
|
43,112
|
|
|
$
|
31,346
|
|
|
37.5
|
%
|
|
$
|
139,150
|
|
|
$
|
118,110
|
|
|
17.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income per worksite employee per month (GAAP)
|
|
$
|
34
|
|
|
$
|
28
|
|
|
21.4
|
%
|
|
$
|
42
|
|
|
$
|
38
|
|
|
10.5
|
%
|
|
Income tax expense per worksite employee per month
|
|
19
|
|
|
17
|
|
|
11.8
|
%
|
|
23
|
|
|
23
|
|
|
—
|
|
|||||
Interest expense per worksite employee per month
|
|
2
|
|
|
1
|
|
|
100.0
|
%
|
|
1
|
|
|
1
|
|
|
—
|
|
|||||
Depreciation and amortization per worksite employee per month
|
|
8
|
|
|
8
|
|
|
—
|
|
|
9
|
|
|
9
|
|
|
—
|
|
|||||
EBITDA per worksite employee per month
|
|
63
|
|
|
54
|
|
|
16.7
|
%
|
|
75
|
|
|
71
|
|
|
5.6
|
%
|
|||||
Stock-based compensation per worksite employee per month
|
|
12
|
|
|
8
|
|
|
50.0
|
%
|
|
10
|
|
|
9
|
|
|
11.1
|
%
|
|||||
Charitable donations to Hurricane Harvey relief efforts per worksite employee per month
|
|
2
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|||||
Other per worksite employee per month
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Stockholder advisory expenses per worksite employee per month
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Adjusted EBITDA per worksite employee per month
|
|
$
|
77
|
|
|
$
|
62
|
|
|
24.2
|
%
|
|
$
|
86
|
|
|
$
|
80
|
|
|
7.5
|
%
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||||||
|
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income (GAAP)
|
|
$
|
19,202
|
|
|
$
|
14,065
|
|
|
36.5
|
%
|
|
$
|
68,848
|
|
|
$
|
56,471
|
|
|
21.9
|
%
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Stock-based compensation
|
|
6,584
|
|
|
4,191
|
|
|
57.1
|
%
|
|
16,390
|
|
|
12,527
|
|
|
30.8
|
%
|
||||
Charitable donations to Hurricane Harvey relief efforts
|
|
1,218
|
|
|
—
|
|
|
—
|
|
|
1,218
|
|
|
—
|
|
|
—
|
|
||||
Other
|
|
(200
|
)
|
|
—
|
|
|
—
|
|
|
(200
|
)
|
|
—
|
|
|
—
|
|
||||
Stockholder advisory expenses
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
323
|
|
|
—
|
|
||||
Total non-GAAP adjustments
|
|
7,602
|
|
|
4,191
|
|
|
81.4
|
%
|
|
17,408
|
|
|
12,850
|
|
|
35.5
|
%
|
||||
Tax effect
|
|
(2,723
|
)
|
|
(1,569
|
)
|
|
73.6
|
%
|
|
(6,262
|
)
|
|
(4,858
|
)
|
|
28.9
|
%
|
||||
Adjusted net income
|
|
$
|
24,081
|
|
|
$
|
16,687
|
|
|
44.3
|
%
|
|
$
|
79,994
|
|
|
$
|
64,463
|
|
|
24.1
|
%
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||||||||
|
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Diluted net income per share of common stock (GAAP)
|
|
$
|
0.91
|
|
|
$
|
0.66
|
|
|
37.9
|
%
|
|
$
|
3.27
|
|
|
$
|
2.64
|
|
|
23.9
|
%
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Stock-based compensation
|
|
0.31
|
|
|
0.20
|
|
|
55.0
|
%
|
|
0.78
|
|
|
0.59
|
|
|
32.2
|
%
|
||||
Charitable donations to Hurricane Harvey relief efforts
|
|
0.06
|
|
|
—
|
|
|
—
|
|
|
0.06
|
|
|
—
|
|
|
—
|
|
||||
Other
|
|
(0.01
|
)
|
|
—
|
|
|
—
|
|
|
(0.01
|
)
|
|
—
|
|
|
—
|
|
||||
Stockholder advisory expenses
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.02
|
|
|
—
|
|
||||
Total non-GAAP adjustments
|
|
0.36
|
|
|
0.20
|
|
|
80.0
|
%
|
|
0.83
|
|
|
0.61
|
|
|
36.1
|
%
|
||||
Tax effect
|
|
(0.13
|
)
|
|
(0.08
|
)
|
|
62.5
|
%
|
|
(0.30
|
)
|
|
(0.24
|
)
|
|
25.0
|
%
|
||||
Adjusted diluted net income per share of common stock
|
|
$
|
1.14
|
|
|
$
|
0.78
|
|
|
46.2
|
%
|
|
$
|
3.80
|
|
|
$
|
3.01
|
|
|
26.2
|
%
|
•
|
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
September 30, 2017
, the last business day of the reporting period was a
Friday
, client prepayments were
$14.2 million
and accrued worksite employee payroll was
$256.7 million
. 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.
|
•
|
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
$49.0 million
in the first
nine
months of
2017
and
$44.2 million
in the first
nine
months of
2016
. However, our estimate of workers’ compensation incurred claims was
$49.1 million
in the
2017
period and
$45.2 million
in the
2016
period. During the first
nine
months of
2017
and
2016
, we received
$22.7 million
and
$12.8 million
, respectively for the return of excess claim funds related to the workers’ compensation program, which resulted in an increase in 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
September 30, 2017
, premiums owed and cash funded to United have exceeded the costs of the United plan, resulting in a
$24.5 million
surplus,
$15.5 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. The premiums, including additional quarterly premium, owed to United at
September 30, 2017
, were
$30.4 million
, which is included in accrued health insurance costs, a current liability, on our Consolidated Balance Sheets.
|
•
|
Operating results
– Our adjusted net income has a significant impact on our operating cash flows. Our adjusted net income
increased
24.1%
to
$80.0 million
in the
nine months ended September 30, 2017
, compared to
$64.5 million
in the
nine months ended September 30, 2016
, due to higher gross profit. Please read “Results of Operations
–
Nine Months Ended September 30, 2017
Compared to
Nine Months Ended September 30, 2016
.”
|
Period |
|
Total Number of Shares Purchased
(1)(2)
|
|
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)
|
|||||
|
|
|
|
|
|
|
|
|
|||||
07/01/2017 – 07/31/2017
|
|
20,054
|
|
|
$
|
69.99
|
|
|
20,000
|
|
|
876,782
|
|
08/01/2017 – 08/31/2017
|
|
—
|
|
|
—
|
|
|
—
|
|
|
876,782
|
|
|
09/01/2017 – 09/30/2017
|
|
3,000
|
|
|
79.94
|
|
|
3,000
|
|
|
873,782
|
|
|
Total
|
|
23,054
|
|
|
$
|
71.28
|
|
|
23,000
|
|
|
|
(1)
|
During the three months ended
September 30, 2017
,
54
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. During the three months ended
September 30, 2017
,
23,000
shares were repurchased under the program. As of
September 30, 2017
, we were authorized to repurchase an additional
873,782
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†
|
*
|
|
10.2†
|
*
|
|
10.3†
|
*
|
|
10.4†
|
*
|
|
31.1
|
*
|
|
31.2
|
*
|
|
32.1
|
**
|
|
32.2
|
**
|
|
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.
|
|
____________________________________
|
|
|
|
†
|
Management contract or compensatory plan or arrangement
|
|
|
|
|
|
|
*
|
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 nine
month periods ended
September 30, 2017
and
2016
; (ii) the Consolidated Balance Sheets at
September 30, 2017
and
December 31, 2016
; (iii) the Consolidated Statement of Stockholders’ Equity for the
nine
month period ended
September 30, 2017
; (iv) the Consolidated Statements of Cash Flows for the
nine
month periods ended
September 30, 2017
and
2016
; and (v) Notes to the Consolidated Financial Statements.
|
|
Insperity, Inc.
|
|
|
|
|
Date: November 1, 2017
|
By:
|
/s/ Douglas S. Sharp
|
|
|
Douglas S. Sharp
|
|
|
Senior Vice President of Finance,
|
|
|
Chief Financial Officer and Treasurer
|
|
|
(Principal Financial Officer)
|
a.
|
Gross negligence or willful misconduct in the performance of the Grantee’s duties;
|
b.
|
Conviction or plea of
nolo contendre
for a felony or any crime involving moral turpitude; or
|
c.
|
Committing an act of fraud or deceit intended to result in personal and unauthorized enrichment of Grantee at the Company’s expense.
|
a.
|
A termination initiated by the Grantee due to (items (1) through (4) below referred to herein as “Good Reason”):
|
b.
|
An involuntary termination of the Grantee, other than for “Cause”.
|
|
|
|
INSPERITY, INC.
|
|
|
|
|
|
|
Award Date:
|
|
|
By:
|
|
|
|
|
Name:
|
Timothy T. Clifford
|
|
|
|
Title
|
Chairman of the
|
|
|
|
|
Compensation Committee
|
|
|
|
GRANTEE:
|
Date:
|
|
|
|
a.
|
Gross negligence or willful misconduct in the performance of the Grantee’s duties;
|
b.
|
Conviction or plea of
nolo contendre
for a felony or any crime involving moral turpitude; or
|
c.
|
Committing an act of fraud or deceit intended to result in personal and unauthorized enrichment of Grantee at the Company’s expense.
|
a.
|
A termination initiated by the Grantee due to (items (1) through (3) below referred to herein as “Good Reason”):
|
b.
|
An involuntary termination of the Grantee, other than for “Cause”.
|
|
|
|
INSPERITY, INC.
|
|
|
|
|
|
|
Award Date:
|
|
|
By:
|
|
|
|
|
Name:
|
Paul J. Sarvadi
|
|
|
|
Title
|
Chairman of the Board and
|
|
|
|
|
Chief Executive Officer
|
|
|
|
GRANTEE:
|
Date:
|
|
|
|
|
|
|
INSPERITY, INC.
|
|
|
|
|
|
|
Award Date:
|
|
|
By:
|
|
|
|
|
Name:
|
Paul J. Sarvadi
|
|
|
|
Title
|
Chairman of the Board and
|
|
|
|
|
Chief Executive Officer
|
|
|
|
GRANTEE:
|
Date:
|
|
|
|
|
|
|
INSPERITY, INC.
|
|
|
|
|
|
|
Award Date:
|
|
|
By:
|
|
|
|
|
Name:
|
Timothy T. Clifford
|
|
|
|
Title
|
Chairman of the
|
|
|
|
|
Compensation Committee
|
|
|
|
GRANTEE:
|
Date:
|
|
|
|
|
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: November 1, 2017
|
|
|
|
|
/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: November 1, 2017
|
|
|
|
|
/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
|
|
November 1, 2017
|
|
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/
Douglas S. Sharp
|
|
Douglas S. Sharp
|
|
Senior Vice President of Finance,
|
|
Chief Financial Officer and Treasurer
|
|
November 1, 2017
|