x
|
Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
|
o
|
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
|
Delaware
|
76-0479645
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
|
19001 Crescent Springs Drive
|
||
Kingwood, Texas
|
77339
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Common Stock, par value $0.01 per share
|
New York Stock Exchange
|
|
Rights to Purchase Series A Junior Participating Preferred Stock
|
New York Stock Exchange
|
|
(Title of class)
|
(Name of Exchange on Which Registered)
|
Large accelerated filer
x
|
Accelerated filer
o
|
Non-accelerated filer
o
(Do not check if a smaller reporting company)
|
Smaller reporting company
o
|
Part I
|
||
Item 1.
|
2
|
|
Item 1A.
|
19
|
|
Item 1B.
|
24
|
|
Item 2.
|
24
|
|
Item 3.
|
24
|
|
Item S-K 401(b).
|
25
|
|
Part II | ||
Item 5.
|
26
|
|
Item 6.
|
28
|
|
Item 7.
|
29
|
|
Item 7A.
|
44
|
|
Item 8.
|
45
|
|
Item 9.
|
45
|
|
Item 9A.
|
45
|
|
Item 9B.
|
45
|
|
Part III | ||
Item 10.
|
46
|
|
Item 11.
|
46
|
|
Item 12.
|
46
|
|
|
||
Item 13.
|
46
|
|
Item 14.
|
46
|
|
Part IV
|
||
Item 15.
|
47
|
·
|
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
|
·
|
the need to provide competitive health care and related benefits to attract and retain employees
|
·
|
the increasing costs associated with health and workers’ compensation insurance coverage, workplace safety programs, employee-related complaints and litigation
|
·
|
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
|
·
|
benefits and payroll administration
|
·
|
health and workers’ compensation insurance programs
|
·
|
personnel records management
|
·
|
employer liability management
|
·
|
employee recruiting and selection
|
·
|
employee performance management
|
·
|
training and development services
|
·
|
Internal Revenue Code (the “Code”)
|
·
|
The Family and Medical Leave Act (FMLA)*
|
·
|
Federal Income Contribution Act (FICA)
|
·
|
Health Insurance Portability and
|
·
|
Federal Unemployment Tax Act (FUTA)
|
Accountability Act (HIPAA)
|
|
·
|
Fair Labor Standards Act (FLSA)*
|
·
|
Drug-Free Workplace Act*
|
·
|
Employee Retirement Income Security Act, as amended (ERISA)
|
·
|
Occupational Safety and Health Act
(OSHA)*
|
·
|
Consolidated Omnibus Budget Reconcilia-
tion Act of 1985 (COBRA)*
|
·
|
Worker Adjustment and Retraining
Notification Act (WARN)*
|
·
|
Immigration Reform and Control Act
(IRCA)
|
·
|
Uniformed Services Employment and
Reemployment Rights Act (USERRA)
|
·
|
Title VII (Civil Rights Act of 1964)*
|
·
|
State unemployment and employment
security laws
|
·
|
Americans with Disabilities Act (ADA)*
|
● |
State workers’ compensation laws
|
·
|
Age Discrimination in Employment Act
(ADEA)*
|
·
|
Health Care and Education Reconciliation
Act of 2010 (the “Reconciliation Act”)
|
·
|
Patient Protection and Affordable Care Act (PPACA)
|
||
·
|
Genetic Information Nondiscrimination Act of 2008
|
·
|
administrative functions
|
·
|
benefit plans administration
|
·
|
personnel management
|
·
|
employer liability management
|
·
|
payroll processing
|
·
|
payroll tax deposits
|
·
|
quarterly payroll tax reporting
|
·
|
employee file maintenance
|
·
|
unemployment claims processing
|
·
|
workers’ compensation claims reporting
|
·
|
a group health plan
|
·
|
a health savings account program
|
·
|
a health care flexible spending account plan
|
·
|
an educational assistance plan
|
·
|
an adoption assistance plan
|
·
|
group term life insurance
|
·
|
group universal life insurance
|
·
|
accidental death and dismemberment insurance
|
·
|
short-term and long-term disability insurance
|
·
|
a 401(k) retirement plan
|
·
|
cafeteria plans for group health and health savings account contributions
|
·
|
drafting and reviewing personnel policies and employee handbooks
|
·
|
designing job descriptions
|
·
|
performing prospective employee screening and background investigations
|
·
|
designing performance appraisal processes and forms
|
·
|
professional development and issues-oriented training
|
·
|
employee counseling
|
·
|
substance abuse awareness training
|
·
|
outplacement services
|
·
|
compensation guidance
|
·
|
WebPayroll
SM
for the submission, approval and reporting of payroll data
|
·
|
client-specific payroll information and reports
|
·
|
employee information, including online check stubs and pay history reports
|
·
|
employee on-boarding including payroll enrollment, policy acknowledgements and employment verification
|
·
|
employee benefits enrollment and changes
|
·
|
employee-specific benefits content, including summary plan descriptions and enrollment status
|
·
|
access to 401(k) plan information through the Retirement Service Center
SM
powered by Insperity
TM
|
·
|
self-service and customizable access to data and reports through an interactive reporting environment
|
·
|
online human resources forms
|
·
|
best practices human resources management process maps and process overviews
|
·
|
online personnel guide
|
·
|
e-Learning web-based training
|
·
|
online recruiting services
|
·
|
links to benefits providers and other key vendors
|
·
|
frequently asked questions
|
·
|
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)
|
·
|
Workers’ compensation compliance, procurement, management and reporting
|
·
|
Compliance with the Code, COBRA, HIPAA and ERISA (for each employee benefit plan sponsored solely by Insperity), as well as monitoring changes in other governmental regulations governing the employer/employee relationship and updating the client when necessary
|
·
|
Employee benefits administration of plans sponsored solely by Insperity
|
·
|
Payment, through Insperity, of commissions, bonuses, vacations, paid time off, sick pay, paid leaves of absence and severance payments
|
·
|
Payment and related tax reporting and remittance of non-qualified deferred compensation and equity-based compensation
|
·
|
Ownership and protection of all client intellectual property rights
|
·
|
Compliance with OSHA regulations, EPA regulations, FLSA, FMLA, WARN, USERRA and state and local equivalents and compliance with government contracting provisions
|
·
|
Compliance with state and local pay or play health care mandates and all such other similar state and local legislation
|
·
|
Compliance with the National Labor Relations Act (“NLRA”), including all organizing efforts and expenses related to a collective bargaining agreement and related benefits
|
·
|
Professional licensing requirements, fidelity bonding and professional liability insurance
|
·
|
Products produced and/or services provided
|
·
|
COBRA, HIPAA and ERISA compliance for client-sponsored benefit plans
|
·
|
Implementation of policies and practices relating to the employee/employer relationship
|
·
|
Compliance with all federal, state and local employment laws, including, but not limited to Title VII of the Civil Rights Act of 1964, ADEA, Title I of ADA, the Consumer Credit Protection Act, and immigration laws and regulations
|
Revenue Change
|
% of Total Revenues
|
|||||||
Northeast
|
9.2 | % | 26.3 | % | ||||
Southeast
|
3.1 | % | 9.3 | % | ||||
Central
|
10.6 | % | 14.7 | % | ||||
Southwest
|
6.0 | % | 28.0 | % | ||||
West
|
16.1 | % | 21.7 | % |
Industry
|
% of Client Base
|
|||
Computer and information services
|
26 | % | ||
Finance, insurance and real estate
|
15 | % | ||
Management, administration and consulting services
|
14 | % | ||
Wholesale trade
|
8 | % | ||
Manufacturing
|
7 | % | ||
Medical services
|
7 | % | ||
Retail trade
|
5 | % | ||
Not-for-profit and similar organizations
|
5 | % | ||
Engineering, accounting and legal services
|
4 | % | ||
Construction
|
4 | % | ||
Other
|
5 | % |
Initial
|
||||||||
Market
|
Sales Offices
|
Entry Date
|
||||||
Houston
|
5 | 1986 | ||||||
San Antonio
|
1 | 1989 | ||||||
Austin
|
1 | 1989 | ||||||
Orlando
|
1 | 1989 | ||||||
Dallas/Fort Worth
|
4 | 1993 | ||||||
Atlanta
|
2 | 1994 | ||||||
Phoenix
|
1 | 1995 | ||||||
Chicago
|
2 | 1995 | ||||||
Washington D.C.
|
3 | 1995 | ||||||
Denver
|
2 | 1996 | ||||||
Los Angeles
|
5 | 1997 | ||||||
Charlotte
|
1 | 1997 | ||||||
St. Louis
|
1 | 1998 | ||||||
San Francisco
|
3 | 1998 | ||||||
New York
|
3 | 1999 | ||||||
Baltimore
|
1 | 2000 | ||||||
New Jersey
|
2 | 2000 | ||||||
San Diego
|
1 | 2001 | ||||||
Boston
|
2 | 2001 | ||||||
Minneapolis
|
2 | 2002 | ||||||
Raleigh
|
1 | 2006 | ||||||
Kansas City
|
1 | 2007 | ||||||
Columbus
|
1 | 2010 | ||||||
Nashville
|
1 | 2011 | ||||||
Philadelphia
|
1 | 2012 |
|
·
|
market size, in terms of small and medium-sized businesses engaged in selected industries that meet our risk profile
|
|
·
|
market receptivity to PEO services, including the regulatory environment and relevant history with other PEO providers
|
|
·
|
existing relationships within a given market, such as vendor or client relationships
|
|
·
|
expansion cost issues, such as advertising and overhead costs
|
|
·
|
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
|
|
·
|
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
|
|
·
|
long-term strategy issues, such as the general perception of markets and our estimate of the long-term revenue growth potential of the market
|
|
·
|
worksite employee enrollment
|
|
·
|
human resources management
|
|
·
|
benefits and defined contribution plan administration
|
|
·
|
payroll processing
|
|
·
|
client invoicing and collection
|
|
·
|
management information and reporting
|
|
·
|
sales bid calculations
|
|
·
|
a 401(k) retirement plan
|
|
·
|
cafeteria plans under Code Section 125 for group health and health savings account contributions
|
|
·
|
a group health plan, which includes medical, dental, vision and prescription drug coverage, as well as a worklife program
|
|
·
|
a health savings account program
|
|
·
|
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
|
|
·
|
the employer’s degree of behavioral control (the extent of instructions, training and the nature of the work)
|
|
·
|
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)
|
|
·
|
withholding of income tax requirements governed by Code Section 3401, et seq.
|
|
·
|
obligations under FICA, governed by Code Section 3101, et seq.
|
|
·
|
obligations under FUTA, governed by Code Section 3301, et seq.
|
|
·
|
payment of the salaries and wages for work performed by worksite employees, regardless of whether the client timely pays us the associated service fee
|
|
·
|
withholding and payment of federal and state payroll taxes with respect to wages and salaries reported by Insperity
|
|
·
|
providing benefits to worksite employees even if our costs to provide such benefits exceed the fees the client pays us
|
|
·
|
income tax withholding requirements
|
|
·
|
FICA
|
|
·
|
FUTA
|
Name
|
Age
|
Position
|
Paul J. Sarvadi
|
56
|
Chairman of the Board and Chief Executive Officer
|
Richard G. Rawson
|
64
|
President
|
A. Steve Arizpe
|
55
|
Executive Vice President of Client Services and Chief Operating Officer
|
Jay E. Mincks
|
59
|
Executive Vice President of Sales and Marketing
|
Douglas S. Sharp
|
51
|
Senior Vice President of Finance, Chief Financial Officer and Treasurer
|
Daniel D. Herink
|
46
|
Senior Vice President of Legal, General Counsel and Secretary
|
2012
|
High
|
Low
|
Dividends
per Share
|
|||||||||
First Quarter
|
$ | 31.79 | $ | 25.62 | $ | 0.15 | ||||||
Second Quarter
|
31.14 | 24.10 | 0.17 | |||||||||
Third Quarter
|
28.48 | 23.94 | 0.17 | |||||||||
Fourth Quarter
|
33.24 | 24.95 | 1.17 | (1) | ||||||||
2011
|
||||||||||||
First Quarter
|
$ | 30.42 | $ | 25.13 | $ | 0.15 | ||||||
Second Quarter
|
32.38 | 28.47 | 0.15 | |||||||||
Third Quarter
|
32.26 | 19.88 | 0.15 | |||||||||
Fourth Quarter
|
27.55 | 20.91 | 0.15 |
(1)
|
Includes a $1.00 per share special dividend.
|
Period
|
Total Number
of Shares
Purchased
(1) (2)
|
Average Price
Paid per Share
|
Total Number of Shares
Purchased as Part of
Publicly Announced
Programs
(1) (2)
|
Maximum Number of
Shares that May Yet
be Purchased Under
the Program
(1)
|
||||||||||||
10/01/2012 –
10/31/2012
|
— | $ | — | — | 829,472 | |||||||||||
11/01/2012 –
11/30/2012
|
— | — | — | 829,472 | ||||||||||||
12/01/2012 –
12/31/2012
|
81,048 | 31.00 | 80,983 | 829,472 | ||||||||||||
Total
|
81,048 | $ | 31.00 | 80,983 | 829,472 |
(1)
|
Our Board of Directors has authorized a program to repurchase up to 14,500,000 shares of our outstanding common stock. During the three months ended December 31, 2012, no shares were repurchased under the program; however 65 shares were withheld to satisfy tax withholding obligations for the vesting of restricted stock awards. As of December 31, 2012, we are authorized to repurchase an additional 829,472 shares under the program. Unless terminated early by resolution of the board of directors, the repurchase program will expire when we have repurchased all shares authorized for repurchase under the repurchase program.
|
(2)
|
On November 26, 2012, we commenced a tender modified “Dutch auction” tender offer to purchase up to $50 million in value of our common stock at a price not less than $27.00 per share and not more than $31.00 per share. The tender offer expired on December 21, 2012, resulting in the repurchase on December 28, 2012, of 80,983 shares at a price of $31.00 per share, excluding transaction costs.
|
12/07 | 12/08 | 12/09 | 12/10 | 12/11 | 12/12 | |||||||||||||||||||
Insperity, Inc.
|
100.00 | 78.32 | 87.23 | 110.88 | 98.16 | 133.47 | ||||||||||||||||||
S&P Smallcap 600
|
100.00 | 68.93 | 86.55 | 109.32 | 110.43 | 128.46 | ||||||||||||||||||
S&P 1500 Composite Human Resources and Employment Services
|
100.00 | 73.03 | 96.49 | 114.35 | 95.09 | 106.80 |
Year ended December 31,
|
||||||||||||||||||||
2012
|
2011
|
2010
|
2009
|
2008
|
||||||||||||||||
(in thousands, except per share and statistical data)
|
||||||||||||||||||||
Income Statement Data:
|
||||||||||||||||||||
Revenues
(1)
|
$ | 2,158,824 | $ | 1,976,219 | $ | 1,719,752 | $ | 1,653,096 | $ | 1,724,434 | ||||||||||
Gross profit
|
382,221 | 351,775 | 298,536 | 287,967 | 343,739 | |||||||||||||||
Operating income
|
67,494 | (2) | 57,314 | 37,060 | 27,033 | 64,982 | ||||||||||||||
Net income
|
40,402 | 30,470 | (3) | 22,440 | 16,574 | 45,780 | ||||||||||||||
Diluted net income per share
|
$ | 1.56 | $ | 1.16 | $ | 0.86 | $ | 0.65 | $ | 1.76 | ||||||||||
Balance Sheet Data:
|
||||||||||||||||||||
Working capital
|
$ | 115,706 | $ | 126,562 | $ | 144,479 | $ | 127,627 | $ | 98,414 | ||||||||||
Total assets
|
750,200 | 712,259 | 659,845 | 576,470 | 616,840 | |||||||||||||||
Total debt/capital lease obligations
|
— | — | — | — | 537 | |||||||||||||||
Total stockholders’ equity
|
240,905 | 245,207 | 240,395 | 223,160 | 208,479 | |||||||||||||||
Cash dividends per share
|
$ | 1.66 | (4) | $ | 0.60 | $ | 0.52 | $ | 0.52 | $ | 0.48 | |||||||||
Statistical Data:
|
||||||||||||||||||||
Average number of worksite employees
paid per month during period
|
125,650 | 116,839 | 107,014 | 108,736 | 116,957 | |||||||||||||||
Revenues per worksite employee
per month
(5)
|
$ | 1,432 | $ | 1,410 | $ | 1,339 | $ | 1,267 | $ | 1,229 | ||||||||||
Gross profit per worksite employee
per month
|
$ | 253 | $ | 251 | $ | 232 | $ | 221 | $ | 245 | ||||||||||
Operating income per worksite employee per month
|
$ | 45 | $ | 41 | $ | 29 | $ | 21 | $ | 46 |
(1)
|
Gross billings of $12.992 billion, $11.700 billion, $10.169 billion, $9.856 billion and $10.372 billion, less worksite employee payroll cost of $10.833 billion, $9.724 billion, $8.449 billion, $8.203 billion and $8.648 billion, respectively.
|
(2)
|
Includes an impairment charge in the fourth quarter of 2012 of $4.2 million. Please read Note 5 to the Consolidated Financial Statements, “Goodwill and Other Intangible Assets,” for additional information.
|
(3)
|
Includes the impact of a $4.4 million loss related to the exchange of an aircraft, and a $3.1 million loss related to a settlement with the State of California. Please read Note 13 to the Consolidated Financial Statements, “Commitments and Contingencies,” for additional information on the settlement with the State of California.
|
(4)
|
Includes a $1.00 per share special dividend paid in the fourth quarter of 2012.
|
(5)
|
Gross billings of $8,617, $8,345, $7,919, $7,553 and $7,391 per worksite employee per month, less payroll cost of $7,185, $6,935, $6,580, $6,286 and $6,162 per worksite employee per month, respectively.
|
|
·
|
employment-related taxes (“payroll taxes”)
|
|
·
|
costs of employee benefit plans
|
|
·
|
workers’ compensation costs
|
·
|
Salaries, wages and payroll taxes
– Salaries, wages and payroll taxes are primarily a function of the number of corporate employees and 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 ABUs.
|
·
|
Stock-based compensation
– Our stock-based compensation relates to the recognition of non-cash compensation expense over the vesting period of restricted stock awards.
|
·
|
Commissions –
Commission expense consists primarily of amounts paid to sales managers and BPAs. Commissions are based on the number of new accounts sold and a percentage of revenue generated by such personnel.
|
·
|
Advertising
– Advertising expense primarily consists of media advertising and other business promotions in our current and anticipated sales markets, including the Insperity Championship
TM
presented by UnitedHealthcare
®
sponsorship. In 2011, certain costs incurred as a result of our rebranding initiative are also included in advertising.
|
·
|
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, and acquisition transaction expenses
|
|
·
|
administrative costs, such as postage, printing and supplies
|
|
·
|
employee travel expenses
|
|
·
|
technology and facility repairs and maintenance costs
|
|
·
|
rebranding initiative costs in 2011
|
·
|
Depreciation and amortization –
Depreciation and amortization expense is primarily a function of our capital investments in corporate facilities, service centers, sales offices, technology infrastructure and that associated with our acquisitions.
|
·
|
Impairment charge –
Non-cash expense associated with the decline in fair value of intangible assets, including goodwill. Please read Note 5 to the Consolidated Financial Statements, “Goodwill and Other Intangible Assets,” for additional information.
|
·
|
Benefits costs
– We provide group health insurance coverage to our worksite employees through a national network of carriers including UnitedHealthcare (“United”), UnitedHealthcare of California, Kaiser Permanente, Blue Shield of California, HMSA BlueCross BlueShield of Hawaii, Unity Health Plan and Tufts, all of which provide fully insured policies or service contracts.
|
Change in
Completion Rate
|
Change in
Benefits Costs
(in thousands)
|
Change in
Net Income
(in thousands)
|
|||||||
(2.5)% | $ | (18,064 | ) | $ | 7,370 | ||||
(1.0)% | (7,226 | ) | 2,948 | ||||||
1.0% | 7,226 | (2,948 | ) | ||||||
2.5% | 18,064 | (7,370 | ) |
·
|
Workers’ compensation costs
– Since October 1, 2007, our workers’ compensation coverage has been provided through our arrangement with the ACE Group of Companies (“ACE”). Under our arrangement with ACE (the “ACE Program”), we bear the economic burden for the first $1 million layer of claims per occurrence, and effective October 1, 2010, we also bear the economic burden for a maximum aggregate amount of $5 million per policy year for claim amounts that exceed the first $1 million. ACE bears the economic burden for all claims in excess of these levels. The ACE Program is a fully insured policy whereby ACE has the responsibility to pay all claims incurred under the policy regardless of whether we satisfy our responsibilities. Our coverage from September 1, 2003 through September 30, 2007 was provided through selected member insurance companies of American International Group, Inc.
|
Change in
Loss
Development Rate
|
Change in Workers’
Compensation Costs
(in thousands
)
|
Change in
Net Income
(in thousands)
|
|||||||
(5.0)% | $ | (2,491 | ) | $ | 1,470 | ||||
(2.5)% | (1,246 | ) | 735 | ||||||
2.5% | 1,246 | (735 | ) | ||||||
5.0% | 2,491 | (1,470 | ) |
·
|
Contingent liabilities
– We accrue and disclose contingent liabilities in our Consolidated Financial Statements in accordance with ASC 450-10,
Contingencies
. GAAP requires accrual of contingent liabilities that are considered probable to occur and that can be reasonably estimated. For contingent liabilities that are considered reasonably possible to occur, financial statement disclosure is required, including the range of possible loss if it can be reasonably determined. From time to time we disclose in our financial statements issues that we believe are reasonably possible to occur, although we cannot determine the range of possible loss in all cases. As issues develop, we evaluate the probability of future loss and the potential range of such losses. If such evaluation were to determine that a loss was probable and the loss could be reasonably estimated, we would be required to accrue our estimated loss, which would reduce net income in the period that such determination was made.
|
·
|
Deferred taxes
– We have recorded a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. While we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, our ability to realize our deferred tax assets could change from our current estimates. If we determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, an adjustment to reduce the valuation allowance would increase net income in the period that such determination is made. Likewise, should we determine that we will not be able to realize all or part of our net deferred tax assets in the future, an adjustment to increase the valuation allowance would reduce net income in the period such determination is made.
|
·
|
Allowance for doubtful accounts
– We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to pay their comprehensive service fees. We believe that the success of our business is heavily dependent on our ability to collect these comprehensive service fees for several reasons, including:
|
|
·
|
the fact that we are at risk for the payment of our direct costs and worksite employee payroll costs regardless of whether our clients pay their comprehensive service fees
|
|
·
|
the large volume and dollar amount of transactions we process
|
|
·
|
the periodic and recurring nature of payroll, upon which the comprehensive service fees are based
|
·
|
Property and equipment
–
Our property and equipment relate primarily to our facilities and related improvements, furniture and fixtures, computer hardware and software and capitalized software development costs. These costs are depreciated or amortized over the estimated useful lives of the assets. If we determine that the useful lives of these assets will be shorter than we currently estimate, our depreciation and amortization expense could be accelerated, which would decrease net income in the periods of such a determination. In addition, we periodically evaluate these costs for impairment. If events or circumstances were to indicate that any of our long-lived assets might be impaired, we would assess recoverability based on the estimated undiscounted future cash flows to be generated from the applicable asset. In addition, we may record an impairment loss, which would reduce net income, to the extent that the carrying value of the asset exceeded the fair value of the asset. Fair value is generally determined using an estimate of discounted future net cash flows from operating activities or upon disposal of the asset.
|
·
|
Goodwill and other intangibles –
Goodwill is tested for impairment on an annual basis and between annual tests in certain circumstances, and is written down when impaired. Purchased intangible assets other than goodwill are amortized over their useful lives unless these lives are determined to be indefinite. Our purchased intangible assets are carried at cost less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets, which ranges from three to 10 years. Please read Note 5 to the Consolidated Financial Statements, “Goodwill and Other Intangible Assets,” for additional information.
|
Year ended December 31,
|
||||||||||||
2012
|
2011
|
% Change
|
||||||||||
(in thousands, except per share and statistical data)
|
||||||||||||
Revenues (gross billings of $12.992 billion and $11.700 billion, less worksite employee payroll cost of $10.833 billion and $9.724 billion, respectively)
|
$ | 2,158,824 | $ | 1,976,219 | 9.2 | % | ||||||
Gross profit
|
382,221 | 351,775 | 8.7 | % | ||||||||
Operating expenses
|
314,727 | (1) | 294,461 | 6.9 | % | |||||||
Operating income
|
67,494 | 57,314 | 17.8 | % | ||||||||
Other income (expense)
|
796 | (6,539 | ) (2) | 112.2 | % | |||||||
Net income
|
40,402 | 30,470 | 32.6 | % | ||||||||
Diluted net income per share of common stock
|
1.56 | 1.16 | 34.5 | % | ||||||||
Statistical Data:
|
||||||||||||
Average number of worksite employees paid per month
|
125,650 | 116,839 | 7.5 | % | ||||||||
Revenues per worksite employee per month
(3)
|
$ | 1,432 | $ | 1,410 | 1.6 | % | ||||||
Gross profit per worksite employee per month
|
253 | 251 | 0.8 | % | ||||||||
Operating expenses per worksite employee per month
|
208 | 210 | (1.0 | )% | ||||||||
Operating income per worksite employee per month
|
45 | 41 | 9.8 | % | ||||||||
Net income per worksite employee per month
|
27 | 22 | 22.7 | % |
(1)
|
Includes an impairment charge in the fourth quarter of 2012 of $4.2 million. Please read Note 5 to the Consolidated Financial Statements, “Goodwill and Other Intangible Assets,” for additional information.
|
(2)
|
Includes the impact of a $4.4 million loss related to the exchange of an aircraft, and a $3.1 million loss related to a settlement with the State of California. Please read Note 13 to the Consolidated Financial Statements, “Commitments and Contingencies,” for additional information on the settlement with the State of California.
|
(3)
|
Gross billings of $8,617 and $8,345 per worksite employee per month, less payroll cost of $7,185 and $6,935 per worksite employee per month, respectively.
|
Year ended December 31,
|
Year ended December 31,
|
|||||||||||||||||||
2012
|
2011
|
% Change
|
2012
|
2011
|
||||||||||||||||
(in thousands)
|
(% of total revenue)
|
|||||||||||||||||||
Northeast
|
$ | 560,455 | $ | 513,075 | 9.2 | % | 26.3 | % | 26.3 | % | ||||||||||
Southeast
|
198,049 | 192,116 | 3.1 | % | 9.3 | % | 9.9 | % | ||||||||||||
Central
|
312,373 | 282,503 | 10.6 | % | 14.7 | % | 14.5 | % | ||||||||||||
Southwest
|
595,379 | 561,908 | 6.0 | % | 28.0 | % | 28.9 | % | ||||||||||||
West
|
461,427 | 397,363 | 16.1 | % | 21.7 | % | 20.4 | % | ||||||||||||
2,127,683 | 1,946,965 | 9.3 | % | 100.0 | % | 100.0 | % | |||||||||||||
Other revenue
|
31,141 | 29,254 | 6.5 | % | ||||||||||||||||
Total revenue
|
$ | 2,158,824 | $ | 1,976,219 | 9.2 | % |
·
|
Benefits costs –
The cost of group health insurance and related employee benefits increased $8 per worksite employee per month, or 3.5%, on a per covered employee basis compared to 2011. The percentage of worksite employees covered under our health insurance plan was 72.1% in 2012 versus 73.7% in 2011. Please read “—Critical Accounting Policies and Estimates – Benefits Costs” for a discussion of our accounting for health insurance costs.
|
·
|
Workers’ compensation costs –
Workers’ compensation costs increased 9.8%, or $1 per worksite employee per month compared to 2011. As a percentage of non-bonus payroll cost, workers’ compensation costs remained flat at 0.54% compared to 2011. During 2012, we recorded reductions in workers’ compensation costs of $13.1 million, or 0.14% of non-bonus payroll costs, for changes in estimated losses related to prior reporting periods, compared to $11.4 million, or 0.13% of non-bonus payroll costs in 2011. The 2012 period costs include the impact of a 0.6% discount rate used to accrue workers’ compensation loss claims, compared to a 1.1% discount rate used in the 2011 period. Please read “—Critical Accounting Policies and Estimates – Workers’ Compensation Costs” for a discussion of our accounting for workers’ compensation costs.
|
·
|
Payroll tax costs
– Payroll taxes increased 9.9%, or $11 per worksite employee per month compared to 2011, due primarily to an 11.4% increase in total payroll cost in 2012 as compared to 2011. Payroll taxes as a percentage of payroll cost decreased to 7.05% in 2012 compared to 7.15% in 2011.
|
Year ended December 31 , | Year ended December 31 , | |||||||||||||||||||||||
2012 | 2011 |
% Change
|
2012 | 2011 |
% Change
|
|||||||||||||||||||
(in thousands)
|
(per worksite employee per month)
|
|||||||||||||||||||||||
Salaries, wages and payroll taxes
|
$ | 168,807 | $ | 155,233 | 8.7 | % | $ | 112 | $ | 111 | 0.9 | % | ||||||||||||
Stock–based compensation
|
9,814 | 8,601 | 14.1 | % | 7 | 6 | 16.7 | % | ||||||||||||||||
Commissions
|
14,515 | 13,451 | 7.9 | % | 10 | 10 | — | |||||||||||||||||
Advertising
|
21,586 | 26,613 | (18.9 | )% | 14 | 19 | (26.3 | )% | ||||||||||||||||
General and administrative expenses
|
77,564 | 75,345 | 2.9 | % | 50 | 53 | (5.7 | )% | ||||||||||||||||
Impairment charge
|
4,191 | — | — | 3 | — | — | ||||||||||||||||||
Depreciation and amortization
|
18,250 | 15,218 | 19.9 | % | 12 | 11 | 9.1 | % | ||||||||||||||||
Total operating expenses
|
$ | 314,727 | $ | 294,461 | 6.9 | % | $ | 208 | $ | 210 | (1.0 | )% |
·
|
Salaries, wages and payroll taxes of corporate and sales staff increased 8.7%, or $1 per worksite employee per month compared to 2011, primarily due to a 6.1% rise in headcount.
|
·
|
Stock-based compensation increased 14.1%, or $1 per worksite employee per month compared to 2011, due primarily to an increase in the weighted average market value on the date of grant associated with restricted stock awards. The stock-based compensation expense represents amortization of restricted stock awards granted to employees and the annual stock grant made to non-employee directors. Please read Note 1 to the Consolidated Financial Statements, “Accounting Policies,” for additional information.
|
·
|
Commissions expense increased 7.9%, but remained flat on a per worksite employee per month basis compared to 2011.
|
·
|
Advertising costs decreased 18.9%, or $5 per worksite employee per month compared to 2011, primarily due to the non-recurrence of expenses related to our 2011 rebranding initiative.
|
·
|
General and administrative expenses increased 2.9%, but decreased $3 per worksite employee per month, primarily due to increased professional fees and office expenses, partially offset by the non-recurrence of expenses related to our 2011 rebranding initiative.
|
·
|
Depreciation and amortization expense increased 19.9%, or $1 per worksite employee per month compared to 2011, primarily due to investments in our technology infrastructure and amortization associated with our acquisitions.
|
Year ended December 31,
|
||||||||||||
2011
|
2010
|
% Change
|
||||||||||
(in thousands, except per share and statistical data)
|
||||||||||||
Revenues (gross billings of $11.700 billion and $10.169 billion, less worksite employee payroll cost of $9.724 billion and $8.449 billion, respectively)
|
$ | 1,976,219 | $ | 1,719,752 | 14.9 | % | ||||||
Gross profit
|
351,775 | 298,536 | 17.8 | % | ||||||||
Operating expenses
|
294,461 | 261,476 | 12.6 | % | ||||||||
Operating income
|
57,314 | 37,060 | 54.7 | % | ||||||||
Other income (expense)
|
(6,539 | ) (1) | 961 | (780.4 | )% | |||||||
Net income
|
30,470 | 22,440 | 35.8 | % | ||||||||
Diluted net income per share of common stock
|
1.16 | 0.86 | 34.9 | % | ||||||||
Statistical Data:
|
||||||||||||
Average number of worksite employees paid per month
|
116,839 | 107,014 | 9.2 | % | ||||||||
Revenues per worksite employee per month
(2)
|
$ | 1,410 | $ | 1,339 | 5.3 | % | ||||||
Gross profit per worksite employee per month
|
251 | 232 | 8.2 | % | ||||||||
Operating expenses per worksite employee per month
|
210 | 204 | 2.9 | % | ||||||||
Operating income per worksite employee per month
|
41 | 29 | 41.4 | % | ||||||||
Net income per worksite employee per month
|
22 | 17 | 29.4 | % |
(1)
|
Includes the impact of a $4.4 million loss related to the exchange of an aircraft, and a $3.1 million loss related to a settlement with the State of California. Please read Note 13 to the Consolidated Financial Statements, “Commitments and Contingencies,” for additional information on the settlement with the State of California.
|
(2)
|
Gross billings of $8,345 and $7,919 per worksite employee per month, less payroll cost of $6,935 and $6,580 per worksite employee per month, respectively.
|
Year ended December 31,
|
Year ended December 31,
|
|||||||||||||||||||
2011
|
2010
|
% Change
|
2011
|
2010
|
||||||||||||||||
(in thousands)
|
(% of total revenue)
|
|||||||||||||||||||
Northeast
|
$ | 513,075 | $ | 412,233 | 24.5 | % | 26.3 | % | 24.2 | % | ||||||||||
Southeast
|
192,116 | 184,223 | 4.3 | % | 9.9 | % | 10.8 | % | ||||||||||||
Central
|
282,503 | 251,756 | 12.2 | % | 14.5 | % | 14.8 | % | ||||||||||||
Southwest
|
561,908 | 522,518 | 7.5 | % | 28.9 | % | 30.7 | % | ||||||||||||
West
|
397,363 | 331,916 | 19.7 | % | 20.4 | % | 19.5 | % | ||||||||||||
1,946,965 | 1,702,646 | 14.3 | % | 100.0 | % | 100.0 | % | |||||||||||||
Other revenue
|
29,254 | 17,106 | 71.0 | % | ||||||||||||||||
Total revenue
|
$ | 1,976,219 | $ | 1,719,752 | 14.9 | % |
·
|
Benefits costs –
The cost of group health insurance and related employee benefits increased $23 per worksite employee per month, or 4.8%, on a per covered employee basis compared to 2010. These results were favorably impacted by a decrease in the number of COBRA participants. The number of participants electing COBRA coverage in the United plan declined from 5.5% in the fourth quarter of 2010 to 3.2% in the fourth quarter of 2011, due primarily to the August 2011 expiration of the 65% federal premium subsidy provided to COBRA eligible participants under the ARRA. Historically, the net costs of COBRA claims per enrollee are approximately double the cost of claims associated with active enrollees. The percentage of worksite employees covered under our health insurance plan was 73.7% in 2011 versus 74.3% in 2010. Please read “—Critical Accounting Policies and Estimates – Benefits Costs” for a discussion of our accounting for health insurance costs.
|
·
|
Workers’ compensation costs –
Workers’ compensation costs increased 3.0%, but decreased $2 per worksite employee per month compared to 2010. As a percentage of non-bonus payroll cost, workers’ compensation costs decreased to 0.54% in 2011 from 0.60% in 2010. During 2011, we recorded reductions in workers’ compensation costs of $11.4 million, or 0.13% of non-bonus payroll costs, for changes in estimated losses related to prior reporting periods, compared to $6.2 million, or 0.08% of non-bonus payroll costs in 2010. The 2011 period costs include the impact of a 1.1% discount rate used to accrue workers’ compensation loss claims, compared to a 1.4% discount rate used in the 2010 period. Please read “—Critical Accounting Policies and Estimates – Workers’ Compensation Costs” for a discussion of our accounting for workers’ compensation costs.
|
·
|
Payroll tax costs
– Payroll taxes increased 15.7%, or $28 per worksite employee per month compared to 2010. Payroll taxes as a percentage of payroll cost increased from 7.11% in 2010 to 7.15% in 2011. The increase in payroll tax costs was due primarily to a 15.1% increase in total payroll cost in 2011 as compared to 2010.
|
Year ended December 31 , | Year ended December 31, | |||||||||||||||||||||||
2011 | 2010 |
% Change
|
2011 | 2010 |
% Change
|
|||||||||||||||||||
(in thousands)
|
(per worksite employee per month)
|
|||||||||||||||||||||||
Salaries, wages and payroll taxes
|
$ | 155,233 | $ | 146,901 | 5.7 | % | $ | 111 | $ | 115 | (3.5 | )% | ||||||||||||
Stock–based compensation
|
8,601 | 8,126 | 5.8 | % | 6 | 6 | — | |||||||||||||||||
Commissions
|
13,451 | 11,881 | 13.2 | % | 10 | 9 | 11.1 | % | ||||||||||||||||
Advertising
|
26,613 | 16,447 | 61.8 | % | 19 | 13 | 46.2 | % | ||||||||||||||||
General and administrative expenses
|
75,345 | 63,214 | 19.2 | % | 53 | 49 | 8.2 | % | ||||||||||||||||
Depreciation and amortization
|
15,218 | 14,907 | 2.1 | % | 11 | 12 | (8.3 | )% | ||||||||||||||||
Total operating expenses
|
$ | 294,461 | $ | 261,476 | 12.6 | % | $ | 210 | $ | 204 | 2.9 | % |
·
|
Salaries, wages and payroll taxes of corporate and sales staff increased 5.7%, but decreased $4 per worksite employee per month compared to 2010. The overall increase was primarily due to a 7.4% rise in headcount related to our ABU strategy and associated acquisitions, offset by a decrease in incentive compensation.
|
·
|
Stock-based compensation increased 5.8%, but remained flat on a per worksite employee per month basis compared to 2010, due primarily to an increase in the weighted average market value on the date of grant associated with restricted awards. The stock-based compensation expense represents amortization of restricted stock awards granted to employees and the annual stock grant made to non-employee directors. Please read Note 1 to the Consolidated Financial Statements, “Accounting Policies,” for additional information.
|
·
|
Commissions expense increased 13.2%, or $1 per worksite employee per month compared to 2010, primarily due to a 9% increase in the average number of worksite employees paid per month and an $0.8 million increase in ABU commissions.
|
·
|
Advertising costs increased 61.8%, or $6 per worksite employee per month compared to 2010, primarily due to advertising and business promotions related to our rebranding initiative.
|
·
|
General and administrative expenses increased 19.2%, or $4 per worksite employee per month, primarily due to increased travel and training, costs associated with our rebranding initiative, increased consulting and costs associated with acquisitions made in late 2010 and early 2011.
|
·
|
Depreciation and amortization expense decreased $1 per worksite employee per month, but increased 2.1% compared to the 2010 period due to investments in our technology infrastructure and amortization associated with our acquisitions.
|
Year ended December 31,
|
||||||||||||
2012
|
2011
|
% Change
|
||||||||||
(in thousands, except per worksite employee)
|
||||||||||||
GAAP to non-GAAP reconciliation:
|
||||||||||||
Payroll cost (GAAP)
|
$ | 10,832,966 | $ | 9,723,990 | 11.4 | % | ||||||
Less: bonus payroll cost
|
1,326,442 | 1,059,677 | 25.2 | % | ||||||||
Non-bonus payroll cost
|
$ | 9,506,524 | $ | 8,664,313 | 9.7 | % | ||||||
Payroll cost per worksite employee (GAAP)
|
$ | 7,185 | $ | 6,935 | 3.6 | % | ||||||
Less: Bonus payroll cost per worksite employee
|
880 | 755 | 16.6 | % | ||||||||
Non-bonus payroll cost per worksite employee
|
$ | 6,305 | $ | 6,180 | 2.0 | % |
·
|
Timing of client payments / payroll levels –
We typically collect our comprehensive service fee, along with the client’s payroll funding, from clients at least one day prior to the payment of worksite employee payrolls and associated payroll taxes. Therefore, the last business day of a reporting period has a substantial impact on our reporting of operating cash flows. For example, many worksite employees are paid on Fridays and at month-end; therefore, operating cash flows decrease in the reporting periods that end on a Friday. In the year ended December 31, 2012, which the last business day of the reporting period ended on a Monday, client prepayments were $13.5 million and accrued worksite employee payroll was $150.1 million. In the year ended December 31, 2011, which ended on a Friday, client prepayments were $10.4 million and accrued worksite employee payroll was $130.3 million.
|
·
|
Workers’ compensation plan funding
–
Under our workers’ compensation insurance arrangements, we make monthly payments to the carriers comprised of premium costs and funds to be set aside for payment of future claims (“claim funds”). These pre-determined amounts are stipulated in our agreements with the carriers, and are based primarily on anticipated worksite employee payroll levels and workers’ compensation loss rates during the policy year. Changes in payroll levels from those that were anticipated in the arrangements can result in changes in the amount of the cash payments, which will impact our reporting of operating cash flows. Our claim funds paid, based upon anticipated worksite employee payroll levels and workers’ compensation loss rates, were $46.7 million in 2012 and $41.5 million in 2011. However, our estimates of workers’ compensation loss costs were $36.9 million and $35.3 million in 2012 and 2011, respectively. During 2012 and 2011, we received $2.5 million and $10.0 million, respectively, for the return of excess claim funds related to the workers’ compensation program, which resulted in an increase to working capital.
|
·
|
Medical plan funding –
Our health care contract with United establishes participant cash funding rates 90 days in advance of the beginning of a reporting quarter. Therefore, changes in the participation level of the United Plan have a direct impact on our operating cash flows. In addition, changes to the funding rates, which are solely determined by United based primarily upon recent claim history and anticipated cost trends, also have a significant impact on our operating cash flows. Since inception of the United plan, premiums paid and owed to United have exceeded Plan Costs, resulting in an $18.5 million surplus, $9.5 million of which is reflected as a current asset, and $9.0 million of which is reflected as a long-term asset on our Consolidated Balance Sheets at December 31, 2012. The premiums owed to United at December 31, 2012, were $10.5 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 32.6% to $40.4 million in 2012 from $30.5 million in 2011. Please read “Results of Operations
– Year Ended December 31, 2012 Compared to Year Ended December 31, 2011.
”
|
Less than
|
More than
|
|||||||||||||||||||
Contractual obligations
|
Total
|
1 Year
|
1-3 Years
|
3-5 Years
|
5 Years
|
|||||||||||||||
Non-cancelable operating leases
|
$ | 42,309 | $ | 13,648 | $ | 17,726 | $ | 8,454 | $ | 2,481 | ||||||||||
Purchase obligations
(1)
|
30,836 | 6,308 | 12,706 | 6,332 | 5,490 | |||||||||||||||
Other long-term liabilities:
|
||||||||||||||||||||
Accrued workers’ compensation claim costs
(2)
|
$ | 111,685 | $ | 45,396 | $ | 29,903 | $ | 25,196 | $ | 11,190 | ||||||||||
Total contractual cash obligations
|
$ | 184,830 | $ | 65,352 | $ | 60,335 | $ | 39,982 | $ | 19,161 |
(1)
|
The table includes purchase obligations associated with non-cancelable contracts individually greater than
$100,000 and one year.
|
(2)
|
Accrued workers’ compensation claim costs include the short and long-term amounts. For more information, please read, “Critical Accounting Policies and Estimates – Workers’ Compensation Costs.”
|
Principal
Maturities
|
Coupon
Interest Rate
|
Effective
Yield
|
||||||||||
2013
|
$ | 9,055 | 5.24 | % | 0.64 | % | ||||||
2014
|
6,110 | 4.92 | % | 0.36 | % | |||||||
2015
|
1,050 | 3.57 | % | 0.41 | % | |||||||
Total
|
$ | 16,215 | 5.01 | % | 0.52 | % | ||||||
Fair Market Value
|
$ | 16,904 |
3.1
|
Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form S-1 (No. 33-96952)).
|
3.2
|
Certificate of Ownership and Merger dated March 3, 2011 (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 10-Q for the quarter ended March 31, 2011).
|
3.3
|
Amended and Restated Bylaws of Insperity, Inc. dated March 3, 2011 (incorporated by reference to Exhibit 3.2 to the Registrant’s Form 10-Q for the quarter ended March 31, 2011).
|
3.4
|
Certificate of Designation of Series A Junior Participating Preferred Stock setting forth the terms of the Preferred Stock (included as Exhibit A to the Rights Agreement).
|
4.1
|
Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-1 (No. 33-96952)).
|
4.2
|
Rights Agreement dated as of November 13, 2007 between Insperity, Inc. and Mellon Investor Services, LLC, as Rights Agent (the “Rights Agreement”) (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on November 16, 2007).
|
4.3
|
Form of Rights Certificate (included as Exhibit B to the Rights Agreement).
|
10.1†
|
Insperity, Inc. 2001 Incentive Plan, as amended and restated (incorporated by reference to Appendix A to the Registrant’s definitive proxy statement on Schedule 14A filed on March 18, 2009 (No. 1-13998)).
|
10.2†
|
Form of Incentive Stock Option Agreement (1997 Plan) (incorporated by reference to Exhibit 10.7 to the Registrant’s Form 10-K filed for the year ended December 31, 2004).
|
10.3†
|
Form of Incentive Stock Option Agreement (2001 Plan – 3 year vesting) (incorporated by reference to Exhibit 10.8 to the Registrant’s Form 10-K filed for the year ended December 31, 2004).
|
10.4†
|
Form of Incentive Stock Option Agreement (2001 Plan – 5 year vesting) (incorporated by reference to Exhibit 10.9 to the Registrant’s Form 10-K filed for the year ended December 31, 2004).
|
10.5†
|
Form of Director Stock Option Agreement (Annual Grant) (incorporated by reference to Exhibit 10.11 to the Registrant’s Form 10-K filed for the year ended December 31, 2004).
|
10.6†
|
Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10.12 to the Registrant’s Form 10-K filed for the year ended December 31, 2004).
|
10.7†
|
Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q filed for the quarter ended September 30, 2012).
|
10.8†
|
Form of Director Stock Option Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q filed for the quarter ended September 30, 2012).
|
10.9†
|
Form of Director Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q filed for the quarter ended September 30, 2012).
|
10.10
|
Insperity, Inc. Nonqualified Stock Option Plan (incorporated by reference to Exhibit 99.6 to the Registrant’s Registration Statement on Form S-8 (No. 333-85151)).
|
10.11
|
First Amendment to Insperity, Inc. Nonqualified Stock Option Plan, effective August 7, 2001 (incorporated by reference to Exhibit 10.8 to the Registrant’s Form 10-K for the year ended December 31, 2002).
|
10.12
|
Second Amendment to Insperity, Inc. Nonqualified Stock Option Plan, effective January 28, 2003 (incorporated by reference to Exhibit 10.9 to the Registrant’s Form 10-K for the year ended December 31, 2002).
|
10.13
|
Insperity, Inc. Amended and Restated Employee Stock Purchase Plan effective April 1, 2002 (incorporated by reference to Exhibit 10.10 to the Registrant’s Form 10-K for the year ended December 31, 2002).
|
10.14
|
First Amendment to Insperity, Inc. Amended and Restated Employee Stock Purchase Plan, effective July 31, 2002 (incorporated by reference to Exhibit 10.11 to the Registrant’s Form 10-K for the year ended December 31, 2002).
|
10.15
|
Second Amendment to Insperity, Inc. Amended and Restated Employee Stock Purchase Plan, effective August 15, 2003 (incorporated by reference to Exhibit 10.12 to the Registrant’s Form 10-K for the year ended December 31, 2003).
|
10.16†
|
Directors Compensation Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 10-Q filed for the quarter ended September 30, 2012).
|
10.17†
|
Board of Directors Compensation Arrangements (incorporated by reference to the Registrant's Form 8-K dated February 7, 2005).
|
10.18
|
Insperity, Inc. 2008 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-8 (No. 333-151275)).
|
10.19
|
Insperity, Inc. 2012 Incentive Plan (incorporated by reference to the Registrant's definitive proxy statement on Schedule 14A filed on March 29, 2012 (No. 1-13998)).
|
10.20(+)
|
Minimum Premium Financial Agreement by and between Insperity Holdings, Inc. and United Healthcare Insurance Company, Hartford, Connecticut (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q for the quarter ended June 30, 2002).
|
10.21(+)
|
Minimum Premium Administrative Services Agreement by and between Insperity Holdings, Inc. and United Healthcare Insurance Company, Hartford, Connecticut (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 10-Q for the quarter ended June 30, 2002).
|
10.22(+)
|
Amended and Restated Security Deposit Agreement by and between Insperity Holdings, Inc. and United Healthcare Insurance Company, Hartford, Connecticut (incorporated by reference to Exhibit 10.5 to the Registrant’s Form 10-Q for the quarter ended June 30, 2002).
|
10.23(+)
|
Amendment to Various Agreements between United Healthcare Insurance Company and Insperity Holdings, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended June 30, 2005).
|
10.24
|
Houston Service Center Operating Lease Amendment (incorporated by reference to Exhibit 10.27 to the Registrant’s Form 10-K for the year ended December 31, 2004).
|
10.25(+)
|
Letter Agreement dated April 21, 2007, between Insperity Holdings, Inc. and UnitedHealthcare Insurance Company (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended June 30, 2007).
|
10.26(+)
|
Amendment to Minimum Premium Financial Agreement, as amended and restated effective January 1, 2005, by and between Insperity Holdings, Inc., and UnitedHealthcare Insurance Company (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended June 30, 2007).
|
10.27(+)
|
Amendment to Minimum Premium Administrative Services Agreement, as amended and restated effective January 1, 2005, by and between Insperity Holdings, Inc., and UnitedHealthcare Insurance Company (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q for the quarter ended June 30, 2007).
|
10.28(+)
|
Letter Agreement dated October 1, 2010, between Insperity Holdings, Inc. and UnitedHealthcare Insurance Company (incorporated by reference to Exhibit 10.29 to the Registrant’s Form 10-K filed for the year ended December 31, 2010).
|
Letter Agreement dated October 22, 2012, between Insperity Holdings, Inc. and UnitedHealthcare Insurance Company.
|
10.30
|
Exchange Agreement for Corporate Aircraft, dated August 30, 2011 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended September 30, 2011).
|
10.31
|
Credit Agreement dated September 15, 2011 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 1, 2011).
|
Amendment No. 1 to the Credit Agreement dated December 7, 2012.
|
Subsidiaries of Insperity, Inc.
|
Consent of Independent Registered Public Accounting Firm.
|
Powers of Attorney.
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
101.INS*
|
XBRL Instance Document
(1)
.
|
101.SCH*
|
XBRL Taxonomy 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.
|
|
(1)
|
Attached as exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Operations for the years ended December 31, 2012, 2011 and 2010; (ii) the Consolidated Balance Sheets at December 31, 2012 and 2011; (iii) the Consolidated Statements of Comprehensive Income for the years ended December 31, 2012, 2011 and 2010; (iv) the Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2012, 2011 and 2010; and (v) the Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010. Users of this data are advised pursuant to Rule 406T of Regulation S-T this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, additionally the data is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and is not subject to liability under these sections.
|
|
†
|
Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K.
|
|
(+)
|
Confidential treatment has been requested for this exhibit and confidential portions have been filed with the Securities and Exchange Commission.
|
INSPERITY, INC.
|
||
By
:
|
/s/ Douglas S. Sharp
|
|
Douglas S. Sharp
|
||
Senior
Vice President of Finance
|
||
Chief Financial Officer and Treasurer
|
Signature
|
Title
|
|
/s/ Paul J. Sarvadi
|
Chairman of the Board, Chief Executive Officer and Director
|
|
Paul J. Sarvadi
|
||
(Principal Executive Officer)
|
||
/s/ Richard G. Rawson
|
President and Director
|
|
Richard G. Rawson
|
||
/s/ Douglas S. Sharp
|
Senior Vice President of Finance
|
|
Douglas S. Sharp
|
Chief Financial Officer and Treasurer
|
|
(Principal Financial Officer)
|
||
*
|
Director
|
|
Michael W. Brown
|
||
*
|
Director
|
|
Jack M. Fields
,
Jr.
|
||
*
|
Director
|
|
Eli Jones
|
||
*
|
Director
|
|
Paul S. Lattanzio
|
||
*
|
Director
|
|
Gregory E. Petsch
|
||
/s/ Austin P. Young
|
Director
|
|
Austin P. Young
|
||
* By: /s/ Daniel D. Herink
|
||
Daniel D. Herink, attorney-in-fact
|
Report of Independent Registered Public Accounting Firm
|
F-2
|
Management’s Report on Internal Control
|
F-3
|
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
|
F-4
|
Consolidated Balance Sheets as of December 31, 2012 and 2011
|
F-5
|
Consolidated Statements of Operations for the years ended December 31, 2012, 2011 and 2010
|
F-7
|
Consolidated Statements of Comprehensive Income for the years ended December 31, 2012, 2011 and 2010
|
F-8
|
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2012, 2011 and 2010
|
F-9
|
Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010
|
F-10
|
Notes to Consolidated Financial Statements
|
F-12
|
/s/ Ernst & Young LLP |
/s/ Paul J. Sarvadi
|
/s/ Douglas S. Sharp
|
|
Paul J. Sarvadi
|
Douglas S. Sharp
|
|
Chairman of the Board and
|
Senior Vice President of Finance
|
|
Chief Executive Officer
|
Chief Financial Officer and Treasurer
|
/s/ Ernst & Young LLP |
December 31,
2012
|
December 31,
2011
|
|||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 264,544 | $ | 211,208 | ||||
Restricted cash
|
47,149 | 44,737 | ||||||
Marketable securities
|
16,904 | 56,987 | ||||||
Accounts receivable, net:
|
||||||||
Trade
|
6,931 | 7,893 | ||||||
Unbilled
|
181,040 | 158,508 | ||||||
Other
|
2,415 | 4,532 | ||||||
Prepaid insurance
|
15,620 | 21,300 | ||||||
Other current assets
|
9,651 | 11,488 | ||||||
Income taxes receivable
|
— | 2,902 | ||||||
Deferred income taxes
|
7,211 | 3,233 | ||||||
Total current assets
|
551,465 | 522,788 | ||||||
Property and equipment:
|
||||||||
Land
|
4,115 | 3,653 | ||||||
Buildings and improvements
|
68,583 | 67,496 | ||||||
Computer hardware and software
|
81,140 | 76,105 | ||||||
Software development costs
|
35,866 | 32,699 | ||||||
Furniture and fixtures
|
36,717 | 36,133 | ||||||
Aircraft
|
35,879 | 35,866 | ||||||
262,300 | 251,952 | |||||||
Accumulated depreciation and amortization
|
(168,358 | ) | (159,008 | ) | ||||
Total property and equipment, net
|
93,942 | 92,944 | ||||||
Other assets:
|
||||||||
Prepaid health insurance
|
9,000 | 9,000 | ||||||
Deposits – health insurance
|
3,000 | 2,640 | ||||||
Deposits – workers’ compensation
|
64,201 | 52,320 | ||||||
Goodwill and other intangible assets, net
|
23,775 | 28,433 | ||||||
Other assets
|
4,817 | 4,134 | ||||||
Total other assets
|
104,793 | 96,527 | ||||||
Total assets
|
$ | 750,200 | $ | 712,259 |
December 31,
2012
|
December 31,
2011
|
|||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 3,660 | $ | 5,085 | ||||
Payroll taxes and other payroll deductions payable
|
178,534 | 168,652 | ||||||
Accrued worksite employee payroll cost
|
150,070 | 130,317 | ||||||
Accrued health insurance costs
|
13,942 | 9,427 | ||||||
Accrued workers’ compensation costs
|
49,484 | 46,548 | ||||||
Accrued corporate payroll and commissions
|
23,537 | 22,383 | ||||||
Other accrued liabilities
|
12,478 | 13,814 | ||||||
Income tax payable
|
4,054 | — | ||||||
Total current liabilities
|
435,759 | 396,226 | ||||||
Noncurrent liabilities:
|
||||||||
Accrued workers’ compensation costs
|
64,536 | 60,054 | ||||||
Deferred income taxes
|
9,000 | 10,772 | ||||||
Total noncurrent liabilities
|
73,536 | 70,826 | ||||||
Commitments and contingencies
|
||||||||
Stockholders’ equity:
|
||||||||
Preferred stock, par value $0.01 per share:
|
||||||||
Shares authorized – 20,000
|
||||||||
Shares issued and outstanding – none
|
— | — | ||||||
Common stock, par value $0.01 per share:
|
||||||||
Shares authorized – 60,000
|
||||||||
Shares issued – 30,758 and 30,839 at December 31, 2012 and 2011, respectively
|
308 | 309 | ||||||
Additional paid-in capital
|
133,207 | 135,871 | ||||||
Treasury stock, at cost – 5,096 and 5,141 shares at December 31, 2012 and 2011, respectively
|
(133,950 | ) | (134,647 | ) | ||||
Accumulated other comprehensive income, net of tax
|
16 | 24 | ||||||
Retained earnings
|
241,324 | 243,650 | ||||||
Total stockholders’ equity
|
240,905 | 245,207 | ||||||
Total liabilities and stockholders’ equity
|
$ | 750,200 | $ | 712,259 |
Year ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
Revenues (gross billings of $12.992 billion, $11.700 billion and $10.169 billion, less worksite employee payroll cost of $10.833 billion, $9.724 billion and $8.449 billion, respectively)
|
$ | 2,158,824 | $ | 1,976,219 | $ | 1,719,752 | ||||||
Direct costs:
|
||||||||||||
Payroll taxes, benefits and workers’ compensation
costs
|
1,776,603 | 1,624,444 | 1,421,216 | |||||||||
Gross profit
|
382,221 | 351,775 | 298,536 | |||||||||
Operating expenses:
|
||||||||||||
Salaries, wages and payroll taxes
|
168,807 | 155,233 | 146,901 | |||||||||
Stock-based compensation
|
9,814 | 8,601 | 8,126 | |||||||||
Commissions
|
14,515 | 13,451 | 11,881 | |||||||||
Advertising
|
21,586 | 26,613 | 16,447 | |||||||||
General and administrative expenses
|
77,564 | 75,345 | 63,214 | |||||||||
Impairment charge
|
4,191 | — | — | |||||||||
Depreciation and amortization
|
18,250 | 15,218 | 14,907 | |||||||||
314,727 | 294,461 | 261,476 | ||||||||||
Operating income
|
67,494 | 57,314 | 37,060 | |||||||||
Other income (expense):
|
||||||||||||
Interest, net
|
609 | 969 | 991 | |||||||||
Other, net
|
187 | (7,508 | ) | (30 | ) | |||||||
Income before income tax expense
|
68,290 | 50,775 | 38,021 | |||||||||
Income tax expense
|
27,888 | 20,305 | 15,581 | |||||||||
Net income
|
$ | 40,402 | $ | 30,470 | $ | 22,440 | ||||||
Less distributed and undistributed earnings allocated to participating securities
|
(1,224 | ) | (908 | ) | (657 | ) | ||||||
Net income allocated to common shares
|
$ | 39,178 | $ | 29,562 | $ | 21,783 | ||||||
Basic net income per share of common stock
|
$ | 1.57 | $ | 1.16 | $ | 0.86 | ||||||
Diluted net income per share of common stock
|
$ | 1.56 | $ | 1.16 | $ | 0.86 |
Year ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
Net income
|
$ | 40,402 | $ | 30,470 | $ | 22,440 | ||||||
Other comprehensive income:
|
||||||||||||
Unrealized gain (loss) on available-for-sale securities, net of tax
|
(8 | ) | 3 | 18 | ||||||||
Comprehensive income
|
$ | 40,394 | $ | 30,473 | $ | 22,458 |
Common Stock
Issued
|
Additional
Paid-In
|
Treasury
|
Accumulated
Other
Comprehensive
|
Retained
|
|
|||||||||||||||||||||||
Shares | Amount | Capital | Stock | Income (Loss) | Earnings | Total | ||||||||||||||||||||||
Balance at December 31, 2009
|
30,839 | $ | 309 | $ | 138,551 | $ | (135,712 | ) | $ | 3 | $ | 220,009 | $ | 223,160 | ||||||||||||||
Purchase of treasury stock, at cost
|
― | ― | ― | (7,852 | ) | — | ― | (7,852 | ) | |||||||||||||||||||
Exercise of stock options
|
― | ― | (1,963 | ) | 9,146 | — | ― | 7,183 | ||||||||||||||||||||
Income tax benefit from stock-based compensation, net
|
― | ― | 25 | — | — | ― | 25 | |||||||||||||||||||||
Stock-based compensation expense
|
— | — | (966 | ) | 9,092 | — | — | 8,126 | ||||||||||||||||||||
Other
|
― | ― | (40 | ) | 862 | — | ― | 822 | ||||||||||||||||||||
Dividends paid
|
— | — | — | — | — | (13,527 | ) | (13,527 | ) | |||||||||||||||||||
Unrealized gain on marketable securities, net of tax
|
— | — | — | — | 18 | — | 18 | |||||||||||||||||||||
Net income
|
— | — | — | — | — | 22,440 | 22,440 | |||||||||||||||||||||
Balance at December 31, 2010
|
30,839 | $ | 309 | $ | 135,607 | $ | (124,464 | ) | $ | 21 | $ | 228,922 | $ | 240,395 | ||||||||||||||
Purchase of treasury stock, at cost
|
― | ― | ― | (25,079 | ) | — | ― | (25,079 | ) | |||||||||||||||||||
Exercise of stock options
|
― | ― | (1,042 | ) | 4,998 | — | ― | 3,956 | ||||||||||||||||||||
Income tax benefit from stock-based compensation, net
|
― | ― | 1,663 | — | — | ― | 1,663 | |||||||||||||||||||||
Stock-based compensation expense
|
— | — | (416 | ) | 9,017 | — | — | 8,601 | ||||||||||||||||||||
Other
|
― | ― | 59 | 881 | — | ― | 940 | |||||||||||||||||||||
Dividends paid
|
— | — | — | — | — | (15,742 | ) | (15,742 | ) | |||||||||||||||||||
Unrealized gain on marketable securities, net of tax
|
— | — | — | — | 3 | — | 3 | |||||||||||||||||||||
Net income
|
— | — | — | — | — | 30,470 | 30,470 | |||||||||||||||||||||
Balance at December 31, 2011
|
30,839 | $ | 309 | $ | 135,871 | $ | (134,647 | ) | $ | 24 | $ | 243,650 | $ | 245,207 | ||||||||||||||
Purchase of treasury stock, at cost
|
― | ― | ― | (13,773 | ) | — | ― | (13,773 | ) | |||||||||||||||||||
Repurchase of common stock
|
(81 | ) | (1 | ) | (3,161 | ) | ― | ― | ― | (3,162 | ) | |||||||||||||||||
Exercise of stock options
|
― | ― | (1,630 | ) | 3,879 | — | ― | 2,249 | ||||||||||||||||||||
Income tax benefit from stock-based compensation, net
|
― | ― | 1,751 | — | — | ― | 1,751 | |||||||||||||||||||||
Stock-based compensation expense
|
— | — | 289 | 9,525 | — | — | 9,814 | |||||||||||||||||||||
Other
|
― | ― | 87 | 1,066 | — | ― | 1,153 | |||||||||||||||||||||
Dividends paid
|
— | — | — | — | — | (42,728 | ) | (42,728 | ) | |||||||||||||||||||
Unrealized loss on marketable securities, net of tax
|
— | — | — | — | (8 | ) | — | (8 | ) | |||||||||||||||||||
Net income
|
— | — | — | — | — | 40,402 | 40,402 | |||||||||||||||||||||
Balance at December 31, 2012
|
30,758 | $ | 308 | $ | 133,207 | $ | (133,950 | ) | $ | 16 | $ | 241,324 | $ | 240,905 |
Year ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net income
|
$ | 40,402 | $ | 30,470 | $ | 22,440 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||||||
Depreciation and amortization
|
18,183 | 15,218 | 14,950 | |||||||||
Loss on exchange of assets
|
— | 4,408 | — | |||||||||
Impairment charge
|
4,191 | — | — | |||||||||
Amortization of marketable securities
|
2,295 | 2,172 | 1,650 | |||||||||
Stock-based compensation
|
9,814 | 8,601 | 8,126 | |||||||||
Deferred income taxes
|
(5,743 | ) | (46 | ) | 1,179 | |||||||
Changes in operating assets and liabilities, net of acquisitions:
|
||||||||||||
Restricted cash
|
(2,412 | ) | (3,533 | ) | (4,768 | ) | ||||||
Accounts receivable
|
(19,453 | ) | (28,826 | ) | (18,874 | ) | ||||||
Prepaid insurance
|
5,680 | 3,678 | (10,494 | ) | ||||||||
Other current assets
|
1,837 | (2,862 | ) | (2,141 | ) | |||||||
Other assets
|
(12,924 | ) | (652 | ) | 4,180 | |||||||
Accounts payable
|
(1,425 | ) | 1,776 | 1,136 | ||||||||
Payroll taxes and other payroll deductions payable
|
9,922 | 23,556 | 17,499 | |||||||||
Accrued worksite employee payroll expense
|
19,753 | 20,620 | 16,559 | |||||||||
Accrued health insurance costs
|
4,515 | (5,992 | ) | 9,045 | ||||||||
Accrued workers’ compensation costs
|
7,418 | 8,791 | 8,748 | |||||||||
Accrued corporate payroll, commissions and other accrued liabilities
|
2,353 | (1,871 | ) | 9,556 | ||||||||
Income taxes payable/receivable
|
6,392 | (1,597 | ) | 49 | ||||||||
Total adjustments
|
50,396 | 43,441 | 56,400 | |||||||||
Net cash provided by operating activities
|
90,798 | 73,911 | 78,840 | |||||||||
Cash flows from investing activities:
|
||||||||||||
Marketable securities:
|
||||||||||||
Purchases
|
(30,680 | ) | (51,397 | ) | (60,003 | ) | ||||||
Proceeds from maturities
|
32,619 | 31,706 | 18,301 | |||||||||
Proceeds from dispositions
|
35,891 | 3,907 | 2,748 | |||||||||
Investments and acquisitions, net of cash acquired
|
(2,410 | ) | (14,555 | ) | (12,918 | ) | ||||||
Property and equipment:
|
||||||||||||
Purchases
|
(17,631 | ) | (31,440 | ) | (6,764 | ) | ||||||
Proceeds from dispositions
|
69 | 82 | 54 | |||||||||
Net cash provided by (used in) investing activities
|
17,858 | (61,697 | ) | (58,582 | ) |
Year ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
Cash flows from financing activities:
|
||||||||||||
Purchase of treasury stock
|
$ | (13,773 | ) | $ | (25,079 | ) | $ | (7,852 | ) | |||
Repurchase of common stock
|
(3,162 | ) | — | — | ||||||||
Dividends paid
|
(42,728 | ) | (15,742 | ) | (13,527 | ) | ||||||
Proceeds from the exercise of stock options
|
2,249 | 3,956 | 7,183 | |||||||||
Income tax benefit from stock-based compensation
|
2,316 | 2,166 | 860 | |||||||||
Other
|
(222 | ) | (1,136 | ) | 822 | |||||||
Net cash used in financing activities
|
(55,320 | ) | (35,835 | ) | (12,514 | ) | ||||||
Net increase (decrease) in cash and cash equivalents
|
53,336 | (23,621 | ) | 7,744 | ||||||||
Cash and cash equivalents at beginning of year
|
211,208 | 234,829 | 227,085 | |||||||||
Cash and cash equivalents at end of year
|
$ | 264,544 | $ | 211,208 | $ | 234,829 | ||||||
Supplemental disclosures:
|
||||||||||||
Cash paid for income taxes
|
$ | 24,924 | $ | 19,782 | $ | 13,492 |
1.
|
Accounting Policies
|
Buildings and improvements
|
5-30 years
|
Computer hardware and software, and acquired technologies
|
1-5 years
|
Software development costs
|
3 years
|
Furniture and fixtures
|
5-7 years
|
Aircraft
|
15-20 years
|
Year ended December 31,
|
||||||||
2012
|
2011
|
|||||||
(in thousands)
|
||||||||
Beginning balance
|
$ | 104,791 | $ | 96,934 | ||||
Accrued claims
|
37,772 | 36,845 | ||||||
Present value discount
|
(868 | ) | (1,513 | ) | ||||
Paid claims
|
(30,010 | ) | (27,475 | ) | ||||
Ending balance
|
$ | 111,685 | $ | 104,791 | ||||
Current portion of accrued claims
|
$ | 47,149 | $ | 44,737 | ||||
Long-term portion of accrued claims
|
64,536 | 60,054 | ||||||
$ | 111,685 | $ | 104,791 |
2.
|
Cash, Cash Equivalents and Marketable Securities
|
December 31,
|
||||||||
2012
|
2011
|
|||||||
(in thousands)
|
||||||||
Overnight holdings:
|
||||||||
Money market funds (cash equivalents)
|
$ | 255,000 | $ | 71,350 | ||||
Investment holdings:
|
||||||||
Money market funds (cash equivalents)
|
26,087 | 59,587 | ||||||
Marketable securities
|
16,904 | 56,987 | ||||||
297,991 | 187,924 | |||||||
Cash held in demand accounts
|
21,732 | 113,968 | ||||||
Outstanding checks
|
(38,275 | ) | (33,697 | ) | ||||
Total cash, cash equivalents and marketable securities
|
$ | 281,448 | $ | 268,195 | ||||
Cash and cash equivalents
|
$ | 264,544 | $ | 211,208 | ||||
Marketable securities
|
16,904 | 56,987 | ||||||
$ | 281,448 | $ | 268,195 |
·
|
Level 1 - quoted prices in active markets using identical assets
|
·
|
Level 2 - significant other observable inputs, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other observable inputs
|
·
|
Level 3 - significant unobservable inputs
|
Fair Value Measurements
|
||||||||||||||||
(in thousands)
|
||||||||||||||||
December 31,
|
||||||||||||||||
2012
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Money market funds
|
$ | 281,087 | $ | 281,087 | $ | — | $ | — | ||||||||
Municipal bonds
|
16,904 | — | 16,904 | — | ||||||||||||
Total
|
$ | 297,991 | $ | 281,087 | $ | 16,904 | $ | — |
Fair Value Measurements
|
||||||||||||||||
(in thousands)
|
||||||||||||||||
December 31,
|
||||||||||||||||
2011
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Money market funds
|
$ | 130,937 | $ | 130,937 | $ | — | $ | — | ||||||||
Municipal bonds
|
56,987 | — | 56,987 | — | ||||||||||||
Total
|
$ | 187,924 | $ | 130,937 | $ | 56,987 | $ | — |
Gross
|
Gross
|
|||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Estimated
|
|||||||||||||
Cost
|
Gains
|
Losses
|
Fair Value
|
|||||||||||||
(in thousands)
|
||||||||||||||||
December 31, 2012:
|
||||||||||||||||
Municipal bonds
|
$ | 16,878 | $ | 29 | $ | (3 | ) | $ | 16,904 | |||||||
December 31, 2011:
|
||||||||||||||||
Municipal bonds
|
$ | 56,945 | $ | 90 | $ | (48 | ) | $ | 56,987 |
Amortized
Cost
|
Estimated
Fair Value
|
|||||||
(in thousands)
|
||||||||
Less than one year
|
$ | 9,301 | $ | 9,309 | ||||
One to five years
|
7,577 | 7,595 | ||||||
Total
|
$ | 16,878 | $ | 16,904 |
3.
|
Accounts Receivable
|
December 31,
|
||||||||
2012
|
2011
|
|||||||
(in thousands)
|
||||||||
Accrued worksite employee payroll cost
|
$ | 150,070 | $ | 130,317 | ||||
Unbilled revenues
|
44,483 | 38,564 | ||||||
Customer prepayments
|
(13,513 | ) | (10,373 | ) | ||||
Unbilled accounts receivable
|
$ | 181,040 | $ | 158,508 |
4.
|
Deposits
|
5.
|
Goodwill and Other Intangible Assets
|
December 31,
|
||||||||||||||||||||||||
2012
|
2011
|
|||||||||||||||||||||||
Gross
Carrying
Amount
|
Accumulated
Amortization/
Impairment
|
Net
Carrying
Amount
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net
Carrying
Amount
|
|||||||||||||||||||
(in thousands)
|
||||||||||||||||||||||||
Amortizable intangible assets:
|
||||||||||||||||||||||||
Trademarks
|
$ | 1,285 | $ | (571 | ) | $ | 714 | $ | 1,785 | $ | (742 | ) | $ | 1,043 | ||||||||||
Customer relationships
|
9,643 | (3,790 | ) | 5,853 | 9,043 | (2,809 | ) | 6,234 | ||||||||||||||||
Goodwill
|
21,156 | (3,948 | ) | 17,208 | 21,156 | — | 21,156 | |||||||||||||||||
Total goodwill and intangible assets
|
$ | 32,084 | $ | (8,309 | ) | $ | 23,775 | $ | 31,984 | $ | (3,551 | ) | $ | 28,433 |
Goodwill
|
||||
(in thousands)
|
||||
Balance at December 31, 2010
|
$ | 14,327 | ||
Acquisitions
|
6,829 | |||
Balance at December 31, 2011
|
21,156 | |||
Impairment
|
(3,948 | ) | ||
Balance at December 31, 2012
|
$ | 17,208 |
6.
|
Acquisitions
|
7.
|
Revolving Credit Facility
|
8.
|
Income Taxes
|
December 31,
|
||||||||
2012
|
2011
|
|||||||
(in thousands)
|
||||||||
Deferred tax liabilities:
|
||||||||
Prepaid assets
|
$ | (6,929 | ) | $ | (9,268 | ) | ||
Depreciation
|
(8,580 | ) | (8,616 | ) | ||||
Software development costs
|
(3,104 | ) | (2,858 | ) | ||||
Amortization
|
— | (1,210 | ) | |||||
Total deferred tax liabilities
|
(18,613 | ) | (21,952 | ) | ||||
Deferred tax assets:
|
||||||||
Accrued incentive compensation
|
4,896 | 3,877 | ||||||
Net operating loss carryforward
|
2,057 | 2,290 | ||||||
Workers’ compensation accruals
|
5,079 | 3,744 | ||||||
Accrued rent
|
1,033 | 1,132 | ||||||
Stock-based compensation
|
3,114 | 2,908 | ||||||
Other
|
645 | 610 | ||||||
Total deferred tax assets
|
16,824 | 14,561 | ||||||
Valuation allowance
|
— | (148 | ) | |||||
Total net deferred tax assets
|
16,824 | 14,413 | ||||||
Net deferred tax liabilities
|
$ | (1,789 | ) | $ | (7,539 | ) | ||
Net current deferred tax assets
|
$ | 7,211 | $ | 3,233 | ||||
Net noncurrent deferred tax liabilities
|
(9,000 | ) | (10,772 | ) | ||||
$ | (1,789 | ) | $ | (7,539 | ) |
Year ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
(in thousands)
|
||||||||||||
Current income tax expense:
|
||||||||||||
Federal
|
$ | 29,280 | $ | 16,816 | $ | 12,668 | ||||||
State
|
4,351 | 3,535 | 1,734 | |||||||||
Total current income tax expense
|
33,631 | 20,351 | 14,402 | |||||||||
Deferred income tax (benefit) expense:
|
||||||||||||
Federal
|
(5,363 | ) | 47 | 1,033 | ||||||||
State
|
(380 | ) | (93 | ) | 146 | |||||||
Total deferred income tax (benefit) expense
|
(5,743 | ) | (46 | ) | 1,179 | |||||||
Total income tax expense
|
$ | 27,888 | $ | 20,305 | $ | 15,581 |
Year ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
(in thousands)
|
||||||||||||
Expected income tax expense at 35%
|
$ | 23,901 | $ | 17,770 | $ | 13,307 | ||||||
State income taxes, net of federal benefit
|
2,497 | 2,249 | 1,273 | |||||||||
Nondeductible expenses
|
1,663 | 904 | 1,092 | |||||||||
Research and development credit
|
— | (558 | ) |
––
|
||||||||
Other, net
|
(173 | ) | (60 | ) | (91 | ) | ||||||
Reported total income tax expense
|
$ | 27,888 | $ | 20,305 | $ | 15,581 |
9.
|
Stockholders’ Equity
|
10.
|
Incentive Plans
|
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Exercise | Remaining | Aggregate | ||||||||||||||
Price | Contractual | Intrinsic | ||||||||||||||
Shares | Per Share | Life | Value | |||||||||||||
(in thousands) | (in years) | (in thousands) | ||||||||||||||
Outstanding – December 31, 2011
|
315 | $ | 16.67 | |||||||||||||
Granted
|
— | — | ||||||||||||||
Exercised
|
(160 | ) | 14.05 | |||||||||||||
Cancelled
|
(3 | ) | 25.99 | |||||||||||||
Outstanding – December 31, 2012
|
152 | 19.30 | 3.3 | $ | 2,019 | |||||||||||
Exercisable – December 31, 2012
|
152 | 19.30 | 3.3 | $ | 2,019 |
Weighted Average
|
||||||||
Grant Date
|
||||||||
Shares
|
Fair Value
|
|||||||
(in thousands)
|
||||||||
Non-vested – December 31, 2011
|
778 | $ | 23.91 | |||||
Granted
|
375 | 30.47 | ||||||
Vested
|
(383 | ) | 22.65 | |||||
Cancelled/Forfeited
|
(19 | ) | 28.51 | |||||
Non-vested – December 31, 2012
|
751 | 27.70 |
11.
|
Net Income Per Share
|
Year ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
(in thousands)
|
||||||||||||
Net income
|
$ | 40,402 | $ | 30,470 | $ | 22,440 | ||||||
Less distributed and undistributed earnings allocated to participating securities
|
(1,224 | ) | (908 | ) | (657 | ) | ||||||
Net income allocated to common shares
|
$ | 39,178 | $ | 29,562 | $ | 21,783 | ||||||
Weighted average common shares outstanding
|
25,007 | 25,405 | 25,254 | |||||||||
Incremental shares from assumed conversions of common stock options
|
60 | 92 | 114 | |||||||||
Adjusted weighted average common shares outstanding
|
25,067 | 25,497 | 25,368 | |||||||||
Potentially dilutive securities not included in weighted average share calculation due to anti-dilutive effect
|
29 | 29 | 372 |
12.
|
Leases
|
Operating
Leases
|
||||
(in thousands)
|
||||
2013
|
$ | 13,648 | ||
2014
|
10,658 | |||
2015
|
7,068 | |||
2016
|
5,196 | |||
2017
|
3,258 | |||
Thereafter
|
2,481 | |||
Total minimum lease payments
|
$ | 42,309 |
13.
|
Commitments and Contingencies
|
2013
|
$ | 6,308 | ||
2014
|
7,006 | |||
2015
|
5,700 | |||
2016
|
4,902 | |||
2017
|
1,430 | |||
Thereafter
|
5,490 | |||
Total obligations
|
$ | 30,836 |
14.
|
Quarterly Financial Data (Unaudited)
|
Quarter ended
|
||||||||||||||||
March 31
|
June 30
|
Sept. 30
|
Dec. 31
|
|||||||||||||
(in thousands, except per share amounts)
|
||||||||||||||||
2012:
|
||||||||||||||||
Revenues
|
$ | 595,177 | $ | 519,256 | $ | 511,953 | $ | 532,438 | ||||||||
Gross profit
|
103,004 | 87,294 | (1) | 98,420 | 93,503 | |||||||||||
Operating income
|
23,046 | 9,415 | 19,140 | 15,893 | (2) | |||||||||||
Net income
|
13,884 | 5,621 | 11,452 | 9,445 | ||||||||||||
Basic net income per share
|
0.54 | 0.22 | 0.45 | 0.34 | (3) | |||||||||||
Diluted net income per share
|
0.54 | 0.22 | 0.45 | 0.34 | (3) | |||||||||||
2011:
|
||||||||||||||||
Revenues
|
$ | 536,381 | $ | 472,903 | $ | 471,821 | $ | 495,114 | ||||||||
Gross profit
|
90,959 | 83,841 | 87,029 | 89,946 | (4) | |||||||||||
Operating income
|
15,129 | 11,400 | 14,094 | 16,691 | ||||||||||||
Net income
|
8,786 | 6,741 | 4,099 | (5) | 10,844 | |||||||||||
Basic net income per share
|
0.33 | 0.25 | 0.16 | 0.42 | ||||||||||||
Diluted net income per share
|
0.33 | 0.25 | 0.16 | 0.42 |
(1)
|
Included in the results for the second quarter of 2012 is a $2.9 million reduction to payroll tax expense related to a refund of Pennsylvania sales taxes. Please read Note 13, “Commitments and Contingencies,” for additional information.
|
(2)
|
Included in the results for the fourth quarter of 2012 is a $4.2 million impairment charge, related to our Performance Management reporting unit. Please read Note 5, “Goodwill and Other Intangible Assets,” for additional information.
|
(3)
|
Under the two-class earnings per share method, undistributed losses resulting from dividends exceeding net income are not allocated to participating securities. This resulted in a $0.03 earnings per share decrease in the fourth quarter of 2012. Please read Note 11, “Net Income Per Share,” for additional information.
|
(4)
|
Included in the results for the fourth quarter of 2011 is a $2.5 million adjustment related to the reversal of Pennsylvania sales taxes accrued in prior periods. Please read Note 13, “Commitments and Contingencies,” for additional information.
|
(5)
|
Included in the results for the third quarter of 2011 is a $4.4 million loss related to the exchange of an aircraft and a $3.1 million loss related to a settlement with the State of California. Please read Note 13, “Commitments and Contingencies,” for additional information on the settlement with the State of California.
|
By:
|
/s/ Richard G. Rawson
|
|
Its:
|
President
|
|
Date: Oct 30, 2012
|
cc:
|
Kim Bacon, Managing Director, Health and Welfare Services
|
Elry
Falkenstein, UHC VP Professional Employer Organizations
|
|
1)
|
In keeping with previous agreements, UHC’s suggested language is as follows: "Competitive" means that either (i) the Company and the Employer agree or (ii) an independent consultant chosen by mutual agreement of the parties has determined, that such product ranks either *** as compared to competing products of other vendors in the designated market. In making any determination of the rank of a product in a market, such consultant shall apply such criteria relating to *** and *** as it shall determine appropriate. All fees and expenses of any such consultant shall be paid by the Employer.
|
|
a.
|
The exclusivity provisions shall not apply to any Client of Insperity where a state or municipality requires issuance of small business policies directly to Clients and/or Employees, nor shall it apply to Clients and/or Employees who elect coverage under a federal, state or private exchange. Insperity and UnitedHealthcare will work together to find mutually agreeable parameters for any Insperity ***.
|
|
b.
|
Barring significant *** or ***, existing UHC membership is grandfathered for the remainder of the contractual period from the time a competing carrier is introduced into a market.
|
|
c.
|
When a new carrier is added to a UHC market, the *** is made at the *** and not the ***.
|
|
d.
|
If there is a Significant *** to the Company *** network in a Market, if no group health insurance or similar product is offered by the Company in the Market, or if no group health insurance or similar product offered by the Company is Competitive in that Market, the Employer may offer, subject to the existing terms of our agreement, the health insurance or similar products of a Competing Vendor in such market. Only *** will be introduced into a limited number of Markets, not to exceed *** Markets, through December 31, 2015. The *** market cap does not apply if changes are *** by *** or ***.
|
|
e.
|
*** and *** will remain exclusive markets. If agreed to by both parties, the exclusivity requirement will be modified if changes are *** by *** or *** (to the extent not previously addressed in subparagraph a to this section 1).
|
|
f.
|
UnitedHealthcare will be the exclusive Vendor for *** coverage offered in the *** markets. If agreed to by both parties, the exclusivity requirement will be modified if changes are *** by *** or *** (to the extent not previously addressed in subparagraph a to this section 1).
|
|
g.
|
UHC will be notified at least 90 days prior to the introduction of a competing carrier into a market.
|
|
2)
|
In the event that either party reasonably believes that any state or other jurisdiction may impose a *** on it for proceeding with its performance under the Agreement, or that a state or jurisdiction will enforce a regulation or statute that will result in either a material reduction in Insperity's ability to market its full suite of services to its existing and potential clients or UnitedHealthcare's ability to market its insurance products in the state or jurisdiction, such party will promptly advise the other party of such belief and the basis therefore. In such event, the parties agree to cooperate in good faith to resolve such matter to the satisfaction of both parties. After a good faith effort by the parties to eliminate the risk of *** or the material reduction of Insperity's ability to market its full suite of services to its existing and potential clients or UnitedHealthcare's ability to market its insurance products in the state or jurisdiction, if the matter is not resolved to the satisfaction of both parties, (a) the party upon which such *** may be imposed may immediately discontinue the Agreement's application in such state or jurisdiction by providing notice to that effect to the other party, except that the effective date of the termination may be extended to the latest date the Agreement can remain in effect before triggering the ***, or later if adequate indemnification is provided by the other party, or, (b) in the case of a material reduction of Insperity's ability to market its full suite of services to its existing and potential clients, or UnitedHealthcare's ability to market its insurance products in the state or jurisdiction, the Agreement's application in such state or jurisdiction will be effective *** following notice to the other party. In the event of termination, the Agreement will continue to apply in all other states or jurisdictions, except that if it is a Federal law at issue the Agreement will discontinue in its entirety. Furthermore, in the event of termination of this Agreement, Insperity agrees that it will deliver written notice to UnitedHealthcare of termination of the Policy issued to Insperity as of the effective date of the termination of this Agreement.
|
|
3)
|
Renew UHC Dental coverage with *** renewal *** in 2014 and *** in 2015.
|
|
4)
|
Renew OptumHealth (OH) Care24 w/ Worklife Solutions at *** through 2015.
|
|
5)
|
Combined *** and ***:
|
|
a.
|
2013 CY *** – based on actual calendar year *** with *** through *** 2013 *** by ***.
|
|
b.
|
2014 CY *** – based on *** by ***.
|
|
c.
|
2015 CY *** – based on *** by ***.
|
|
6)
|
*** and *** will continue to be a pass through of actual expenses. The current placeholder will require adjustment to incorporate *** and in *** the *** and ***.
|
|
7)
|
If *** below the following thresholds, the *** by the percentage in the table. *** includes all *** for *** in *** or *** as per current agreement. The total *** measurements process remains the same as current agreement.
|
i.
|
***
below
|
***
|
***
|
***
|
***
|
***
|
***
|
***
|
***
|
***
|
|
|
Cumulative
***
|
***
|
***
|
***
|
|
8)
|
If *** above the following thresholds, the *** by the percentage in the table. *** includes all *** for *** in *** or *** as per current agreement. The total *** measurements process remains the same as current agreement.
|
i.
|
***
above
|
***
|
***
|
***
|
***
|
***
|
***
|
***
|
***
|
***
|
|
Cumulative
***
|
***
|
***
|
***
|
BORROWER
:
|
||
INSPERITY, INC.
|
||
By:
|
/s/ Douglas S. Sharp
|
|
Name:
|
Douglas S. Sharp
|
|
Title:
|
Senior Vice President of Finance,
|
|
Chief Financial Officer and Treasurer
|
AGENT
:
|
||
AMEGY BANK NATIONAL ASSOCIATION
|
||
By:
|
/s/ Ryan Hightower
|
|
Name:
|
Ryan Hightower
|
|
Title:
|
Vice President
|
LENDERS
:
|
||
AMEGY BANK NATIONAL ASSOCIATION
|
||
By:
|
/s/ Ryan Hightower
|
|
Name:
|
Ryan Hightower
|
|
Title:
|
Vice President
|
BANK OF AMERICA, N.A.
|
||
By:
|
/s/ Gary L. Mingle
|
|
Name:
|
Gary L. Mingle
|
|
Title:
|
Senior Vice-President
|
WOODFOREST NATIONAL BANK
|
||
By:
|
/s/ Dan E. Hauser
|
|
Name:
|
Dan E. Hauser
|
|
Title:
|
Regional President
|
•
|
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 Statement (Form S-8 No.333-181569) pertaining to the Insperity, Inc. 2012 Incentive Plan,
|
(2)
|
Registration Statement (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, 2013
|
/s/ M. W. Brown
|
January 1
, 2013
|
|
Michael W. Brown
|
Date
|
/s/ Jack Fields
|
January 15
, 2013
|
|
Jack M. Fields
|
Date
|
/s/ Eli Jones
|
January 11
, 2013
|
|
Eli Jones
|
Date
|
/s/ Paul Lattanzio
|
January 9
, 2013
|
|
Paul S. Lattanzio
|
Date
|
/s/ Gregory E. Petsch
|
January 9
, 2013
|
|
Gregory E. Petsch
|
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, 2013
|
/s/ Douglas S. Sharp
|
|
Douglas S. Sharp
|
|
Senior Vice President of Finance,
|
|
Chief Financial Officer and Treasurer
|
|
February 11, 2013
|