☒
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Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the fiscal year ended
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December 31, 2019
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or
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☐
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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,
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Texas
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77339
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(Address of principal executive offices)
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(Zip Code)
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Common Stock, Par value $0.01 per share
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NSP
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New York Stock Exchange
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(Title of class)
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(Trading symbol)
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(Name of exchange on which registered)
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Large accelerated filer
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☒
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Emerging growth company
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☐
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Smaller reporting company
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☐
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TABLE OF CONTENTS
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Page
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Part I
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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Item S-K 401(b).
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Part II
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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Part III
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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Part IV
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Item 15.
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Item 16.
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BUSINESS
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Insperity
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2
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2019 Form 10-K
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BUSINESS
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•
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the focus on growth and productivity of the small and medium-sized business community in the United States, utilizing outsourcing to concentrate on core competencies
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•
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the need to provide competitive health care and related benefits to attract and retain employees
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•
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the increasing costs associated with health and workers’ compensation insurance coverage, workplace safety programs, employee-related complaints and litigation
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•
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complex regulation of employment issues and the related costs of compliance, including the allocation of time and effort to such functions by owners and key executives
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•
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the significant costs, time and specialized knowledge required to purchase or develop the technology infrastructure to administer benefits, HR and payroll processing on an integrated basis
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Insperity
|
3
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2019 Form 10-K
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BUSINESS
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•
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benefits and payroll administration
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•
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health and workers’ compensation insurance programs
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•
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personnel records management
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•
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employer liability management
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•
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assistance with government compliance
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•
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general HR advice
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•
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access to Insperity Premier for employees, managers and client owners
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•
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401(k) retirement plan sponsored by us
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•
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employee recruiting and support
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•
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employee performance management
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•
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training and development services
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Insperity
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4
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2019 Form 10-K
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BUSINESS
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•
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Internal Revenue Code (the “Code”)
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•
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The Family and Medical Leave Act (FMLA)
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•
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Federal Income Contribution Act (FICA)
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•
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Genetic Information Nondiscrimination Act of 2008
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Federal Unemployment Tax Act (FUTA)
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•
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Drug-Free Workplace Act
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•
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Fair Labor Standards Act (FLSA)
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•
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Occupational Safety and Health Act (OSHA)
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•
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Employee Retirement Income Security Act, as amended (ERISA)
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•
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Worker Adjustment and Retraining Notification Act (WARN)
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•
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Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)
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•
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Uniformed Services Employment and Reemployment Rights Act (USERRA)
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•
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Immigration Reform and Control Act (IRCA)
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•
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State unemployment and employment security laws
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•
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Title VII (Civil Rights Act of 1964)
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•
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State workers’ compensation laws
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•
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Health Insurance Portability and Accountability Act (HIPAA)
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•
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Health Care and Education Reconciliation Act of 2010 (the “Reconciliation Act”)
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•
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Age Discrimination in Employment Act (ADEA)
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•
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Patient Protection and Affordable Care Act (PPACA)
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•
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Americans with Disabilities Act (ADA)
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•
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State and local law equivalents of the foregoing
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•
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payroll processing
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•
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payroll tax deposits
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•
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payroll tax reporting
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•
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employee file maintenance
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•
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unemployment claims processing
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•
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workers’ compensation claims reporting and monitoring
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•
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a group health plan
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•
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a health savings account program
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•
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a health care flexible spending account plan
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•
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a 401(k) retirement plan
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cafeteria plans for group health and health savings account contributions
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short-term and long-term disability insurance
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•
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an educational assistance program
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an adoption assistance program
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group term life insurance
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group universal life insurance
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accidental death and dismemberment insurance
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paid family leave, where required by law
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Insperity
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5
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2019 Form 10-K
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BUSINESS
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•
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WebPayroll for the submission, approval and reporting of payroll data
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mobile access to review and approve payroll transactions and employee time entry
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tools to manage the onboarding of new employees
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employee administration functions such as viewing or changing information about employees
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access to client-specific compliance-related information relevant to many HR areas
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reporting and analytics tools to create, view, save and export reports and data about employees and, for our mid-market customers, to do more complex analysis and visualization of their workforce data with the Insperity People Analytics solution
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ability to manage employee time and attendance information, absences and paid time off
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access to talent management tools in the areas of recruiting, performance management and learning management
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access to a library of online human resources forms
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access to a wide range of best-practices human resources management content
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access to view, edit and change a range of employee profile information
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online check stubs, pay history, W-2s, update W-4 forms and other state forms
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employee-specific benefits content, including summary plan descriptions, enrollment status and tools to assist with benefits selection
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access to 401(k) retirement plan information, if offered by client
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e-Learning web-based training
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links to benefits providers and other key vendors
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performance management tools including self-reviews and review history, if offered by client
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ability to submit time and attendance information, absences and paid time off requests
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Insperity
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6
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2019 Form 10-K
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BUSINESS
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•
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mobile access to perform a wide range of employee-specific activities such as reporting time and attendance and paid time off, view pay stubs, insurance coverage and ID cards, view 401(k) balances and other commonly accessed data
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drafting and reviewing personnel policies and employee handbooks
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designing job descriptions
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performing prospective employee screening and background investigations
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designing performance appraisal processes and forms
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professional development and issues-oriented training
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employee counseling
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substance abuse awareness training
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outplacement services
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compensation guidance
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Insperity
|
7
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2019 Form 10-K
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BUSINESS
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Insperity
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8
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2019 Form 10-K
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BUSINESS
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•
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Payment of wages and salaries as reported by the client and related tax reporting and remittance (local, state and federal withholding, FICA, FUTA, state unemployment)
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Workers’ compensation compliance, procurement, management and reporting
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Compliance with the Code, COBRA, HIPAA and ERISA for Insperity-sponsored employee benefit plans , as well as monitoring changes in other governmental laws and regulations governing the employer/employee relationship and updating the client when necessary
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Offering benefits under Insperity-sponsored employee benefit plans that comply with PPACA requirements
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Employee benefits administration of plans sponsored solely by Insperity
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Payment, through Insperity, of commissions, bonuses, vacations, paid time off, sick pay, paid leaves of absence, and severance payments
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Payment and related tax reporting and remittance of non-qualified deferred compensation and equity-based compensation
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Products produced and/or services provided
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Compliance with OSHA regulations, EPA regulations, FLSA, FMLA, WARN, USERRA, and state and local equivalents and compliance with government contracting provisions
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Compliance with federal, state, and local pay or play health care mandates and all such other similar federal, state and local legislation
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Compliance with the National Labor Relations Act (“NLRA”), including all organizing efforts and expenses related to a collective bargaining agreement and related benefits
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Professional licensing requirements, fidelity bonding, and professional liability insurance
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Ownership and protection of all client intellectual property rights
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COBRA, HIPAA, PPACA, the Code and ERISA compliance for client-sponsored employee benefit plans
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Insperity
|
9
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2019 Form 10-K
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BUSINESS
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•
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Implementation of policies and practices relating to the employee/employer relationship
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•
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Internal compliance with all federal, state and local employment laws, including Title VII of the Civil Rights Act of 1964, ADEA, Title I of ADA, the Consumer Credit Protection Act and immigration laws and regulations
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Insperity
|
10
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2019 Form 10-K
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BUSINESS
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Insperity
|
11
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2019 Form 10-K
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BUSINESS
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Market
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Sales Offices
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Initial Entry Date
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Market
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Sales Offices
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Initial Entry Date
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Houston
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6
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1986
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Raleigh
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1
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2006
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San Antonio
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1
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1989
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Kansas City
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1
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2007
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Austin
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2
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1989
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Columbus
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1
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2010
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Orlando
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1
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1989
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Nashville
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1
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2011
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Dallas/Fort Worth
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5
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1993
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Philadelphia
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2
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2012
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Atlanta
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3
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1994
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Seattle
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1
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2015
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Phoenix
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1
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1995
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Indianapolis
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1
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2016
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Chicago
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5
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1995
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Fort Lauderdale
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1
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2017
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Washington D.C.
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2
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1995
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Milwaukee
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1
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2017
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Denver
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2
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1996
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Oklahoma City
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1
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2018
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Los Angeles
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6
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1997
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Pittsburgh
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1
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2018
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Charlotte
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1
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1997
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San Jose
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1
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2018
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St. Louis
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1
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1998
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Stamford
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1
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2018
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San Francisco
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3
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1998
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Portland
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1
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2019
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New York
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5
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1999
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Tampa
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1
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2019
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Baltimore
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2
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2000
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Las Vegas
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1
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2019
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Newark
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3
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2000
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Sacramento
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1
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2019
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San Diego
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2
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2001
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Providence
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1
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2019
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Boston
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3
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2001
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Minneapolis
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2
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2002
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|
•
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market size, in terms of small and medium-sized businesses engaged in selected industries that meet our risk profile
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•
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market receptivity to PEO services, including the regulatory environment and relevant history with other PEO providers
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•
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existing relationships within a given market, such as vendor or client relationships
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•
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expansion cost issues, such as advertising and overhead costs
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•
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direct cost issues that bear on our effectiveness in controlling and managing the cost of our services, such as workers’ compensation and health insurance costs, unemployment risks, and various legal and other factors
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•
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a comparison of the services we offer to alternatives available to small and medium-sized businesses in the relevant market, such as the cost to the target clients of procuring services directly or through other PEOs
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•
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long-term strategy issues, such as the general perception of markets and our estimate of the long-term revenue growth potential of the market
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Insperity
|
12
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2019 Form 10-K
|
BUSINESS
|
Insperity
|
13
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2019 Form 10-K
|
BUSINESS
|
•
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WSEE enrollment
|
•
|
human resources management and employee administration
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•
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benefits and defined contribution plan administration
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•
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time and attendance collection and administration
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•
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payroll processing
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•
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client invoicing and collection
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•
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management information and reporting
|
•
|
sales bid calculations
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Insperity
|
14
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2019 Form 10-K
|
BUSINESS
|
•
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a group health plan, which includes medical, dental, vision and prescription drug coverage, as well as a work-life program
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•
|
a 401(k) retirement plan
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•
|
cafeteria plans under Code Section 125
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•
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a health savings account program
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•
|
a welfare benefits plan, which includes life, disability, and accidental death and dismemberment coverage
|
•
|
a health care flexible spending account plan
|
•
|
an educational assistance program
|
•
|
an adoption assistance program
|
•
|
a commuter benefits program
|
Insperity
|
15
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2019 Form 10-K
|
BUSINESS
|
•
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the employer’s degree of behavioral control (the extent of instructions, training and the nature of the work)
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•
|
the financial control or the economic aspects of the relationship
|
•
|
the intended relationship of the parties (whether employee benefits are provided, whether any contracts exist, whether services are ongoing or for a project, whether there are any penalties for discharge/termination, and the frequency of the business activity)
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Insperity
|
16
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2019 Form 10-K
|
BUSINESS
|
•
|
withholding of income tax requirements governed by Code Section 3401, et seq.
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•
|
obligations under FICA, governed by Code Section 3101, et seq.
|
•
|
obligations under FUTA, governed by Code Section 3301, et seq.
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Insperity
|
17
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2019 Form 10-K
|
BUSINESS
|
Insperity
|
18
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2019 Form 10-K
|
RISK FACTORS
|
•
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payment of the salaries and wages for work performed by WSEEs, regardless of whether the client timely pays us the associated service fee
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•
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withholding and payment of federal and state payroll taxes with respect to wages and salaries reported by Insperity
|
•
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providing benefits to WSEEs even if our costs to provide such benefits exceed the fees the client pays us
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Insperity
|
19
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2019 Form 10-K
|
RISK FACTORS
|
Insperity
|
20
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2019 Form 10-K
|
RISK FACTORS
|
Insperity
|
21
|
2019 Form 10-K
|
RISK FACTORS
|
Insperity
|
22
|
2019 Form 10-K
|
RISK FACTORS
|
Insperity
|
23
|
2019 Form 10-K
|
RISK FACTORS
|
Insperity
|
24
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2019 Form 10-K
|
RISK FACTORS
|
•
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income tax withholding requirements
|
•
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FICA
|
•
|
FUTA
|
Insperity
|
25
|
2019 Form 10-K
|
OTHER INFORMATION
|
Insperity
|
26
|
2019 Form 10-K
|
PROPERTIES
|
Insperity
|
27
|
2019 Form 10-K
|
LEGAL PROCEEDINGS
|
Insperity
|
28
|
2019 Form 10-K
|
MINE SAFETY DISCLOSURES
|
Insperity
|
29
|
2019 Form 10-K
|
EXECUTIVE OFFICERS
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Name
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Age
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Position
|
|
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Paul J. Sarvadi
|
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63
|
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Chairman of the Board and Chief Executive Officer
|
A. Steve Arizpe
|
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62
|
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President and Chief Operating Officer
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Jay E. Mincks
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|
66
|
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Executive Vice President of Sales and Marketing
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Douglas S. Sharp
|
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58
|
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Senior Vice President of Finance, Chief Financial Officer and Treasurer
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Daniel D. Herink
|
|
53
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Senior Vice President of Legal, General Counsel and Secretary
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James D. Allison
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51
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Senior Vice President of Gross Profit Operations
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Insperity
|
30
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2019 Form 10-K
|
STOCK ACTIVITIES
|
Period
|
Total Number of Shares Purchased(1)(2)
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Program(1)
|
|
Maximum Number of Shares that may yet be Purchased under the Program(1)
|
|||||
10/01/2019 – 10/31/2019
|
24,000
|
|
|
$
|
95.73
|
|
|
24,000
|
|
|
1,032,945
|
|
11/01/2019 – 11/30/2019
|
361,412
|
|
|
74.66
|
|
|
361,412
|
|
|
671,533
|
|
|
12/01/2019 – 12/31/2019
|
257,749
|
|
|
77.96
|
|
|
257,700
|
|
|
413,833
|
|
|
Total
|
643,161
|
|
|
$
|
76.77
|
|
|
643,112
|
|
|
|
(1)
|
Our Board has approved a program to repurchase shares of our outstanding common stock, including an additional 700,000 shares authorized for repurchase in August 2019. During the three months ended December 31, 2019, 643,112 shares were repurchased under the program. As of December 31, 2019, we were authorized to repurchase an additional 413,833 shares under the program. Unless terminated earlier by resolution of the Board, the repurchase program will expire when we have repurchased all the shares authorized for repurchase under the repurchase program.
|
(2)
|
During the three months ended December 31, 2019, 49 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.
|
Insperity
|
31
|
2019 Form 10-K
|
STOCK ACTIVITIES
|
|
12/14
|
|
12/15
|
|
12/16
|
|
12/17
|
|
12/18
|
|
12/19
|
|
|
|
|
|
|
|
|
||||||
Insperity, Inc.
|
100.00
|
|
144.62
|
|
216.28
|
|
360.36
|
|
591.74
|
|
551.78
|
|
S&P Smallcap 600
|
100.00
|
|
98.03
|
|
124.06
|
|
140.48
|
|
128.56
|
|
157.85
|
|
S&P Midcap 400
|
100.00
|
|
97.82
|
|
118.11
|
|
137.30
|
|
122.08
|
|
154.07
|
|
S&P 1500 Composite Human Resource and Employment Services
|
100.00
|
|
107.33
|
|
114.70
|
|
153.24
|
|
135.54
|
|
160.06
|
|
Insperity
|
32
|
2019 Form 10-K
|
SELECTED FINANCIAL DATA
|
(in thousands, except per share and statistical data)
|
Year Ended December 31,
|
|
||||||||||||||||||
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
|||||||||||
|
|
|
||||||||||||||||||
Income Statement Data:
|
|
|||||||||||||||||||
Revenues(1)
|
$
|
4,314,804
|
|
|
$
|
3,828,549
|
|
|
$
|
3,300,223
|
|
|
$
|
2,941,347
|
|
|
$
|
2,603,614
|
|
|
Gross profit
|
732,934
|
|
|
681,909
|
|
|
572,731
|
|
|
491,610
|
|
|
437,867
|
|
|
|||||
Operating income
|
186,633
|
|
|
179,036
|
|
|
129,941
|
|
|
106,306
|
|
|
65,699
|
|
(2)
|
|||||
Net income
|
151,099
|
|
|
135,413
|
|
|
84,402
|
|
|
65,991
|
|
|
39,390
|
|
|
|||||
Diluted EPS
|
3.70
|
|
|
3.22
|
|
|
2.01
|
|
(3)
|
1.54
|
|
(3)
|
0.79
|
|
(3)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Non-GAAP Financial Measures(4):
|
|
|
|
|
|
|
|
|
|
|||||||||||
Adjusted net income
|
$
|
169,449
|
|
|
$
|
157,536
|
|
|
$
|
103,005
|
|
|
$
|
76,718
|
|
|
$
|
54,519
|
|
|
Adjusted EPS
|
4.15
|
|
|
3.75
|
|
|
2.45
|
|
(3)
|
1.79
|
|
(3)
|
1.10
|
|
(3)
|
|||||
Adjusted EBITDA
|
250,006
|
|
|
239,601
|
|
|
177,681
|
|
|
141,183
|
|
|
110,014
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Working capital
|
$
|
105,701
|
|
|
$
|
94,204
|
|
|
$
|
54,206
|
|
|
$
|
39,364
|
|
|
$
|
54,337
|
|
|
Total assets
|
1,394,996
|
|
|
1,191,816
|
|
|
1,063,695
|
|
|
907,174
|
|
|
784,912
|
|
|
|||||
Total debt
|
269,400
|
|
|
144,400
|
|
|
104,400
|
|
|
104,400
|
|
|
—
|
|
|
|||||
Total stockholders’ equity
|
4,079
|
|
|
77,676
|
|
|
66,321
|
|
|
60,525
|
|
|
172,455
|
|
|
|||||
Cash dividends per share
|
1.20
|
|
|
0.80
|
|
|
1.58
|
|
(3)(5)
|
0.49
|
|
(3)
|
0.43
|
|
(3)
|
|||||
|
|
|
|
|
|
|
|
|||||||||||||
Average WSEEs paid
|
235,547
|
|
|
209,123
|
|
|
182,696
|
|
|
165,850
|
|
|
145,830
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Statistical Data (per WSEE per month):
|
|
|
|
|
|
|
|
|||||||||||||
Revenues(6)
|
$
|
1,527
|
|
|
$
|
1,526
|
|
|
$
|
1,505
|
|
|
$
|
1,478
|
|
|
$
|
1,488
|
|
|
Gross profit
|
259
|
|
|
272
|
|
|
261
|
|
|
247
|
|
|
250
|
|
|
|||||
Operating income
|
66
|
|
|
71
|
|
|
59
|
|
|
53
|
|
|
38
|
|
|
|||||
Adjusted EBITDA(4)
|
88
|
|
|
95
|
|
|
81
|
|
|
71
|
|
|
63
|
|
|
(1)
|
Revenues are comprised of gross billings less WSEE payroll costs as follows:
|
|
Year Ended December 31,
|
||||||||||||||||||
(in thousands)
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross billings
|
$
|
27,212,010
|
|
|
$
|
23,830,731
|
|
|
$
|
20,173,812
|
|
|
$
|
17,932,857
|
|
|
$
|
15,806,178
|
|
Less: WSEE payroll cost
|
22,897,206
|
|
|
20,002,182
|
|
|
16,873,589
|
|
|
14,991,510
|
|
|
13,202,564
|
|
|||||
Revenues
|
$
|
4,314,804
|
|
|
$
|
3,828,549
|
|
|
$
|
3,300,223
|
|
|
$
|
2,941,347
|
|
|
$
|
2,603,614
|
|
(2)
|
Includes non-cash impairment and other charges of $9.8 million and $1.3 million, respectively, partially offset by a reduction of $0.6 million in 2015.
|
(3)
|
Adjusted to reflect the two-for-one split of our common stock effected on December 18, 2017 as a stock dividend.
|
(4)
|
These are non-GAAP measures used by management to analyze Insperity’s performance. Please read Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a reconciliation of the non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP.
|
(5)
|
Includes a $1.00 per share special dividend paid in 2017.
|
Insperity
|
33
|
2019 Form 10-K
|
SELECTED FINANCIAL DATA
|
(6)
|
Revenues per WSEE per month are comprised of gross billings per WSEE per month less WSEE payroll costs per WSEE per month as follows:
|
|
Year Ended December 31,
|
||||||||||||||||||
(per WSEE per month)
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
Gross billings
|
$
|
9,627
|
|
|
$
|
9,496
|
|
|
$
|
9,202
|
|
|
$
|
9,011
|
|
|
$
|
9,032
|
|
Less: WSEE payroll cost
|
8,100
|
|
|
7,970
|
|
|
7,697
|
|
|
7,533
|
|
|
7,544
|
|
|||||
Revenues
|
$
|
1,527
|
|
|
$
|
1,526
|
|
|
$
|
1,505
|
|
|
$
|
1,478
|
|
|
$
|
1,488
|
|
Insperity
|
34
|
2019 Form 10-K
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Average number of WSEEs paid per month increased 12.6% to 235,547, driving a 7.5% gross profit increase
|
•
|
Net income and diluted earnings per share (“Diluted EPS”) increased 11.6% and 14.9% to $151.1 million and $3.70, respectively
|
•
|
Adjusted EBITDA increased 4.3% to $250.0 million
|
•
|
Adjusted net income increased 7.6% to $169.4 million
|
•
|
Adjusted EPS increased 10.7% to $4.15
|
•
|
Approximately 25.7% and 24.6% of our average paid WSEEs were in our middle market sector for the years ended December 31, 2019 and 2018, respectively, which is generally defined as companies with 150 to 5,000 WSEEs.
|
•
|
Our average gross profit per WSEE per month was $259 in 2019 and $272 in 2018, due in part to an increase in the number of large individual healthcare claimants.
|
•
|
Operating expenses increased 8.6% in 2019 to $546.3 million. On a per WSEE per month basis, operating expenses decreased from $201 in 2018 to $193 in 2019.
|
Insperity
|
35
|
2019 Form 10-K
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Adjusted operating expenses increased 10.7% in 2019 to $546.3 million. On a per WSEE per month basis, adjusted operating expenses decreased from $197 in 2018 to $193 in 2019.
|
•
|
Our adjusted EBITDA per WSEE per month decreased 7.4% from $95 in 2018 to $88 in 2019.
|
•
|
We ended 2019 with working capital of $105.7 million.
|
•
|
During 2019, we paid $48.6 million in dividends, repurchased 2.1 million shares of our common stock at a cost of $203.0 million, paid $56.3 million on capital expenditures partially offset by borrowings of $125.0 million under our credit facility.
|
•
|
employment-related taxes (“payroll taxes”)
|
•
|
costs of employee benefit plans
|
•
|
workers’ compensation costs
|
Insperity
|
36
|
2019 Form 10-K
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Salaries, wages and payroll taxes – Salaries, wages and payroll taxes (“Salaries”) are primarily a function of the number of corporate employees, their associated average pay and any additional incentive compensation. Our corporate employees include client services, sales and marketing, benefits, legal, finance, information technology, administrative support personnel and those associated with our other products and services.
|
•
|
Stock-based compensation – Our stock-based compensation relates to the recognition of non-cash compensation expense over the vesting period of restricted stock and long-term incentive plan awards.
|
•
|
Commissions – Commissions expense consists primarily of amounts paid to sales managers and BPAs as well as channel referral fees. Commissions are based on new accounts sold and a percentage of revenue generated by such personnel.
|
•
|
Advertising – Advertising expense primarily consists of media advertising and other business promotions in our current and anticipated sales markets, including the Insperity Invitational™ presented by UnitedHealthcare® sponsorship.
|
•
|
General and administrative expenses – Our general and administrative expenses primarily include:
|
•
|
rent expenses related to our service centers and sales offices
|
•
|
outside professional service fees related to legal, consulting, and accounting services
|
•
|
administrative costs, such as postage, printing, and supplies
|
•
|
employee travel and training expenses
|
•
|
technology expenses
|
•
|
facility repairs and maintenance costs
|
•
|
Depreciation and amortization – Depreciation and amortization expense is primarily a function of our capital investments in corporate facilities, service centers, sales offices, software development and technology infrastructure.
|
•
|
Impairment charges and other – Impairment charges and other consist of non-cash expense associated with the decline in fair value of long-lived and intangible assets, including goodwill. Please read Note 1 “Accounting Policies,” to the Consolidated Financial Statements for additional information.
|
Insperity
|
37
|
2019 Form 10-K
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Benefits costs – We provide group health insurance coverage to our WSEEs through a national network of carriers including United, UnitedHealthcare of California, Kaiser Permanente, Blue Shield of California, HMSA BlueCross BlueShield of Hawaii and Tufts, all of which provide fully insured policies or service contracts.
|
Insperity
|
38
|
2019 Form 10-K
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Change in
Completion Rate and Annual Trend
|
|
Change in
Benefits Costs
(in thousands) |
|
Change in
Net Income
(in thousands) |
||||
|
|
|
|
|
||||
(2.5)%
|
|
$
|
(24,133
|
)
|
|
$
|
19,234
|
|
(1.0)%
|
|
(9,653
|
)
|
|
7,694
|
|
||
1.0%
|
|
9,653
|
|
|
(7,694
|
)
|
||
2.5%
|
|
24,133
|
|
|
(19,234
|
)
|
•
|
Workers’ compensation costs – Since 2007, our workers’ compensation coverage has been provided through an arrangement with Chubb. The Chubb Program is fully insured in that Chubb has the responsibility to pay all claims incurred under the policy regardless of whether we satisfy our responsibilities. Under the Chubb Program for claims incurred on or before September 30, 2019, we have financial responsibility to Chubb for the first $1 million layer of claims per occurrence and, for claims over $1 million, up to a maximum aggregate amount of $6 million per policy year for claims that exceed $1 million. Effective for claims incurred on or after October 1, 2019, we have financial responsibility to Chubb for the first $1.5 million layer of claims per occurrence and, for claims over $1.5 million, up to a maximum aggregate amount of $6 million per policy year for claims that exceed $1.5 million.
|
Change in Loss Development Rate
|
|
Change in Workers’ Compensation Costs
(in thousands) |
|
Change in
Net Income
(in thousands) |
||||
|
|
|
|
|
||||
(5.0)%
|
|
$
|
(4,412
|
)
|
|
$
|
3,517
|
|
(2.5)%
|
|
(2,206
|
)
|
|
1,758
|
|
||
2.5%
|
|
2,206
|
|
|
(1,758
|
)
|
||
5.0%
|
|
4,412
|
|
|
(3,517
|
)
|
Insperity
|
39
|
2019 Form 10-K
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Contingent liabilities – We accrue and disclose contingent liabilities in our Consolidated Financial Statements in accordance with ASC 450-10, Contingencies. GAAP requires accrual of contingent liabilities that are considered probable to occur and that can be reasonably estimated. For contingent liabilities that are considered reasonably possible to occur, financial statement disclosure is required, including the range of possible loss if it can be reasonably determined. From time to time, we disclose in our financial statements issues that we believe are reasonably possible to occur, although we cannot determine the range of possible loss in all cases. As issues develop, we evaluate the probability of future loss and the potential range of such losses. If such evaluation were to determine that a loss was probable and the loss could be reasonably estimated, we would be required to accrue our estimated loss, which would reduce net income in the period that such determination was made.
|
•
|
Allowance for doubtful accounts – We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our clients to pay their comprehensive service fees. We believe that the success of our business is heavily dependent on our ability to collect these comprehensive service fees for several reasons, including:
|
•
|
the fact that we are at risk for the payment of our direct costs and WSEE payroll costs regardless of whether our clients pay their comprehensive service fees
|
•
|
the large volume and dollar amount of transactions we process
|
•
|
the periodic and recurring nature of payroll, upon which the comprehensive service fees are based
|
Insperity
|
40
|
2019 Form 10-K
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
(in thousands, except per share and statistical data)
|
Year Ended December 31,
|
|
% Change
|
|||||||||||||
2019
|
|
2018
|
|
2017
|
|
2019 v 2018
|
2018 v 2017
|
|||||||||
|
|
|
||||||||||||||
Financial data:
|
|
|
|
|
|
|
|
|
||||||||
Revenues(1)
|
$
|
4,314,804
|
|
|
$
|
3,828,549
|
|
|
$
|
3,300,223
|
|
|
12.7
|
%
|
16.0
|
%
|
Gross profit
|
732,934
|
|
|
681,909
|
|
|
572,731
|
|
|
7.5
|
%
|
19.1
|
%
|
|||
Operating expenses
|
546,301
|
|
|
502,873
|
|
|
442,790
|
|
|
8.6
|
%
|
13.6
|
%
|
|||
Operating income
|
186,633
|
|
|
179,036
|
|
|
129,941
|
|
|
4.2
|
%
|
37.8
|
%
|
|||
Other income (expense)
|
3,010
|
|
|
3,324
|
|
|
200
|
|
|
(9.4
|
)%
|
—
|
|
|||
Net income
|
151,099
|
|
|
135,413
|
|
|
84,402
|
|
|
11.6
|
%
|
60.4
|
%
|
|||
Diluted EPS
|
3.70
|
|
|
3.22
|
|
|
2.01
|
|
(2)
|
14.9
|
%
|
60.2
|
%
|
|||
|
|
|
|
|
|
|
|
|
||||||||
Non-GAAP financial measures(3):
|
|
|
|
|
|
|
|
|
||||||||
Adjusted net income
|
$
|
169,449
|
|
|
$
|
157,536
|
|
|
$
|
103,005
|
|
|
7.6
|
%
|
52.9
|
%
|
Adjusted EBITDA
|
250,006
|
|
|
239,601
|
|
|
177,681
|
|
|
4.3
|
%
|
34.8
|
%
|
|||
Adjusted EPS
|
4.15
|
|
|
3.75
|
|
|
2.45
|
|
(2)
|
10.7
|
%
|
53.1
|
%
|
|||
|
|
|
|
|
|
|
|
|
||||||||
Average WSEEs paid
|
235,547
|
|
|
209,123
|
|
|
182,696
|
|
|
12.6
|
%
|
14.5
|
%
|
|||
|
|
|
|
|
|
|
|
|
||||||||
Statistical data (per WSEE per month):
|
|
|
|
|
|
|
|
|
||||||||
Revenues(4)
|
$
|
1,527
|
|
|
$
|
1,526
|
|
|
$
|
1,505
|
|
|
0.1
|
%
|
1.4
|
%
|
Gross profit
|
259
|
|
|
272
|
|
|
261
|
|
|
(4.8
|
)%
|
4.2
|
%
|
|||
Operating expenses
|
193
|
|
|
201
|
|
|
202
|
|
|
(4.0
|
)%
|
(0.5
|
)%
|
|||
Operating income
|
66
|
|
|
71
|
|
|
59
|
|
|
(7.0
|
)%
|
20.3
|
%
|
|||
Net income
|
53
|
|
|
54
|
|
|
38
|
|
|
(1.9
|
)%
|
42.1
|
%
|
|||
Adjusted EBITDA(3)
|
88
|
|
|
95
|
|
|
81
|
|
|
(7.4
|
)%
|
17.3
|
%
|
|
Year ended December 31,
|
||||||||
(in thousands)
|
2019
|
2018
|
2017
|
||||||
|
|
|
|
||||||
Gross billings
|
$
|
27,212,010
|
|
$
|
23,830,731
|
|
$
|
20,173,812
|
|
Less: WSEE payroll cost
|
22,897,206
|
|
20,002,182
|
|
16,873,589
|
|
|||
Revenues
|
$
|
4,314,804
|
|
$
|
3,828,549
|
|
$
|
3,300,223
|
|
(2)
|
Adjusted to reflect the two-for-one split of our common stock effected on December 18, 2017 in the form of a stock dividend.
|
(3)
|
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.
|
|
Year Ended December 31,
|
||||||||
(per WSEE per month)
|
2019
|
2018
|
2017
|
||||||
Gross billings
|
$
|
9,627
|
|
$
|
9,496
|
|
$
|
9,202
|
|
Less: WSEE payroll cost
|
8,100
|
|
7,970
|
|
7,697
|
|
|||
Revenues
|
$
|
1,527
|
|
$
|
1,526
|
|
$
|
1,505
|
|
Insperity
|
41
|
2019 Form 10-K
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
WSEEs
|
•
|
Adjusted EBITDA
|
•
|
Adjusted EPS
|
•
|
During 2019, the number of WSEEs paid from new client sales decreased over 2018. In addition, the net change in existing clients and client retention also decreased compared to 2018.
|
•
|
During 2018, the number of WSEEs paid from new client sales increased over 2017. In addition, the net change in existing clients and client retention improved compared to 2017.
|
•
|
Average WSEEs paid increased 12.6%
|
•
|
Revenues per WSEE per month increased 0.1%, or $1
|
Insperity
|
42
|
2019 Form 10-K
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Average WSEEs paid increased 14.5%
|
•
|
Revenues per WSEE per month increased 1.4%, or $21
|
Insperity
|
43
|
2019 Form 10-K
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
The cost of group health insurance and related employee benefits increased $12 per WSEE per month, or 4.0%, on a per covered employee basis due primarily to an increase in the number of large individual healthcare claimants in 2019.
|
•
|
The percentage of WSEEs covered under our health insurance plan was 66.5% in 2019 and 68.0% in 2018.
|
•
|
Reported results include changes in estimated claims run-off related to prior periods and an increase in costs of $2.3 million, or $1 per WSEE per month, in 2019 compared to a decrease in costs of $1.3 million, or $1 per WSEE per month, in 2018.
|
•
|
Workers’ compensation costs decreased 4.7%, or $5 per WSEE per month, in 2019 compared to 2018.
|
•
|
As a percentage of non-bonus payroll cost, workers’ compensation costs in 2019 were 0.41% compared to 0.49% in 2018.
|
•
|
As a result of closing out claims incurred in prior periods at lower than expected costs, we recorded a reduction in workers’ compensation costs of $31.7 million, or 0.16% of non-bonus payroll costs, in 2019 compared to a reduction of $18.8 million, or 0.11% of non-bonus payroll costs, in 2018. The 2019 period costs include the impact of a 1.9%
|
Insperity
|
44
|
2019 Form 10-K
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Payroll taxes increased 14.2%, or $8 per WSEE per month, due primarily to a 14.5% increase in payroll costs partially offset by lower unemployment tax rates in 2019.
|
•
|
Payroll taxes as a percentage of payroll cost were 6.7% in both 2019 and 2018.
|
•
|
The cost of group health insurance and related employee benefits increased $6 per WSEE per month, or 2.2%, on a per covered employee basis.
|
•
|
The percentage of WSEEs covered under our health insurance plan was 68.0% in 2018 and 68.8% in 2017.
|
•
|
Reported results include changes in estimated claims run-off related to prior periods and was a decrease in costs of $1.3 million, or $1 per WSEE per month, in 2018 compared to an increase in costs of $1.2 million, or $1 per WSEE per month, in 2017.
|
•
|
Workers’ compensation costs increased 6.2%, but decreased $3 on a per WSEE per month basis, in 2018 compared to 2017.
|
•
|
As a percentage of non-bonus payroll cost, workers’ compensation costs in 2018 were 0.49% compared to 0.54% in 2017.
|
•
|
As a result of closing out claims incurred in prior periods at lower than expected costs, we recorded a reduction in workers’ compensation costs of $18.8 million, or 0.11% of non-bonus payroll costs, in 2018 compared to a reduction of $16.3 million, or 0.11% of non-bonus payroll costs, in 2017. The 2018 period costs include the impact of a 2.6% discount rate used to accrue workers’ compensation loss claims, compared to a 1.6% discount rate used in the 2017 period.
|
•
|
Payroll taxes increased 15.8%, or $6 per WSEE per month, due primarily to an 18.5% increase in payroll costs partially offset by lower unemployment tax rates in 2018.
|
•
|
Payroll taxes as a percentage of payroll cost were 6.7% in 2018 compared to 6.9% in 2017.
|
Insperity
|
45
|
2019 Form 10-K
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Year Ended December 31,
|
||||||||||||||||
|
$
|
|
WSEE
|
||||||||||||||
(in thousands, except per WSEE)
|
2019
|
2018
|
% Change
|
|
2019
|
2018
|
% Change
|
||||||||||
|
|
|
|
|
|
|
|
||||||||||
Salaries
|
$
|
317,124
|
|
$
|
301,027
|
|
5.3
|
%
|
|
$
|
112
|
|
$
|
120
|
|
(6.7
|
)%
|
Stock-based compensation
|
23,993
|
|
20,425
|
|
17.5
|
%
|
|
8
|
|
8
|
|
—
|
|
||||
Commissions
|
31,420
|
|
28,957
|
|
8.5
|
%
|
|
11
|
|
12
|
|
(8.3
|
)%
|
||||
Advertising
|
21,603
|
|
18,554
|
|
16.4
|
%
|
|
8
|
|
7
|
|
14.3
|
%
|
||||
General and administrative
|
123,438
|
|
111,068
|
|
11.1
|
%
|
|
44
|
|
45
|
|
(2.2
|
)%
|
||||
Depreciation and amortization
|
28,723
|
|
22,842
|
|
25.7
|
%
|
|
10
|
|
9
|
|
11.1
|
%
|
||||
Total operating expenses
|
$
|
546,301
|
|
$
|
502,873
|
|
8.6
|
%
|
|
$
|
193
|
|
$
|
201
|
|
(4.0
|
)%
|
•
|
Salaries of corporate and sales staff increased 5.3% to $317.1 million, but decreased $8 on a per WSEE per month basis, compared to 2018. The increase was primarily due to an 11.4% increase in headcount, including a 12.8% increase in total BPAs in 2019, partially offset by the non-recurrence of a $9.3 million one-time tax reform bonus paid in the first quarter of 2018 and lower incentive compensation expense during 2019.
|
•
|
Stock-based compensation increased 17.5% to $24.0 million, but remained flat on a per WSEE per month basis, compared to 2018. This increase was primarily due to the acceleration of restricted stock awards and associated expense into the fourth quarter of 2017 that were originally scheduled to vest in the first quarter of 2018. Please read Note 1 “Accounting Policies” and Note 9 “Incentive Plans,” to the Consolidated Financial Statements for additional information.
|
•
|
Commissions expense increased 8.5% to $31.4 million, but decreased $1 on a per WSEE per month basis, compared to 2018. Commissions are primarily due to commissions associated with the growth in our PEO HR Outsourcing solutions, including an increase in the amount of sales channel referral fees paid during 2019.
|
•
|
Advertising expense increased 16.4% to $21.6 million, or $1 per WSEE per month, compared to 2018. The increase was primarily due to an increase in advertising and business promotions.
|
•
|
General and administrative expenses increased 11.1% to $123.4 million, but decreased $1 on a per WSEE per month basis, compared to 2018. The increase was primarily due to increased travel and training expenses associated with the increase in BPAs and technology licensing and maintenance costs.
|
•
|
Depreciation and amortization expense increased 25.7% to $28.7 million, or $1 per WSEE per month, compared to 2018. The increase was primarily due to increased capital expenditures related to software development costs and sales office expansions.
|
Insperity
|
46
|
2019 Form 10-K
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Year Ended December 31,
|
||||||||||||||||
|
$
|
|
WSEE
|
||||||||||||||
(in thousands, except per WSEE)
|
2018
|
2017
|
% Change
|
|
2018
|
2017
|
% Change
|
||||||||||
|
|
|
|
|
|
|
|
||||||||||
Salaries
|
$
|
301,027
|
|
$
|
259,531
|
|
16.0
|
%
|
|
$
|
120
|
|
$
|
118
|
|
1.7
|
%
|
Stock-based compensation
|
20,425
|
|
24,345
|
|
(16.1
|
)%
|
|
8
|
|
11
|
|
(27.3
|
)%
|
||||
Commissions
|
28,957
|
|
22,773
|
|
27.2
|
%
|
|
12
|
|
10
|
|
20.0
|
%
|
||||
Advertising
|
18,554
|
|
16,686
|
|
11.2
|
%
|
|
7
|
|
8
|
|
(12.5
|
)%
|
||||
General and administrative
|
111,068
|
|
101,273
|
|
9.7
|
%
|
|
45
|
|
46
|
|
(2.2
|
)%
|
||||
Depreciation and amortization
|
22,842
|
|
18,182
|
|
25.6
|
%
|
|
9
|
|
9
|
|
—
|
|
||||
Total operating expenses
|
$
|
502,873
|
|
$
|
442,790
|
|
13.6
|
%
|
|
$
|
201
|
|
$
|
202
|
|
(0.5
|
)%
|
•
|
Salaries of corporate and sales staff increased 16.0% to $301.0 million, or $2 per WSEE per month, compared to 2017. The increase was primarily due to a $9.3 million charge related to a one-time tax reform bonus paid to corporate employees, a 10.7% increase in headcount, including a 16.2% increase in BPAs in 2018, and additional incentive compensation expense as a result of stronger operating results.
|
•
|
Stock-based compensation decreased 16.1% to $20.4 million, or $3 per WSEE per month, compared to 2017. This decrease was primarily due to the acceleration of restricted stock awards and associated expense into the fourth quarter of 2017 that were originally scheduled to vest in the first quarter of 2018. Please read Note 1 “Accounting Policies” and Note 9 “Incentive Plans,” to the Consolidated Financial Statements for additional information.
|
•
|
Commissions expense increased 27.2% to $29.0 million, or $2 per WSEE per month, compared to 2017. Commissions are primarily due to commissions associated with the growth in our PEO HR Outsourcing solutions including an increase in the amount of sales channel referral fees paid in 2018.
|
•
|
Advertising expense increased 11.2% to $18.6 million, but decreased $1 on a per WSEE per month basis, compared to 2017. The increase was due to additional spending on sponsorships, promotional items and billboard advertising.
|
•
|
General and administrative expenses increased 9.7% to $111.1 million, but decreased $1 on a per WSEE per month basis, compared to 2017. The increase was due to increased travel and training expenses associated with the increase in BPAs, professional services, technology costs, rent and office expenses, partially offset by the non-recurrence of charitable contributions made in 2017 related to Hurricane Harvey relief efforts.
|
•
|
Depreciation and amortization expense increased 25.6% to $22.8 million, but remained flat on a per WSEE per month basis, compared to 2017. The increase was primarily due to increased capital expenditures related to software development costs.
|
Insperity
|
47
|
2019 Form 10-K
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Insperity
|
48
|
2019 Form 10-K
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Non-GAAP Measure
|
Definition
|
Benefit of Non-GAAP Measure
|
Non-bonus payroll cost
|
Non-bonus payroll cost is a non-GAAP financial measure that excludes the impact of bonus payrolls paid to our WSEEs.
Bonus payroll cost varies from period to period, but has no direct impact to our ultimate workers’ compensation costs under the current program.
|
Our management refers to non-bonus payroll cost in analyzing, reporting and forecasting our workers’ compensation costs.
We include these non-GAAP financial measures because we believe they are useful to investors in allowing for greater transparency related to the costs incurred under our current workers’ compensation program.
|
Adjusted cash, cash equivalents and marketable securities
|
Excludes funds associated with:
• federal and state income tax withholdings,
• employment taxes,
• other payroll deductions, and
• client prepayments.
|
We believe that the exclusion of the identified items helps us reflect the fundamentals of our underlying business model and analyze results against our expectations, against prior periods, and to plan for future periods by focusing on our underlying operations. We believe that the adjusted results provide relevant and useful information for investors because they allow investors to view performance in a manner similar to the method used by management and improves their ability to understand and assess our operating performance. Adjusted EBITDA is used by our lenders to assess our leverage and ability to make interest payments.
|
|
|
|
Adjusted operating expense
|
Represents operating expenses excluding the impact of the following:
• costs associated with a one-time tax reform bonus paid to corporate employees, and
• charitable donations to Hurricane Harvey relief efforts.
|
|
|
|
|
EBITDA
|
Represents net income computed in accordance with GAAP, plus:
• interest expense,
• income tax expense, and
• depreciation and amortization expense.
|
|
|
|
|
Adjusted EBITDA
|
Represents EBITDA plus:
• non-cash stock based compensation,
• costs associated with a one-time tax reform bonus paid to corporate employees, and
• charitable donations to Hurricane Harvey relief efforts.
|
|
|
|
|
Adjusted net income
|
Represents net income computed in accordance with GAAP, excluding:
• non-cash stock based compensation,
• costs associated with a one-time tax reform bonus paid to corporate employees, and
• charitable donations to Hurricane Harvey relief efforts.
|
|
|
|
|
Adjusted EPS
|
Represents diluted net income per share computed in accordance with GAAP, excluding:
• non-cash stock based compensation,
• costs associated with a one-time tax reform bonus paid to corporate employees, and
• charitable donations to Hurricane Harvey relief efforts.
|
Insperity
|
49
|
2019 Form 10-K
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Year Ended December 31,
|
|||||||||||||||||||
(in thousands, except per WSEE per month)
|
2019
|
|
2018
|
|
2017
|
|||||||||||||||
$
|
WSEE
|
|
$
|
WSEE
|
|
$
|
WSEE
|
|||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
Payroll cost
|
$
|
22,897,206
|
|
$
|
8,100
|
|
|
$
|
20,002,182
|
|
$
|
7,970
|
|
|
$
|
16,873,589
|
|
$
|
7,697
|
|
Less: Bonus payroll cost
|
2,880,680
|
|
1,019
|
|
|
2,498,875
|
|
996
|
|
|
1,959,053
|
|
894
|
|
||||||
Non-bonus payroll cost
|
$
|
20,016,526
|
|
$
|
7,081
|
|
|
$
|
17,503,307
|
|
$
|
6,974
|
|
|
$
|
14,914,536
|
|
$
|
6,803
|
|
% Change year over year
|
14.4
|
%
|
1.5
|
%
|
|
17.4
|
%
|
2.5
|
%
|
|
11.8
|
%
|
1.5
|
%
|
(in thousands, except per WSEE per month)
|
Year Ended December 31,
|
|||||||||||||||||||||||||||||||||
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||||||||||||||||||
$
|
WSEE
|
|
$
|
WSEE
|
|
$
|
WSEE
|
|
$
|
WSEE
|
|
$
|
WSEE
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Net income
|
$
|
151,099
|
|
$
|
53
|
|
|
$
|
135,413
|
|
$
|
54
|
|
|
$
|
84,402
|
|
$
|
38
|
|
|
$
|
65,991
|
|
$
|
33
|
|
|
$
|
39,390
|
|
$
|
23
|
|
Income tax expense
|
38,544
|
|
14
|
|
|
46,947
|
|
19
|
|
|
45,739
|
|
21
|
|
|
39,186
|
|
19
|
|
|
26,229
|
|
14
|
|
||||||||||
Interest expense
|
7,647
|
|
3
|
|
|
4,668
|
|
2
|
|
|
3,213
|
|
1
|
|
|
2,396
|
|
1
|
|
|
459
|
|
—
|
|
||||||||||
Depreciation and amortization
|
28,723
|
|
10
|
|
|
22,842
|
|
9
|
|
|
18,182
|
|
9
|
|
|
16,644
|
|
9
|
|
|
18,565
|
|
11
|
|
||||||||||
EBITDA
|
226,013
|
|
80
|
|
|
209,870
|
|
84
|
|
|
151,536
|
|
69
|
|
|
124,217
|
|
62
|
|
|
84,643
|
|
48
|
|
||||||||||
Impairment charges and other
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
10,480
|
|
6
|
|
||||||||||
Stock-based compensation
|
23,993
|
|
8
|
|
|
20,425
|
|
8
|
|
|
24,345
|
|
11
|
|
|
16,643
|
|
8
|
|
|
13,345
|
|
8
|
|
||||||||||
One-time tax reform bonus
|
—
|
|
—
|
|
|
9,306
|
|
3
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
||||||||||
Charitable donations to Hurricane Harvey relief efforts
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
2,000
|
|
1
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
||||||||||
Other
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
(200
|
)
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
||||||||||
Stockholder advisory expenses
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
323
|
|
1
|
|
|
1,546
|
|
1
|
|
||||||||||
Adjusted EBITDA
|
$
|
250,006
|
|
$
|
88
|
|
|
$
|
239,601
|
|
$
|
95
|
|
|
$
|
177,681
|
|
$
|
81
|
|
|
$
|
141,183
|
|
$
|
71
|
|
|
$
|
110,014
|
|
$
|
63
|
|
% Change year over year
|
4.3
|
%
|
(7.4
|
)%
|
|
34.8
|
%
|
17.3
|
%
|
|
25.9
|
%
|
14.1
|
%
|
|
28.3
|
%
|
12.7
|
%
|
|
30.8
|
%
|
16.7
|
%
|
|
December 31,
|
||||||
(in thousands)
|
2019
|
|
2018
|
||||
|
|
||||||
Cash, cash equivalents and marketable securities
|
$
|
402,070
|
|
|
$
|
387,554
|
|
Less:
|
|
|
|
||||
Amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions
|
234,553
|
|
|
224,487
|
|
||
Client prepayments
|
59,612
|
|
|
34,177
|
|
||
Adjusted cash, cash equivalents and marketable securities
|
$
|
107,905
|
|
|
$
|
128,890
|
|
Insperity
|
50
|
2019 Form 10-K
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Year Ended December 31,
|
|||||||||||||||||||
(in thousands, except per WSEE per month)
|
2019
|
|
2018
|
|
2017
|
|||||||||||||||
$
|
WSEE
|
|
$
|
WSEE
|
|
$
|
WSEE
|
|||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
Operating expenses
|
$
|
546,301
|
|
$
|
193
|
|
|
$
|
502,873
|
|
$
|
201
|
|
|
$
|
442,790
|
|
$
|
202
|
|
Less:
|
|
|
|
|
|
|
|
|
||||||||||||
One-time tax reform bonus
|
—
|
|
—
|
|
|
9,306
|
|
4
|
|
|
—
|
|
—
|
|
||||||
Charitable donations to Hurricane Harvey relief efforts
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
2,000
|
|
1
|
|
||||||
Adjusted operating expenses
|
$
|
546,301
|
|
$
|
193
|
|
|
$
|
493,567
|
|
$
|
197
|
|
|
$
|
440,790
|
|
$
|
201
|
|
% Change year over year
|
10.7
|
%
|
(2.0
|
)%
|
|
12.0
|
%
|
(2.0
|
)%
|
|
14.5
|
%
|
4.1
|
%
|
|
Year Ended December 31,
|
||||||||||||||||||
(in thousands)
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income
|
$
|
151,099
|
|
|
$
|
135,413
|
|
|
$
|
84,402
|
|
|
$
|
65,991
|
|
|
$
|
39,390
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Impairment charges and other(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,480
|
|
|||||
Stock-based compensation
|
23,993
|
|
|
20,425
|
|
|
24,345
|
|
|
16,643
|
|
|
13,345
|
|
|||||
One-time tax reform bonus
|
—
|
|
|
9,306
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Charitable donations to Hurricane Harvey relief efforts
|
—
|
|
|
—
|
|
|
2,000
|
|
|
—
|
|
|
—
|
|
|||||
Other
|
—
|
|
|
—
|
|
|
(200
|
)
|
|
—
|
|
|
—
|
|
|||||
Stockholder advisory expenses
|
—
|
|
|
—
|
|
|
—
|
|
|
323
|
|
|
1,546
|
|
|||||
Total non-GAAP adjustments
|
23,993
|
|
|
29,731
|
|
|
26,145
|
|
|
16,966
|
|
|
25,371
|
|
|||||
Tax effect of non-GAAP adjustments
|
(5,643
|
)
|
|
(7,608
|
)
|
|
(9,354
|
)
|
|
(6,239
|
)
|
|
(10,242
|
)
|
|||||
Enactment of the 2017 Tax Reform Act
|
—
|
|
|
—
|
|
|
2,481
|
|
|
—
|
|
|
—
|
|
|||||
Disaster relief tax credit
|
—
|
|
|
—
|
|
|
(669
|
)
|
|
—
|
|
|
—
|
|
|||||
Adjusted net income
|
$
|
169,449
|
|
|
$
|
157,536
|
|
|
$
|
103,005
|
|
|
$
|
76,718
|
|
|
$
|
54,519
|
|
% Change year over year
|
7.6
|
%
|
|
52.9
|
%
|
|
34.3
|
%
|
|
40.7
|
%
|
|
48.4
|
%
|
(1)
|
Includes impairment and other charges of $10.5 million related to the sale of two aircraft in 2015.
|
Insperity
|
51
|
2019 Form 10-K
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Year Ended December 31,
|
||||||||||||||||||
(amounts per share)
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Diluted EPS
|
$
|
3.70
|
|
|
$
|
3.22
|
|
|
$
|
2.01
|
|
|
$
|
1.54
|
|
|
$
|
0.79
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Impairment charges and other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.21
|
|
|||||
Stock-based compensation
|
0.59
|
|
|
0.49
|
|
|
0.58
|
|
|
0.39
|
|
|
0.27
|
|
|||||
One-time tax reform bonus
|
—
|
|
|
0.22
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Charitable donations to Hurricane Harvey relief efforts
|
—
|
|
|
—
|
|
|
0.05
|
|
|
—
|
|
|
—
|
|
|||||
Other
|
—
|
|
|
—
|
|
|
(0.01
|
)
|
|
—
|
|
|
—
|
|
|||||
Stockholder advisory expenses
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
|
0.03
|
|
|||||
Total non-GAAP adjustments
|
0.59
|
|
|
0.71
|
|
|
0.62
|
|
|
0.40
|
|
|
0.51
|
|
|||||
Tax effect of non-GAAP adjustments
|
(0.14
|
)
|
|
(0.18
|
)
|
|
(0.22
|
)
|
|
(0.15
|
)
|
|
(0.20
|
)
|
|||||
Enactment of the 2017 Tax Reform Act
|
—
|
|
|
—
|
|
|
0.06
|
|
|
—
|
|
|
—
|
|
|||||
Disaster relief tax credit
|
—
|
|
|
—
|
|
|
(0.02
|
)
|
|
—
|
|
|
—
|
|
|||||
Adjusted EPS
|
$
|
4.15
|
|
|
$
|
3.75
|
|
|
$
|
2.45
|
|
|
$
|
1.79
|
|
|
$
|
1.10
|
|
% Change year over year
|
10.7
|
%
|
|
53.1
|
%
|
|
36.9
|
%
|
|
62.7
|
%
|
|
52.8
|
%
|
(1)
|
Per share amounts for the years 2017, 2016 and 2015 have been adjusted to reflect the two-for-one split of our common stock effected on December 18, 2017 as a stock dividend.
|
Insperity
|
52
|
2019 Form 10-K
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Timing of client payments / payroll taxes – 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 WSEE 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 WSEEs are paid on Fridays and at month-end; therefore, operating cash flows decrease in the reporting periods that end on a Friday. In the year ended December 31, 2019, the last business day of the reporting period ended on a Tuesday, client prepayments were $59.6 million and amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions was $234.6 million. In the period ended December 31, 2018, which ended on a Monday, client prepayments were $34.2 million and amounts payable for withheld federal and state income taxes, employment taxes and other payroll deductions was $224.5 million.
|
•
|
Medical plan funding – Our health care contract with United establishes participant cash funding rates 90 days in advance of the beginning of a reporting quarter. Therefore, changes in the participation level of the United plan have a direct impact on our operating cash flows. In addition, changes to the funding rates, which are determined solely by United based primarily upon recent claim history and anticipated cost trends, also have a significant impact on our operating cash flows. As of December 31, 2019, Plan Costs were less than the net premiums paid and owed to United by $2.6 million, which is $6.4 million less than our agreed-upon $9.0 million surplus maintenance level. The $6.4 million difference is therefore reflected as a current liability and $9.0 million is reflected as a long-term asset on our Consolidated Balance Sheets at December 31, 2019. In addition, the premiums owed to United at December 31, 2019, were $9.3 million, which is included in accrued health insurance costs, a current liability, on our Consolidated Balance Sheets.
|
•
|
Operating results – Our net income has a significant impact on our operating cash flows. Our net income increased 11.6% to $151.1 million in 2019 from $135.4 million in 2018. Please read “Results of Operations.”
|
Insperity
|
53
|
2019 Form 10-K
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
(in thousands)
|
Total
|
|
2020
|
|
|
2021-2022
|
|
2023-2024
|
|
Thereafter
|
|
|||||
|
|
|
|
|
|
|
||||||||||
Non-cancelable operating leases
|
$
|
100,402
|
|
$
|
18,786
|
|
|
$
|
34,854
|
|
$
|
25,810
|
|
$
|
20,952
|
|
Purchase obligations(1)
|
109,951
|
|
79,562
|
|
(2)
|
25,228
|
|
4,483
|
|
678
|
|
|||||
Long-term debt
|
269,400
|
|
—
|
|
|
—
|
|
269,400
|
|
—
|
|
|||||
Other long-term liabilities:
|
|
|
|
|
|
|
||||||||||
Accrued workers’ compensation claim costs(3)
|
242,904
|
|
49,295
|
|
|
56,078
|
|
41,814
|
|
95,717
|
|
|||||
Total contractual cash obligations
|
$
|
722,657
|
|
$
|
147,643
|
|
|
$
|
116,160
|
|
$
|
341,507
|
|
$
|
117,347
|
|
(1)
|
The table includes purchase obligations associated with non-cancelable contracts individually greater than $100,000 and one year.
|
(2)
|
Includes $56.5 million related to the construction of a new facility on our corporate campus. For more information please read Item 2. “Properties—Corporate Facilities.”
|
(3)
|
Accrued workers’ compensation claim costs include the short and long-term amounts. For more information, please read, “—Critical Accounting Policies and Estimates—Workers’ Compensation Costs.”
|
Insperity
|
54
|
2019 Form 10-K
|
QUANTITIVE AND QUALITATIVE DISCLOSURES
|
Insperity
|
55
|
2019 Form 10-K
|
DISCLOSURE CONTROLS AND PROCEDURES
|
Insperity
|
56
|
2019 Form 10-K
|
MANAGEMENT AND CERTAIN SECURITY HOLDERS
|
Insperity
|
57
|
2019 Form 10-K
|
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
(a)
|
1.
|
Financial Statements of the Company
|
|
|
|
|
|
The Consolidated Financial Statements listed by the Registrant on the accompanying Index to Consolidated Financial Statements are filed as part of this Annual Report.
|
|
|
|
(a)
|
2.
|
Financial Statement Schedules
|
|
|
|
|
|
The required information is included in the Consolidated Financial Statements or Notes thereto.
|
|
|
|
(a)
|
3.
|
List of Exhibits
|
Exhibit No.
|
|
Exhibit
|
|
3.1
|
|
|
|
3.2
|
|
|
|
4.1
|
|
|
|
4.2
|
*
|
|
|
10.1
|
†
|
|
|
10.2
|
†
|
|
|
10.3
|
†
|
|
|
10.4
|
†
|
|
|
10.5
|
†
|
|
|
10.6
|
†
|
|
|
10.7
|
†
|
|
|
10.8
|
†
|
|
|
10.9
|
†
|
|
|
10.10
|
†
|
|
|
10.11
|
†
|
|
|
10.12
|
†
|
|
|
10.13
|
†
|
|
|
10.14
|
†
|
|
Insperity
|
58
|
2019 Form 10-K
|
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
Exhibit No.
|
|
Exhibit
|
|
10.15
|
†
|
|
|
10.16
|
†
|
|
|
10.17
|
†
|
|
|
10.18
|
*†
|
|
|
10.19
|
*†
|
|
|
10.20
|
*†
|
|
|
10.21
|
†
|
|
|
10.22
|
*†
|
|
|
10.23
|
†
|
|
|
10.24
|
†
|
|
|
10.25
|
†
|
|
|
10.26
|
†
|
|
|
10.27
|
†
|
|
|
10.28
|
|
|
|
10.29
|
|
|
|
10.30
|
|
|
|
10.31
|
|
|
|
10.32
|
|
|
|
10.33
|
|
|
|
10.34
|
*
|
|
|
10.35
|
|
|
|
10.36
|
†
|
|
|
10.37
|
†
|
|
|
10.38
|
(+)
|
|
Insperity
|
59
|
2019 Form 10-K
|
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
Exhibit No.
|
|
Exhibit
|
|
10.39
|
(+)
|
|
|
10.40
|
(+)
|
|
|
10.41
|
(+)
|
|
|
10.42
|
(+)
|
|
|
10.43
|
(+)
|
|
|
10.44
|
(+)
|
|
|
10.45
|
(+)
|
|
|
10.46
|
(+)
|
|
|
10.47
|
(+)
|
|
|
10.48
|
(+)
|
|
|
10.49
|
(+)
|
|
|
10.50
|
(+)
|
|
|
10.51
|
(+)
|
|
|
10.52
|
(+)
|
|
|
10.53
|
(+)
|
|
Insperity
|
60
|
2019 Form 10-K
|
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
Exhibit No.
|
|
Exhibit
|
|
10.54
|
|
|
|
10.55
|
|
|
|
10.56
|
|
|
|
21.1
|
*
|
|
|
23.1
|
*
|
|
|
24.1
|
*
|
|
|
31.1
|
*
|
|
|
31.2
|
*
|
|
|
32.1
|
**
|
|
|
32.2
|
**
|
|
|
101.INS
|
*
|
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
|
101.SCH
|
*
|
|
XBRL Taxonomy 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.
|
104
|
|
|
Cover Page Interactive Data File (embedded with the Inline XBRL document).
|
|
|
|
|
|
*
|
|
Filed herewith.
|
|
**
|
|
Furnished with this report.
|
|
†
|
|
Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K.
|
|
(+)
|
|
Certain portions of the exhibit have been omitted pursuant to an order granting confidential treatment or Rule 601(b)(10) of Regulation S-K. The omitted information is (i) not material and (ii) would likely cause competitive hard to the Company if publicly disclosed.
|
Insperity
|
61
|
2019 Form 10-K
|
SIGNATURES
|
|
INSPERITY, INC.
|
|
|
|
|
|
By:
|
/s/ Douglas S. Sharp
|
|
|
Douglas S. Sharp
|
|
|
Senior Vice President of Finance
|
|
|
Chief Financial Officer and Treasurer
|
Insperity
|
62
|
2019 Form 10-K
|
SIGNATURES
|
Signature
|
|
Title
|
|
|
|
|
|
|
/s/ Paul J. Sarvadi
|
|
Chairman of the Board, Chief Executive Officer
|
Paul J. Sarvadi
|
|
and Director
|
|
|
(Principal Executive Officer)
|
|
|
|
/s/ Douglas S. Sharp
|
|
Senior Vice President of Finance
|
Douglas S. Sharp
|
|
Chief Financial Officer and Treasurer
|
|
|
(Principal Financial Officer)
|
|
|
|
*
|
|
Director
|
Timothy Clifford
|
|
|
|
|
|
*
|
|
Director
|
Carol R. Kaufman
|
|
|
|
|
|
*
|
|
Director
|
John L. Lumelleau
|
|
|
|
|
|
*
|
|
Director
|
Ellen H. Masterson
|
|
|
|
|
|
*
|
|
Director
|
Randall Mehl
|
|
|
|
|
|
*
|
|
Director
|
John Morphy
|
|
|
|
|
|
*
|
|
Director
|
Latha Ramchand
|
|
|
|
|
|
*
|
|
Director
|
Richard G. Rawson
|
|
|
|
|
|
*
|
|
Director
|
Austin P. Young
|
|
|
|
|
|
*By: /s/ Daniel D. Herink
|
|
|
Daniel D. Herink, attorney-in-fact
|
|
|
Insperity
|
63
|
2019 Form 10-K
|
CONSOLIDATED FINANCIAL STATEMENTS
|
Insperity
|
F-1
|
2019 Form 10-K
|
CONSOLIDATED FINANCIAL STATEMENTS
|
Insperity
|
F-2
|
2019 Form 10-K
|
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Estimation of the Cost of Incurred Health Insurance Claims
|
|
|
Description of the Matter
|
As discussed in Note 1 of the consolidated financial statements under “Health Insurance Costs”, the Company provides the majority of its health insurance coverage to its worksite employees through a fully insured health insurance policy with UnitedHealthcare (“United”). While the policy with United is a fully-insured plan, as a result of certain contractual terms, the Company accounts for this plan using a partially self-funded insurance accounting model. Accordingly, the Company records the cost of the United plan, including an estimate of the incurred claims, taxes and administrative fees as benefits expense, which is a component of direct costs. The estimated incurred claims under the Company’s United insurance policy are based upon: (i) the level of claims processed during each quarter; (ii) estimated completion rates based upon recent claim development patterns under the plan; and (iii) the number of participants in the plan, including both active and COBRA enrollees.
Auditing management’s estimation of the cost of incurred health insurance claims was subjective and judgmental due to the significant estimation required in determining the medical and pharmacy completion rates. Estimating actual claims incurred is subjective due to the large number of plan participants and the possibility that the number, magnitude, nature, and the timing of processing of current period claims may not be comparable to historical results experienced by the Company.
|
|
|
How We Addressed the Matter in Our Audit
|
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the estimation process, including, among others, controls over the completeness and accuracy of the data used to estimate the cost of incurred health insurance claims and the review and approval processes that management has in place for the assumptions applied and the calculation of the cost of incurred health insurance claims.
With the support of our actuarial specialists, we performed an independent assessment of the estimated cost of incurred health insurance claims. Our audit procedures included, among others, assessing (i) the Company’s health insurance cost estimation methodologies, (ii) significant assumptions used to develop the medical and pharmacy completion rates, which includes the incurred but not reported component, (iii) the accuracy and completeness of the claims processed and the number of plan participants used in the Company’s computation, as well as (iv) the historical accuracy of management’s estimates of the cost of incurred health insurance claims. Our testing of the medical and pharmacy completion rate assumptions included comparing the completion rate assumptions used by management to the completion rates experienced in historical periods and assessing whether contrary evidence exists with respect to the completion rate assumptions utilized by the Company to estimate the cost of incurred health insurance claims. We compared the Company’s estimate to a range developed by our actuarial specialists based on independently selected assumptions and historical data.
|
Insperity
|
F-3
|
2019 Form 10-K
|
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Estimation of the Cost of Incurred Workers’ Compensation Claims and Related Liability
|
|
|
Description of the Matter
|
As discussed in Note 1 of the consolidated financial statements under “Workers’ Compensation Costs”, the Company provides workers’ compensation insurance, including ongoing health care and indemnity coverage, to its worksite employees whereby claims are paid over numerous years following the date of injury. Under the Company’s insurance program, the Company has financial responsibility for a significant portion of the workers’ compensation claims. Accordingly, the accrual related to incurred costs includes estimates that take into account the ongoing development of claims and therefore requires a significant level of judgment. The estimated accrued claims are based on (i) the loss development rate which is primarily based upon the nature of worksite employees’ job responsibilities, the location of worksite employees, the historical frequency and severity of workers’ compensation claims, (ii) an estimate of future cost trends, and (iii) discount rates which correspond to the weighted average estimated claim payout period.
Auditing management’s estimation of the cost of incurred workers’ compensation claims was subjective due to the significant estimation required in determining the loss development rate and future cost trends. These assumptions have a significant effect on the valuation of the liability.
|
|
|
How We Addressed the Matter in Our Audit
|
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the estimation process, including, among others, controls over the completeness and accuracy of data used to estimate the cost of incurred workers’ compensation claims and the review and approval processes that management has in place for the assumptions applied and the calculation of the cost of incurred workers’ compensation claims.
With the support of our actuarial specialists, we performed an independent assessment of the estimated cost of workers’ compensation claims incurred and the related liability. Our audit procedures included, among others, assessing (i) the Company’s workers’ compensation reserve methodologies, (ii) significant assumptions used to develop the loss development rate, as well as (iii) the historical accuracy of management’s estimates of the cost of incurred workers’ compensation claims. Our audit procedures included testing the completeness and accuracy of the underlying claims and payroll data provided to management's third-party actuaries and reviewing the Company's insurance contracts to assess the Company's self-insured retentions, deductibles, and coverage limits. Furthermore, we involved our actuarial specialists to assist in our evaluation of the methodologies utilized by management's third-party actuaries in developing the reserves recorded by the Company. We compared the Company's reserved amount to a range developed by our actuarial specialists based on historical loss data and independently selected assumptions.
|
|
/s/ Ernst & Young LLP
|
Insperity
|
F-4
|
2019 Form 10-K
|
CONSOLIDATED FINANCIAL STATEMENTS
|
/s/ Paul J. Sarvadi
|
|
/s/ Douglas S. Sharp
|
Paul J. Sarvadi
|
|
Douglas S. Sharp
|
Chairman of the Board and
|
|
Senior Vice President of Finance
|
Chief Executive Officer
|
|
Chief Financial Officer and Treasurer
|
Insperity
|
F-5
|
2019 Form 10-K
|
CONSOLIDATED FINANCIAL STATEMENTS
|
|
/s/ Ernst & Young LLP
|
Insperity
|
F-6
|
2019 Form 10-K
|
CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands, except per share amounts)
|
December 31, 2019
|
December 31, 2018
|
||||
Assets
|
|
|
||||
Cash and cash equivalents
|
$
|
367,342
|
|
$
|
326,773
|
|
Restricted cash
|
49,295
|
|
42,227
|
|
||
Marketable securities
|
34,728
|
|
60,781
|
|
||
Accounts receivable, net
|
465,779
|
|
400,623
|
|
||
Prepaid insurance
|
10,418
|
|
8,411
|
|
||
Other current assets
|
43,493
|
|
27,721
|
|
||
Income taxes receivable
|
3,691
|
|
—
|
|
||
Total current assets
|
974,746
|
|
866,536
|
|
||
Property and equipment, net
|
147,706
|
|
117,213
|
|
||
Right-of-use leased assets
|
56,886
|
|
—
|
|
||
Deposits and prepaid health insurance
|
193,013
|
|
181,674
|
|
||
Goodwill and other intangible assets, net
|
12,714
|
|
12,726
|
|
||
Deferred income taxes, net
|
3,956
|
|
8,816
|
|
||
Other assets
|
5,975
|
|
4,851
|
|
||
Total assets
|
$
|
1,394,996
|
|
$
|
1,191,816
|
|
Liabilities and stockholders’ equity
|
|
|
||||
Accounts payable
|
$
|
4,565
|
|
$
|
10,622
|
|
Payroll taxes and other payroll deductions payable
|
277,248
|
|
261,166
|
|
||
Accrued worksite employee payroll cost
|
401,859
|
|
329,979
|
|
||
Accrued health insurance costs
|
21,180
|
|
35,153
|
|
||
Accrued workers’ compensation costs
|
52,868
|
|
45,818
|
|
||
Accrued corporate payroll and commissions
|
52,612
|
|
60,704
|
|
||
Other accrued liabilities
|
58,713
|
|
28,890
|
|
||
Total current liabilities
|
869,045
|
|
772,332
|
|
||
Accrued workers’ compensation costs
|
193,609
|
|
187,412
|
|
||
Long-term debt
|
269,400
|
|
144,400
|
|
||
Operating lease liabilities, net of current
|
58,863
|
|
—
|
|
||
Other accrued liabilities, net of current
|
—
|
|
9,996
|
|
||
Total noncurrent liabilities
|
521,872
|
|
341,808
|
|
||
Commitments and contingencies
|
|
|
|
|
||
Stockholders’ equity:
|
|
|
||||
Preferred stock ($0.01 per share par value; 20,000 shares authorized; no shares issued and outstanding)
|
—
|
|
—
|
|
||
Common stock ($0.01 per share par value; 120,000 shares authorized; 55,489 shares issued and outstanding)
|
555
|
|
555
|
|
||
Additional paid-in capital
|
48,141
|
|
36,752
|
|
||
Treasury stock, at cost (16,117 and 14,555 shares held in treasury)
|
(544,102
|
)
|
(357,569
|
)
|
||
Accumulated other comprehensive income, net of tax
|
12
|
|
(9
|
)
|
||
Retained earnings
|
499,473
|
|
397,947
|
|
||
Total stockholders’ equity
|
4,079
|
|
77,676
|
|
||
Total liabilities and stockholders’ equity
|
$
|
1,394,996
|
|
$
|
1,191,816
|
|
Insperity
|
F-7
|
2019 Form 10-K
|
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Year Ended December 31,
|
||||||||
(in thousands, except per share amounts)
|
2019
|
2018
|
2017
|
||||||
|
|
|
|
||||||
Revenues(1)
|
$
|
4,314,804
|
|
$
|
3,828,549
|
|
$
|
3,300,223
|
|
Payroll taxes, benefits and workers’ compensation costs
|
3,581,870
|
|
3,146,640
|
|
2,727,492
|
|
|||
Gross profit
|
732,934
|
|
681,909
|
|
572,731
|
|
|||
Salaries, wages and payroll taxes
|
317,124
|
|
301,027
|
|
259,531
|
|
|||
Stock-based compensation
|
23,993
|
|
20,425
|
|
24,345
|
|
|||
Commissions
|
31,420
|
|
28,957
|
|
22,773
|
|
|||
Advertising
|
21,603
|
|
18,554
|
|
16,686
|
|
|||
General and administrative expenses
|
123,438
|
|
111,068
|
|
101,273
|
|
|||
Depreciation and amortization
|
28,723
|
|
22,842
|
|
18,182
|
|
|||
Total operating expenses
|
546,301
|
|
502,873
|
|
442,790
|
|
|||
Operating income
|
186,633
|
|
179,036
|
|
129,941
|
|
|||
Other income (expense):
|
|
|
|
||||||
Interest income
|
10,657
|
|
7,992
|
|
3,413
|
|
|||
Interest expense
|
(7,647
|
)
|
(4,668
|
)
|
(3,213
|
)
|
|||
Income before income tax expense
|
189,643
|
|
182,360
|
|
130,141
|
|
|||
Income tax expense
|
38,544
|
|
46,947
|
|
45,739
|
|
|||
Net income
|
$
|
151,099
|
|
$
|
135,413
|
|
$
|
84,402
|
|
Less distributed and undistributed earnings allocated to participating securities
|
(1,759
|
)
|
(1,875
|
)
|
(1,517
|
)
|
|||
Net income allocated to common shares
|
$
|
149,340
|
|
$
|
133,538
|
|
$
|
82,885
|
|
|
|
|
|
||||||
Net income per share of common stock
|
|
|
|
||||||
Basic
|
$
|
3.72
|
|
$
|
3.24
|
|
$
|
2.02
|
|
Diluted
|
$
|
3.70
|
|
$
|
3.22
|
|
$
|
2.01
|
|
(1)
|
Revenues are comprised of gross billings less worksite employee (“WSEE”) payroll costs as follows:
|
|
Year ended December 31,
|
||||||||
(in thousands)
|
2019
|
2018
|
2017
|
||||||
|
|
|
|
||||||
Gross billings
|
$
|
27,212,010
|
|
$
|
23,830,731
|
|
$
|
20,173,812
|
|
Less: WSEE payroll cost
|
22,897,206
|
|
20,002,182
|
|
16,873,589
|
|
|||
Revenues
|
$
|
4,314,804
|
|
$
|
3,828,549
|
|
$
|
3,300,223
|
|
Insperity
|
F-8
|
2019 Form 10-K
|
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Year Ended December 31,
|
||||||||
(in thousands)
|
2019
|
2018
|
2017
|
||||||
|
|
|
|
||||||
Net income
|
$
|
151,099
|
|
$
|
135,413
|
|
$
|
84,402
|
|
Other comprehensive loss:
|
|
|
|
||||||
Unrealized gain (loss) on available-for-sale securities, net of tax
|
21
|
|
(4
|
)
|
(2
|
)
|
|||
Comprehensive income
|
$
|
151,120
|
|
$
|
135,409
|
|
$
|
84,400
|
|
Insperity
|
F-9
|
2019 Form 10-K
|
CONSOLIDATED FINANCIAL STATEMENTS
|
(in thousands)
|
Common Stock
Issued
|
|
Additional Paid
In Capital
|
|
Treasury
Stock
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Retained
Earnings
|
|
Total
|
|||||||||||||||
Shares
|
|
Amount
|
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance at December 31, 2016
|
55,489
|
|
|
$
|
555
|
|
|
$
|
8,962
|
|
|
$
|
(227,152
|
)
|
|
$
|
(3
|
)
|
|
$
|
278,163
|
|
|
$
|
60,525
|
|
Purchase of treasury stock, at cost
|
—
|
|
|
—
|
|
|
—
|
|
|
(38,735
|
)
|
|
—
|
|
|
—
|
|
|
(38,735
|
)
|
||||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
15,508
|
|
|
8,837
|
|
|
—
|
|
|
—
|
|
|
24,345
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
867
|
|
|
687
|
|
|
—
|
|
|
—
|
|
|
1,554
|
|
||||||
Dividends paid
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(65,768
|
)
|
|
(65,768
|
)
|
||||||
Unrealized loss on marketable securities, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
84,402
|
|
|
84,402
|
|
||||||
Balance at December 31, 2017
|
55,489
|
|
|
$
|
555
|
|
|
$
|
25,337
|
|
|
$
|
(256,363
|
)
|
|
$
|
(5
|
)
|
|
$
|
296,797
|
|
|
$
|
66,321
|
|
Purchase of treasury stock, at cost
|
—
|
|
|
—
|
|
|
—
|
|
|
(113,327
|
)
|
|
—
|
|
|
—
|
|
|
(113,327
|
)
|
||||||
Issuance of long-term incentive awards and dividend equivalents
|
—
|
|
|
—
|
|
|
(5,764
|
)
|
|
6,619
|
|
|
—
|
|
|
(855
|
)
|
|
—
|
|
||||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
15,460
|
|
|
4,965
|
|
|
—
|
|
|
—
|
|
|
20,425
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
1,719
|
|
|
537
|
|
|
—
|
|
|
—
|
|
|
2,256
|
|
||||||
Dividends paid
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(33,408
|
)
|
|
(33,408
|
)
|
||||||
Unrealized loss on marketable securities, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
(4
|
)
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
135,413
|
|
|
135,413
|
|
||||||
Balance at December 31, 2018
|
55,489
|
|
|
$
|
555
|
|
|
$
|
36,752
|
|
|
$
|
(357,569
|
)
|
|
$
|
(9
|
)
|
|
$
|
397,947
|
|
|
$
|
77,676
|
|
Purchase of treasury stock, at cost
|
—
|
|
|
—
|
|
|
—
|
|
|
(203,043
|
)
|
|
—
|
|
|
—
|
|
|
(203,043
|
)
|
||||||
Issuance of long-term incentive awards and dividend equivalents
|
—
|
|
|
—
|
|
|
(7,695
|
)
|
|
8,646
|
|
|
—
|
|
|
(951
|
)
|
|
—
|
|
||||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
16,899
|
|
|
7,094
|
|
|
—
|
|
|
—
|
|
|
23,993
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
2,185
|
|
|
770
|
|
|
—
|
|
|
—
|
|
|
2,955
|
|
||||||
Dividends paid
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(48,622
|
)
|
|
(48,622
|
)
|
||||||
Unrealized gain on marketable securities, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|
—
|
|
|
21
|
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
151,099
|
|
|
151,099
|
|
||||||
Balance at December 31, 2019
|
55,489
|
|
|
$
|
555
|
|
|
$
|
48,141
|
|
|
$
|
(544,102
|
)
|
|
$
|
12
|
|
|
$
|
499,473
|
|
|
$
|
4,079
|
|
Insperity
|
F-10
|
2019 Form 10-K
|
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Year Ended December 31,
|
||||||||
(in thousands)
|
2019
|
2018
|
2017
|
||||||
|
|
|
|
||||||
Cash flows from operating activities
|
|
|
|
||||||
Net income
|
$
|
151,099
|
|
$
|
135,413
|
|
$
|
84,402
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||||
Depreciation and amortization
|
28,723
|
|
22,842
|
|
18,182
|
|
|||
Amortization of marketable securities
|
(486
|
)
|
137
|
|
80
|
|
|||
Stock-based compensation
|
23,993
|
|
20,425
|
|
24,345
|
|
|||
Deferred income taxes
|
4,860
|
|
(4,533
|
)
|
9,742
|
|
|||
Changes in operating assets and liabilities:
|
|
|
|
||||||
Accounts receivable
|
(65,156
|
)
|
(66,642
|
)
|
(63,697
|
)
|
|||
Prepaid insurance
|
(2,007
|
)
|
2,371
|
|
4,259
|
|
|||
Other current assets
|
(15,772
|
)
|
(730
|
)
|
(7,465
|
)
|
|||
Other assets
|
(3,023
|
)
|
(2,005
|
)
|
(2,496
|
)
|
|||
Accounts payable
|
(6,057
|
)
|
4,175
|
|
2,258
|
|
|||
Payroll taxes and other payroll deductions payable
|
16,082
|
|
(42,081
|
)
|
55,481
|
|
|||
Accrued worksite employee payroll expense
|
71,880
|
|
62,577
|
|
52,188
|
|
|||
Accrued health insurance costs
|
(13,973
|
)
|
9,078
|
|
(285
|
)
|
|||
Accrued workers’ compensation costs
|
13,247
|
|
23,763
|
|
23,945
|
|
|||
Accrued corporate payroll, commissions and other accrued liabilities
|
6,359
|
|
8,941
|
|
17,138
|
|
|||
Income taxes payable/receivable
|
(4,616
|
)
|
10,749
|
|
(4,875
|
)
|
|||
Total adjustments
|
54,054
|
|
49,067
|
|
128,800
|
|
|||
Net cash provided by operating activities
|
205,153
|
|
184,480
|
|
213,202
|
|
|||
|
|
|
|
||||||
Cash flows from investing activities
|
|
|
|
||||||
Marketable securities:
|
|
|
|
||||||
Purchases
|
(110,131
|
)
|
(87,887
|
)
|
(1,752
|
)
|
|||
Proceeds from maturities
|
108,380
|
|
12,625
|
|
1,561
|
|
|||
Proceeds from dispositions
|
28,313
|
|
16,299
|
|
—
|
|
|||
Property and equipment:
|
|
|
|
||||||
Purchases
|
(56,307
|
)
|
(35,328
|
)
|
(33,337
|
)
|
|||
Proceeds from dispositions
|
21
|
|
151
|
|
278
|
|
|||
Net cash used in investing activities
|
(29,724
|
)
|
(94,140
|
)
|
(33,250
|
)
|
|||
|
|
|
|
||||||
Cash flows from financing activities
|
|
|
|
||||||
Purchase of treasury stock
|
$
|
(203,043
|
)
|
$
|
(113,327
|
)
|
$
|
(38,735
|
)
|
Dividends paid
|
(48,622
|
)
|
(33,408
|
)
|
(65,768
|
)
|
|||
Borrowings under long-term debt agreement
|
125,000
|
|
40,000
|
|
—
|
|
|||
Other
|
8,312
|
|
2,257
|
|
1,554
|
|
|||
Net cash used in financing activities
|
(118,353
|
)
|
(104,478
|
)
|
(102,949
|
)
|
|||
Net increase (decrease) in cash and cash equivalents
|
57,076
|
|
(14,138
|
)
|
77,003
|
|
|||
Cash, cash equivalents and restricted cash at beginning of year
|
535,474
|
|
549,612
|
|
472,609
|
|
|||
Cash, cash equivalents and restricted cash at end of year
|
$
|
592,550
|
|
$
|
535,474
|
|
$
|
549,612
|
|
Insperity
|
F-11
|
2019 Form 10-K
|
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Year ended December 31,
|
||||||||
(in thousands)
|
2019
|
2018
|
2017
|
||||||
|
|
|
|
||||||
Supplemental schedule of cash, cash equivalents and restricted cash
|
|
|
|
||||||
Cash and cash equivalents
|
$
|
326,773
|
|
$
|
354,260
|
|
$
|
286,034
|
|
Restricted cash
|
42,227
|
|
41,137
|
|
42,637
|
|
|||
Deposits - workers’ compensation
|
166,474
|
|
154,215
|
|
143,938
|
|
|||
Cash, cash equivalents and restricted cash beginning of year
|
$
|
535,474
|
|
$
|
549,612
|
|
$
|
472,609
|
|
|
|
|
|
||||||
Supplemental schedule of cash, cash equivalents and restricted cash
|
|
|
|
||||||
Cash and cash equivalents
|
$
|
367,342
|
|
$
|
326,773
|
|
$
|
354,260
|
|
Restricted cash
|
49,295
|
|
42,227
|
|
41,137
|
|
|||
Deposits - workers’ compensation
|
175,913
|
|
166,474
|
|
154,215
|
|
|||
Cash, cash equivalents and restricted cash end of year
|
$
|
592,550
|
|
$
|
535,474
|
|
$
|
549,612
|
|
|
|
|
|
||||||
Supplemental disclosures of cash flow information
|
|
|
|
||||||
Income taxes, net
|
$
|
38,299
|
|
$
|
40,730
|
|
$
|
40,872
|
|
Cash paid for interest
|
$
|
7,421
|
|
$
|
4,006
|
|
$
|
3,257
|
|
ROU assets obtained in exchange for lease obligations
|
$
|
24,474
|
|
$
|
—
|
|
$
|
—
|
|
Insperity
|
F-12
|
2019 Form 10-K
|
Notes to the Consolidated Financial Statements
|
1.
|
Accounting Policies
|
Insperity
|
F-13
|
2019 Form 10-K
|
Notes to the Consolidated Financial Statements
|
Insperity
|
F-14
|
2019 Form 10-K
|
Notes to the Consolidated Financial Statements
|
(in thousands)
|
December 31, 2019
|
|
December 31, 2018
|
|
||
|
|
|
||||
Land
|
$
|
6,215
|
|
$
|
6,215
|
|
Buildings and improvements
|
119,635
|
|
112,308
|
|
||
Computer hardware and software
|
123,232
|
|
115,259
|
|
||
Software development costs
|
85,252
|
|
71,332
|
|
||
Furniture, fixtures and other
|
48,082
|
|
45,694
|
|
||
Construction in progress
|
20,885
|
|
—
|
|
||
|
403,301
|
|
350,808
|
|
||
Accumulated depreciation and amortization
|
(255,595
|
)
|
(233,595
|
)
|
||
Total property and equipment, net
|
$
|
147,706
|
|
$
|
117,213
|
|
Insperity
|
F-15
|
2019 Form 10-K
|
Notes to the Consolidated Financial Statements
|
|
Useful Life
|
|||
Buildings and improvements
|
5
|
—
|
30
|
years
|
Computer hardware and software
|
2
|
—
|
5
|
years
|
Software development costs
|
3
|
—
|
3
|
years
|
Furniture, fixtures and other
|
5
|
—
|
7
|
years
|
Insperity
|
F-16
|
2019 Form 10-K
|
Notes to the Consolidated Financial Statements
|
Insperity
|
F-17
|
2019 Form 10-K
|
Notes to the Consolidated Financial Statements
|
|
Year Ended December 31,
|
|||||
(in thousands)
|
2019
|
2018
|
||||
|
|
|
||||
Beginning balance
|
$
|
229,639
|
|
$
|
207,630
|
|
Accrued claims
|
63,538
|
|
72,066
|
|
||
Present value discount
|
(4,629
|
)
|
(7,829
|
)
|
||
Paid claims
|
(45,644
|
)
|
(42,228
|
)
|
||
Ending balance
|
$
|
242,904
|
|
$
|
229,639
|
|
|
|
|
||||
Current portion of accrued claims
|
$
|
49,295
|
|
$
|
42,227
|
|
Long-term portion of accrued claims
|
193,609
|
|
187,412
|
|
||
Total accrued claims
|
$
|
242,904
|
|
$
|
229,639
|
|
Insperity
|
F-18
|
2019 Form 10-K
|
Notes to the Consolidated Financial Statements
|
Insperity
|
F-19
|
2019 Form 10-K
|
Notes to the Consolidated Financial Statements
|
2.
|
Cash, Cash Equivalents and Marketable Securities
|
|
December 31,
|
||||||||||||||||||
|
2019
|
|
2018
|
||||||||||||||||
(in thousands)
|
Cash & Cash Equivalents
|
Marketable Securities
|
Total
|
|
Cash & Cash Equivalents
|
Marketable Securities
|
Total
|
||||||||||||
|
|
|
|
|
|
|
|
||||||||||||
Overnight holdings
|
$
|
349,857
|
|
$
|
—
|
|
$
|
349,857
|
|
|
$
|
311,158
|
|
$
|
—
|
|
$
|
311,158
|
|
Investments holdings
|
13,218
|
|
34,728
|
|
47,946
|
|
|
16,711
|
|
60,781
|
|
77,492
|
|
||||||
Cash in demand accounts
|
36,521
|
|
—
|
|
36,521
|
|
|
33,207
|
|
—
|
|
33,207
|
|
||||||
Outstanding checks
|
(32,254
|
)
|
—
|
|
(32,254
|
)
|
|
(34,303
|
)
|
—
|
|
(34,303
|
)
|
||||||
Total
|
$
|
367,342
|
|
$
|
34,728
|
|
$
|
402,070
|
|
|
$
|
326,773
|
|
$
|
60,781
|
|
$
|
387,554
|
|
3.
|
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
|
|
December 31, 2019
|
|
December 31, 2018
|
||||||||||||||||
(in thousands)
|
Total
|
Level 1
|
Level 2
|
|
Total
|
Level 1
|
Level 2
|
||||||||||||
|
|
|
|
|
|
|
|
||||||||||||
Money market funds
|
$
|
363,075
|
|
$
|
363,075
|
|
$
|
—
|
|
|
$
|
325,819
|
|
$
|
325,819
|
|
$
|
—
|
|
U.S. Treasury bills
|
34,728
|
|
34,728
|
|
—
|
|
|
52,197
|
|
52,197
|
|
—
|
|
||||||
Municipal bonds
|
—
|
|
—
|
|
—
|
|
|
10,634
|
|
—
|
|
10,634
|
|
||||||
Total
|
$
|
397,803
|
|
$
|
397,803
|
|
$
|
—
|
|
|
$
|
388,650
|
|
$
|
378,016
|
|
$
|
10,634
|
|
Insperity
|
F-20
|
2019 Form 10-K
|
Notes to the Consolidated Financial Statements
|
(in thousands)
|
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Estimated
Fair Value
|
||||||||
|
|
|
|
|
||||||||
December 31, 2019
|
|
|
|
|
||||||||
U.S. Treasury bills
|
$
|
34,716
|
|
$
|
13
|
|
$
|
(1
|
)
|
$
|
34,728
|
|
|
|
|
|
|
||||||||
December 31, 2018
|
|
|
|
|
||||||||
U.S. Treasury bills
|
$
|
50,150
|
|
$
|
—
|
|
$
|
(3
|
)
|
$
|
50,147
|
|
Municipal bonds
|
10,640
|
|
1
|
|
(7
|
)
|
10,634
|
|
4.
|
Accounts Receivable
|
|
December 31,
|
||||||
(in thousands)
|
2019
|
|
2018
|
||||
|
|
|
|
||||
Trade, net
|
$
|
12,731
|
|
|
$
|
10,015
|
|
Unbilled
|
448,088
|
|
|
385,567
|
|
||
Other
|
4,960
|
|
|
5,041
|
|
||
Accounts receivable, net
|
$
|
465,779
|
|
|
$
|
400,623
|
|
Insperity
|
F-21
|
2019 Form 10-K
|
Notes to the Consolidated Financial Statements
|
|
December 31,
|
||||||
(in thousands)
|
2019
|
|
2018
|
||||
|
|
|
|
||||
Accrued worksite employee payroll cost
|
$
|
401,859
|
|
|
$
|
329,979
|
|
Unbilled revenues
|
105,841
|
|
|
89,765
|
|
||
Customer prepayments
|
(59,612
|
)
|
|
(34,177
|
)
|
||
Unbilled accounts receivable
|
$
|
448,088
|
|
|
$
|
385,567
|
|
5.
|
Deposits and prepaid health insurance
|
|
December 31,
|
||||||
(in thousands)
|
2019
|
|
2018
|
||||
|
|
|
|
||||
Prepaid health insurance
|
$
|
9,000
|
|
|
$
|
9,000
|
|
Deposits – health insurance
|
8,100
|
|
|
6,200
|
|
||
Deposits – workers’ compensation
|
175,913
|
|
|
166,474
|
|
||
Deposits and prepaid health insurance
|
$
|
193,013
|
|
|
$
|
181,674
|
|
6.
|
Long-Term Debt
|
Insperity
|
F-22
|
2019 Form 10-K
|
Notes to the Consolidated Financial Statements
|
7.
|
Income Taxes
|
|
December 31,
|
|||||
(in thousands)
|
2019
|
2018
|
||||
|
|
|||||
Deferred tax liabilities
|
|
|
||||
Prepaid assets
|
$
|
(4,252
|
)
|
$
|
(3,306
|
)
|
Depreciation
|
(4,564
|
)
|
(3,918
|
)
|
||
Software development costs
|
(6,475
|
)
|
(4,950
|
)
|
||
Tenant improvements
|
(3,209
|
)
|
—
|
|
||
Right-of-use leased assets
|
(15,949
|
)
|
—
|
|
||
Intangibles
|
(955
|
)
|
(474
|
)
|
||
Total deferred tax liabilities
|
(35,404
|
)
|
(12,648
|
)
|
||
|
|
|
||||
Deferred tax assets
|
|
|
||||
Accrued incentive compensation
|
5,946
|
|
8,612
|
|
||
Net operating loss carryforward
|
632
|
|
709
|
|
||
Workers’ compensation accruals
|
5,404
|
|
4,739
|
|
||
Accrued rent
|
1,223
|
|
918
|
|
||
Stock-based compensation
|
6,712
|
|
6,183
|
|
||
Operating lease liabilities
|
19,158
|
|
—
|
|
||
Minority investment impairment
|
673
|
|
676
|
|
||
Other
|
287
|
|
305
|
|
||
Total deferred tax assets
|
40,035
|
|
22,142
|
|
||
Valuation allowance
|
(675
|
)
|
(678
|
)
|
||
Total net deferred tax assets
|
39,360
|
|
21,464
|
|
||
|
|
|
||||
Net deferred tax assets
|
$
|
3,956
|
|
$
|
8,816
|
|
|
Year Ended December 31,
|
||||||||
(in thousands)
|
2019
|
2018
|
2017
|
||||||
|
|
|
|
||||||
Current income tax expense
|
|
|
|
||||||
Federal
|
$
|
27,385
|
|
$
|
40,347
|
|
$
|
30,009
|
|
State
|
6,299
|
|
11,133
|
|
5,988
|
|
|||
Total current income tax expense
|
33,684
|
|
51,480
|
|
35,997
|
|
|||
|
|
|
|
||||||
Deferred income tax (benefit) expense
|
|
|
|
||||||
Federal
|
4,016
|
|
(3,398
|
)
|
9,549
|
|
|||
State
|
844
|
|
(1,135
|
)
|
193
|
|
|||
Total deferred income tax (benefit) expense
|
4,860
|
|
(4,533
|
)
|
9,742
|
|
|||
Total income tax expense
|
$
|
38,544
|
|
$
|
46,947
|
|
$
|
45,739
|
|
Insperity
|
F-23
|
2019 Form 10-K
|
Notes to the Consolidated Financial Statements
|
|
Year Ended December 31,
|
||||||||
(in thousands)
|
2019
|
2018
|
2017
|
||||||
|
|
|
|
||||||
Expected income tax expense at 21%, 21% and 35%, respectively
|
$
|
39,825
|
|
$
|
38,296
|
|
$
|
45,549
|
|
State income taxes, net of federal benefit
|
5,821
|
|
7,660
|
|
4,085
|
|
|||
Nondeductible expenses
|
5,959
|
|
4,831
|
|
2,649
|
|
|||
Section 199 benefits
|
—
|
|
—
|
|
(875
|
)
|
|||
Equity compensation
|
(12,120
|
)
|
(2,737
|
)
|
(6,218
|
)
|
|||
Research and development credit
|
(1,069
|
)
|
(856
|
)
|
(634
|
)
|
|||
Disaster employee retention credit
|
—
|
|
—
|
|
(669
|
)
|
|||
Enactment of the 2017 Tax Reform Act
|
—
|
|
—
|
|
2,559
|
|
|||
Other, net
|
128
|
|
(247
|
)
|
(707
|
)
|
|||
Reported total income tax expense
|
$
|
38,544
|
|
$
|
46,947
|
|
$
|
45,739
|
|
8.
|
Stockholders’ Equity
|
Insperity
|
F-24
|
2019 Form 10-K
|
Notes to the Consolidated Financial Statements
|
(amounts per share)
|
2019
|
|
|
2018
|
|
||
|
|
|
|
||||
First quarter
|
$
|
0.30
|
|
|
$
|
0.20
|
|
Second quarter
|
0.30
|
|
|
0.20
|
|
||
Third quarter
|
0.30
|
|
|
0.20
|
|
||
Fourth quarter
|
0.30
|
|
|
0.20
|
|
9.
|
Incentive Plans
|
Insperity
|
F-25
|
2019 Form 10-K
|
Notes to the Consolidated Financial Statements
|
|
Shares
(in thousands)
|
|
Weighted Average
Grant Date Fair
Value
|
|||
|
|
|
|
|||
Non-vested - December 31, 2018
|
582
|
|
|
$
|
49.48
|
|
Granted
|
200
|
|
|
124.04
|
|
|
Vested
|
(320
|
)
|
|
43.75
|
|
|
Canceled
|
(19
|
)
|
|
77.83
|
|
|
Non-vested - December 31, 2019
|
443
|
|
|
$
|
86.10
|
|
|
Number of
Performance
Units
(in thousands)
|
|
Weighted Average
Grant Date Fair
Value
|
|||
|
|
|
|
|||
Unvested at December 31, 2018
|
426
|
|
|
$
|
46.35
|
|
Granted
|
59
|
|
|
139.71
|
|
|
Vested
|
(207
|
)
|
|
29.57
|
|
|
Canceled
|
(6
|
)
|
|
61.47
|
|
|
Unvested at December 31, 2019
|
272
|
|
|
$
|
79.95
|
|
Insperity
|
F-26
|
2019 Form 10-K
|
Notes to the Consolidated Financial Statements
|
10.
|
Net Income Per Share
|
|
Year Ended December 31,
|
||||||||
(in thousands)
|
2019
|
2018
|
2017
|
||||||
|
|
|
|
||||||
Net income
|
$
|
151,099
|
|
$
|
135,413
|
|
$
|
84,402
|
|
Less distributed and undistributed earnings allocated to participating securities
|
(1,759
|
)
|
(1,875
|
)
|
(1,517
|
)
|
|||
Net income allocated to common shares
|
$
|
149,340
|
|
$
|
133,538
|
|
$
|
82,885
|
|
|
|
|
|
||||||
Weighted average common shares outstanding
|
40,186
|
|
41,217
|
|
41,067
|
|
|||
Incremental shares from assumed LTIP awards and conversions of common stock options
|
166
|
|
289
|
|
204
|
|
|||
Adjusted weighted average common shares outstanding
|
40,352
|
|
41,506
|
|
41,271
|
|
|||
|
|
|
|
||||||
Potentially dilutive securities not included in weighted average share calculation due to anti-dilutive effect
|
—
|
|
—
|
|
—
|
|
11.
|
Leases
|
Insperity
|
F-27
|
2019 Form 10-K
|
Notes to the Consolidated Financial Statements
|
(dollars in thousands)
|
Classification in Consolidated Balance Sheets
|
December 31, 2019
|
||
|
|
|
||
Operating lease ROU assets
|
Right-of-use leased assets
|
$
|
56,886
|
|
|
|
|
||
Lease liabilities:
|
|
|
||
Current operating lease liabilities
|
Other accrued liabilities
|
$
|
15,143
|
|
Long-term operating lease liabilities
|
Operating lease liabilities, net of current
|
58,863
|
|
|
Total operating lease liabilities
|
|
$
|
74,006
|
|
Less:
|
|
|
||
Landlord funded tenant improvements
|
|
$
|
12,397
|
|
Deferred rent
|
|
4,723
|
|
|
Operating lease ROU assets
|
|
$
|
56,886
|
|
|
|
|
||
Weighted average remaining lease term (years)
|
6
|
|
||
Weighted average discount rate
|
|
4.5
|
%
|
(in thousands)
|
Operating Leases
|
|
|
|
|
||
2020
|
$
|
18,087
|
|
2021
|
15,611
|
|
|
2022
|
14,206
|
|
|
2023
|
11,682
|
|
|
2024
|
8,952
|
|
|
Thereafter
|
15,758
|
|
|
Total remaining obligation
|
84,296
|
|
|
Less imputed interest
|
10,290
|
|
|
Present value of lease liabilities
|
$
|
74,006
|
|
12.
|
Commitments and Contingencies
|
2020
|
$
|
79,562
|
|
(1)
|
2021
|
16,994
|
|
|
|
2022
|
8,234
|
|
|
|
2023
|
3,188
|
|
|
|
2024
|
1,295
|
|
|
|
Thereafter
|
678
|
|
|
|
Total obligations
|
$
|
109,951
|
|
|
(1)
|
Includes $56.5 million related to the construction of a new facility on our corporate campus.
|
Insperity
|
F-28
|
2019 Form 10-K
|
Notes to the Consolidated Financial Statements
|
13.
|
Quarterly Financial Data (Unaudited)
|
|
Quarter Ended
|
||||||||||||||
(in thousands, except per share amounts)
|
March 31
|
|
June 30
|
|
Sept. 30
|
|
Dec. 31
|
||||||||
|
|
||||||||||||||
2019
|
|
|
|
|
|
|
|
||||||||
Revenues
|
$
|
1,153,010
|
|
|
$
|
1,043,316
|
|
|
$
|
1,043,388
|
|
|
$
|
1,075,090
|
|
Gross profit
|
226,717
|
|
|
173,735
|
|
|
170,546
|
|
|
161,936
|
|
||||
Operating income
|
85,461
|
|
|
38,720
|
|
|
34,733
|
|
|
27,719
|
|
||||
Net income
|
76,289
|
|
|
28,556
|
|
|
25,859
|
|
|
20,395
|
|
||||
Basic net income per share
|
1.86
|
|
|
0.69
|
|
|
0.64
|
|
|
0.51
|
|
||||
Diluted net income per share
|
1.85
|
|
|
0.69
|
|
|
0.63
|
|
|
0.51
|
|
||||
|
|
|
|
|
|
|
|
||||||||
2018
|
|
|
|
|
|
|
|
||||||||
Revenues
|
$
|
1,014,372
|
|
|
$
|
922,295
|
|
|
$
|
925,126
|
|
|
$
|
966,756
|
|
Gross profit
|
199,720
|
|
|
154,544
|
|
|
166,054
|
|
|
161,591
|
|
||||
Operating income
|
64,703
|
|
|
33,581
|
|
|
48,133
|
|
|
32,619
|
|
||||
Net income
|
49,991
|
|
|
24,560
|
|
|
36,207
|
|
|
24,655
|
|
||||
Basic net income per share
|
1.20
|
|
|
0.59
|
|
|
0.86
|
|
|
0.59
|
|
||||
Diluted net income per share
|
1.18
|
|
|
0.58
|
|
|
0.86
|
|
|
0.59
|
|
Insperity
|
F-29
|
2019 Form 10-K
|
•
|
prior to that date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;
|
•
|
upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding certain shares described in Section 203); or
|
•
|
on or subsequent to that date, the business combination is approved by the board of directors of the corporation and authorized at an annual or special meeting of stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock that is not owned by the “interested stockholder.”
|
•
|
the maximum number of directors of our Board of Directors,
|
•
|
the classes of our Board of Directors,
|
•
|
the right of our Board of Directors to amend the Bylaws,
|
•
|
the minimum voting requirement for stockholders to amend the Bylaws,
|
•
|
the limitation on stockholders to act by written consent,
|
•
|
the authority of our Board of Directors to create and issue rights to purchase Insperity stock,
|
•
|
limitations on liability of directors as allowed under the General Corporation Law of Delaware.
|
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” that the Grantee has not consented to in writing:
|
b.
|
An involuntary termination by the Company or Subsidiary other than for Cause.
|
a.
|
the Grantee submits a voluntary request for retirement that is accepted by the Company or Subsidiary;
|
b.
|
the Grantee’s Employment terminates on or after the date that the Grantee has attained sixty-two (62) years of age and has at least fifteen (15) years of continuous Employment as of the termination date;
|
c.
|
the Grantee’s Employment terminates on or after the date that is six (6) months after the Grant Date; and
|
d.
|
the Grantee executes an effective Waiver and Release Agreement. In order for a Waiver and Release Agreement to be effective for purposes of Retirement, the Waiver and Release Agreement must be:
|
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” that the Grantee has not consented to in writing:
|
b.
|
An involuntary termination by the Company or Subsidiary other than for Cause.
|
a.
|
the Grantee submits a voluntary request for retirement that is accepted by the Company or Subsidiary;
|
b.
|
the Grantee’s Employment terminates on or after the date that the Grantee has attained sixty-two (62) years of age and has at least fifteen (15) years of continuous Employment as of the termination date;
|
c.
|
the Grantee’s Employment terminates on or after the date that is six (6) months after the Grant Date; and
|
d.
|
the Grantee executes an effective Waiver and Release Agreement. In order for a Waiver and Release Agreement to be effective for purposes of Retirement, the Waiver and Release Agreement must be:
|
a.
|
the Grantee submits a voluntary request for retirement that is accepted by the Company or Subsidiary;
|
b.
|
the Grantee’s Employment terminates on or after the date that the Grantee has attained sixty-two (62) years of age and has at least fifteen (15) years of continuous Employment as of the termination date;
|
c.
|
the Grantee’s Employment terminates on or after the date that is six (6) months after the Grant Date; and
|
d.
|
the Grantee executes an effective Waiver and Release Agreement. In order for a Waiver and Release Agreement to be effective for purposes of Retirement, the Waiver and Release Agreement must be:
|
a.
|
the Grantee submits a voluntary request for retirement that is accepted by the Company or Subsidiary;
|
b.
|
the Grantee’s Employment terminates on or after the date that the Grantee has attained sixty-two (62) years of age and has at least fifteen (15) years of continuous Employment as of the termination date;
|
c.
|
the Grantee’s Employment terminates on or after the date that is six (6) months after the Grant Date; and
|
d.
|
the Grantee executes an effective Waiver and Release Agreement. In order for a Waiver and Release Agreement to be effective for purposes of Retirement, the Waiver and Release Agreement must be:
|
(i)
|
The Committee may provide for earlier vesting for an Employee Award granted in conjunction with an Employee’s date of hire or upon a termination of employment by reason of death, disability, retirement or Change of Control.
|
(ii)
|
The one (1) year minimum vesting period shall not apply to an Employee Award that is granted in lieu of salary or bonus.”
|
•
|
Insperity Holdings, Inc., a Delaware corporation and wholly owned subsidiary of Insperity, Inc.
|
•
|
Insperity Enterprises, Inc., a Texas corporation and wholly owned subsidiary of Insperity Holdings, Inc.
|
•
|
Administaff Partnerships Holding, Inc., a Delaware corporation and wholly owned subsidiary of Insperity Holdings, Inc.
|
•
|
Insperity Captive Insurance Companies Limited, a Bermuda corporation and wholly owned subsidiary of Administaff Partnerships Holding, Inc.
|
•
|
Insperity Business Services, L.P., a Delaware limited partnership, with Insperity Holdings, Inc. being a 1% general partner and Administaff Partnerships Holding, Inc. being a 99% limited partner.
|
•
|
Insperity Retirement Services, L.P., a Delaware limited partnership, with Insperity Holdings, Inc. being a 1% general partner and Administaff Partnerships Holding, Inc. being a 99% limited partner.
|
•
|
Insperity Services, L.P., a Delaware limited partnership, with Insperity Holdings, Inc. being a 1% general partner and Administaff Partnerships Holding, Inc. being a 99% limited partner.
|
•
|
Administaff Partnerships Holding II, Inc., a Delaware corporation and wholly owned subsidiary of Insperity Services, L.P.
|
•
|
Insperity GP, Inc., a Delaware corporation and wholly owned subsidiary of Insperity Services, L.P.
|
•
|
Insperity Support Services, L.P., a Delaware limited partnership, with Insperity GP, Inc. being a 1% general partner and Administaff Partnerships Holding II, Inc. being a 99% limited partner.
|
•
|
Administaff Companies, Inc., a Delaware corporation and wholly owned subsidiary of Insperity Holdings, Inc.
|
•
|
Administaff Partnerships Holding III, Inc., a Delaware corporation and wholly owned subsidiary of Administaff Companies, Inc.
|
•
|
Insperity PEO Services, L.P., a Delaware limited partnership, with Administaff Companies, Inc. being a 1% general partner and Administaff Partnerships Holding III, Inc. being a 99% limited partner.
|
•
|
Insperity Insurance Services, L.L.C., a Delaware limited liability company and wholly owned subsidiary of Insperity PEO Services, L.P.
|
•
|
Insperity Employment Screening, L.L.C, a Delaware limited liability company and wholly owned subsidiary of Insperity Holdings, Inc.
|
•
|
Insperity Expense Management, Inc. a California corporation and wholly owned subsidiary of Insperity Holdings, Inc.
|
•
|
Insperity Payroll Services, L.L.C., a Delaware limited liability company and wholly owned subsidiary of Insperity Business Services, L.P.
|
(1)
|
Registration Statements (Form S-8 Nos. 333-221310, 333-181569) pertaining to the Insperity, Inc. 2012 Incentive Plan,
|
(2)
|
Registration Statements (Form S-8 No. 333-159007, 333-140602, 333-66344) pertaining to the Insperity, Inc. 2001 Incentive Plan,
|
(3)
|
Registration Statement (Form S-8 No. 333-151275) pertaining to the Insperity, Inc. 2008 Employee Stock Purchase Plan,
|
(4)
|
Registration Statement (Form S-8 No. 333-118790) pertaining to the Insperity, Inc. Directors Compensation Plan, and
|
(5)
|
Registration Statements (Form S-8 Nos. 333-85151, 333-66342) pertaining to the Insperity, Inc. Non-Qualified Stock Option Plan;
|
|
/s/Ernst & Young LLP
|
|
|
Houston, Texas
|
|
February 11, 2020
|
|
/s/ Tim Clifford
|
|
January 28, 2020
|
Tim Clifford
|
|
Date
|
/s/ Carol Kaufman
|
|
January 29, 2020
|
Carol Kaufman
|
|
Date
|
/s/ John Lumelleau
|
|
January 31, 2020
|
John Lumelleau
|
|
Date
|
/s/ Ellen H. Masterson
|
|
January 29, 2020
|
Ellen H. Masterson
|
|
Date
|
/s/ Randall A. Mehl
|
|
January 28, 2020
|
Randall A. Mehl
|
|
Date
|
/s/ John Morphy
|
|
January 29, 2020
|
John Morphy
|
|
Date
|
/s/ Latha Ramchand
|
|
January 29, 2020
|
Latha Ramchand
|
|
Date
|
/s/ Richard G. Rawson
|
|
January 31, 2020
|
Richard G. Rawson
|
|
Date
|
/s/ Austin P. Young
|
|
January 30, 2020
|
Austin P. Young
|
|
Date
|
1.
|
I have reviewed this annual report on Form 10-K 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.
|
|
/s/ Paul J. Sarvadi
|
|
Paul J. Sarvadi
|
|
Chairman of the Board and Chief Executive Officer
|
1.
|
I have reviewed this annual report on Form 10-K 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.
|
|
/s/ Douglas S. Sharp
|
|
Douglas S. Sharp
|
|
Senior Vice President of Finance,
|
|
Chief Financial Officer and Treasurer
|
/s/ Paul J. Sarvadi
|
|
Paul J. Sarvadi
|
|
Chairman of the Board and Chief Executive Officer
|
|
February 11, 2020
|
|
/s/ Douglas S. Sharp
|
|
Douglas S. Sharp
|
|
Senior Vice President of Finance,
|
|
Chief Financial Officer and Treasurer
|
|
February 11, 2020
|