Attached files
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| 8-K - INSPERITY INC 8-K 11-01-2011 - INSPERITY, INC. | form8k.htm |
Exhibit 99.1
INSPERITY ANNOUNCES THIRD QUARTER RESULTS
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Q3 Adjusted EPS increases 32% to $0.37
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Q3 Revenues increase 14% on worksite employee growth of 9%
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YTD Adjusted EPS increases 100% to $1.12
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Repurchase of 670,000 shares in Q3 and 896,000 year to date
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HOUSTON – Nov. 1, 2011 – Insperity, Inc. (NYSE: NSP), a leading provider of human resources and business performance solutions for America’s best businesses, today reported results for the third quarter and nine months ended Sept. 30, 2011. For the third quarter, the company reported adjusted diluted earnings per share of $0.37, a 32.1% increase over the 2010 period. These earnings exclude costs of $0.17 per share arising from two previously reported non-operational items and $0.04 per share related to the company’s rebranding initiative. Adjusted net income of $9.6 million excludes $4.5 million of after-tax costs associated with the two non-operational items and $1.1 million of after-tax costs related to the rebranding initiative. In accordance with generally accepted accounting principles (“GAAP”), net income for the third quarter of 2011 was $4.1 million, or $0.16 per diluted share.
“Solid execution of our rebranding and associated growth strategy was reflected in our unit growth and overall excellent third quarter results,” said Paul J. Sarvadi, Insperity chairman and chief executive officer. “We expect further development of our cross-selling initiatives within our fall selling campaign to position the company for an exciting 2012.”
Revenues for the third quarter of 2011 increased 13.9% over the 2010 quarter due to a 9.0% increase in the average number of worksite employees paid per month and a 4.5% increase in revenues per worksite employee per month.
Gross profit increased 18.1% over the third quarter of 2010 to $87.0 million. The average gross profit per worksite employee per month increased $18, or 7.9%, to $245 in the third quarter of 2011 from $227 in the 2010 period. This increase was attributable to improved results in each of the company’s Workforce Optimization™ (PEO) direct cost programs and a higher contribution from the company’s adjacent businesses.
Operating expenses increased 18.4% to $72.9 million compared to the third quarter of 2010, including costs of $1.8 million associated with the company’s rebranding initiative. Operating expenses per worksite employee per month increased 9.0% to $206 in the 2011 period from $189 in the 2010 period.
Other non-operational expenses totaling $7.5 million included a $4.4 million loss related to the exchange of a corporate aircraft and a $3.1 million loss related to the settlement of a dispute with the Employment Development Department of the State of California, as previously disclosed.
Insperity, Inc.
Page 2
Year-to-Date Results
For the nine months ended Sept. 30, 2011, the company reported adjusted diluted earnings per share of $1.12, a 100.0% increase over the 2010 period. These earnings exclude costs of $0.17 per share arising from two previously reported non-operational items and $0.21 per share related to the company’s rebranding initiative. Adjusted net income of $29.7 million excludes $4.5 million of after-tax costs associated with the two non-operational items and $5.6 million of after-tax costs associated with the company’s rebranding initiative. On a GAAP basis, net income for the nine months ended Sept. 30, 2011 was $19.6 million, or $0.74 per diluted share.
Year-to-date revenues were $1.5 billion, an increase of 15.3% over the 2010 period. Gross profit for the nine months ended Sept. 30, 2011, increased 20.3% to $261.8 million. The average gross profit per worksite employee per month increased $24, or 10.5%, to $253 in the 2011 period from $229 in the 2010 period.
Year-to-date operating expenses increased 14.4% over the first nine months of 2010 to $221.2 million, primarily due to rebranding costs of approximately $9.7 million, and expenses of $6.8 million associated with acquisitions made in mid 2010 and early 2011. On a per worksite employee per month basis, operating expenses increased 5.4% to $214 in the 2011 period from $203 in the 2010 period.
Adjusted EBITDA plus stock-based compensation, excluding the $7.5 million in costs associated with the two non-operational items, increased 39.2% to $59.3 million compared to the first nine months of 2010. Cash outlays included an upfront payment of $10.8 million related to the acquisition of desktop and software-as-a-service products and other assets of OrgPlus, dividends of $11.9 million, capital expenditures of $23.4 million and share repurchases of $22.5 million. The company received a $10.0 million scheduled reimbursement from its workers’ compensation program during the first nine months of 2011. Working capital at Sept. 30, 2011, was $129.1 million.
“Our strong balance sheet and cash flow has allowed us to execute our growth acceleration plan in a challenging economy while we also pursue strategic acquisitions,” said Douglas S. Sharp, senior vice-president of finance, chief financial officer and treasurer. “Additionally, we continue to provide a strong return to shareholders in the form of increased dividends and recent share repurchase activity.”
Insperity will be hosting a conference call today at 10 a.m. ET to discuss these results, give guidance for the fourth quarter and answer questions from investment analysts. To listen in, call 877-651-0053 and use conference i.d. number 18060517. The call will also be webcast at http://ir.insperity.com. The conference call script and company guidance will be available at the same website later today. A replay of the conference call will be available at 855-859-2056, conference i.d. 18060517, for one week. The webcast will be archived for one year.
Insperity, Inc.
Page 3
Insperity, a trusted advisor to America’s best businesses for more than 25 years, provides an array of human resources and business solutions designed to help improve business performance. InsperityTM Business Performance Advisors offer the most comprehensive Workforce OptimizationTM solution in the marketplace that delivers administrative relief, better benefits, reduced liabilities and a systematic way to improve productivity. Additional offerings include MidMarket SolutionsTM, Performance Management, Expense Management, Time and Attendance, Organizational Planning, Recruiting Services, Employment Screening, Retirement Services, Insurance Services and Technology Services. Insperity business performance solutions support more than 100,000 businesses with over 2 million employees. With 2010 revenues in excess of $1.7 billion, Insperity operates in 56 offices throughout the United States. For more information, visit http://www.insperity.com.
The statements contained herein that are not historical facts are forward-looking statements within the meaning of the federal securities laws (Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). You can identify such forward-looking statements by the words “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “likely,” “possibly,” “probably,” “goal,” “opportunity,” “objective,” “target,” “assume,” “outlook,” “guidance,” “predicts,” “appears,” “indicator” and similar expressions. Forward-looking statements involve a number of risks and uncertainties. In the normal course of business, Insperity, Inc., in an effort to help keep our stockholders and the public informed about our operations, may from time to time issue such forward-looking statements, either orally or in writing. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of such plans or strategies, or projections involving anticipated revenues, earnings, unit growth, profit per worksite employee, pricing, operating expenses or other aspects of operating results. We base the forward-looking statements on our expectations, estimates and projections at the time such statements are made. These statements are not guarantees of future performance and involve risks and uncertainties that we cannot predict. In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Therefore, the actual results of the future events described in such forward-looking statements could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are: (i) continued effects of the economic recession and general economic conditions; (ii) regulatory and tax developments and possible adverse application of various federal, state and local regulations; (iii) the ability to secure competitive replacement contracts for health insurance and workers’ compensation contracts at expiration of current contracts; (iv) increases in health insurance costs and workers’ compensation rates and underlying claims trends, health care reform, financial solvency of workers’ compensation carriers and other insurers, state unemployment tax rates, liabilities for employee and client actions or payroll-related claims; (v) failure to manage growth of our operations and the effectiveness of our sales and marketing efforts; (vi) changes in the competitive environment in the PEO industry, including the entrance of new competitors and our ability to renew or replace client companies; (vii) our liability for worksite employee payroll, payroll taxes and benefits costs; (viii) our liability for disclosure of sensitive or private information; (ix) our ability to integrate or realize expected return on our Adjacent Business Strategy, including acquisitions; and (x) an adverse final judgment or settlement of claims against Insperity. These factors are discussed in further detail in Insperity’s filings with the U.S. Securities and Exchange Commission. Any of these factors, or a combination of such factors, could materially affect the results of our operations and whether forward-looking statements we make ultimately prove to be accurate.
Except to the extent otherwise required by federal securities law, we do not undertake any obligation to update our forward-looking statements to reflect events or circumstances after the date they are made or to reflect the occurrence of unanticipated events.
Insperity, Inc.
Page 4
Insperity, Inc.
Summary Financial Information
(in thousands, except per share amounts and statistical data)
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September 30,
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December 31,
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2011
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2010
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(Unaudited)
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Assets
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Cash and cash equivalents
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$ | 169,910 | $ | 234,829 | ||||
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Restricted cash
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42,812 | 41,204 | ||||||
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Marketable securities
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55,394 | 43,367 | ||||||
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Accounts receivable
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162,338 | 142,107 | ||||||
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Prepaid insurance and other current assets
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26,149 | 33,506 | ||||||
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Income taxes receivable
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989 | 1,808 | ||||||
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Deferred income taxes
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1,751 | 1,267 | ||||||
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Total current assets
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459,343 | 498,088 | ||||||
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Property and equipment, net
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88,452 | 76,027 | ||||||
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Prepaid health insurance
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9,000 | 9,000 | ||||||
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Deposits
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49,368 | 54,371 | ||||||
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Goodwill and other intangible assets, net
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28,867 | 21,251 | ||||||
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Other assets
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1,440 | 1,108 | ||||||
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Total assets
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$ | 636,470 | $ | 659,845 | ||||
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Liabilities and Stockholders’ Equity
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Accounts payable
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$ | 2,659 | $ | 3,309 | ||||
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Payroll taxes and other payroll deductions payable
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104,204 | 145,096 | ||||||
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Accrued worksite employee payroll cost
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130,788 | 109,697 | ||||||
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Accrued health insurance costs
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5,209 | 15,419 | ||||||
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Accrued workers’ compensation costs
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45,316 | 42,081 | ||||||
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Accrued corporate payroll and commissions
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22,296 | 23,743 | ||||||
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Other accrued liabilities
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19,778 | 14,264 | ||||||
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Total current liabilities
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330,250 | 353,609 | ||||||
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Accrued workers’ compensation costs
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58,508 | 55,730 | ||||||
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Other accrued liabilities
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— | 1,261 | ||||||
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Deferred income taxes
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9,260 | 8,850 | ||||||
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Total noncurrent liabilities
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67,768 | 65,841 | ||||||
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Stockholders’ equity:
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Common stock
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309 | 309 | ||||||
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Additional paid-in capital
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136,111 | 135,607 | ||||||
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Treasury stock, cost
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(134,697 | ) | (124,464 | ) | ||||
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Accumulated other comprehensive income, net of tax
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52 | 21 | ||||||
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Retained earnings
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236,677 | 228,922 | ||||||
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Total stockholders’ equity
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238,452 | 240,395 | ||||||
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Total liabilities and stockholders’ equity
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$ | 636,470 | $ | 659,845 | ||||
Insperity, Inc.
Page 5
Insperity, Inc.
Summary Financial Information (continued)
(in thousands, except per share amounts and statistical data)
(Unaudited)
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Three months ended
September 30,
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Nine months ended
September 30,
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2011
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2010
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Change
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2011
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2010
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Change
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Operating results:
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Revenues (gross billings of $2.835 billion, $2.444 billion, $8.454 billion and $7.274 billion, less worksite employee payroll cost of $2.363 billion, $2.030 billion, $6.973 billion and $5.990 billion, respectively)
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$ | 471,821 | $ | 414,146 | 13.9 | % | $ | 1,481,105 | $ | 1,284,226 | 15.3 | % | ||||||||||||
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Direct costs:
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Payroll taxes, benefits and workers’ compensation costs
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384,792 | 340,460 | 13.0 | % | 1,219,276 | 1,066,498 | 14.3 | % | ||||||||||||||||
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Gross profit
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87,029 | 73,686 | 18.1 | % | 261,829 | 217,728 | 20.3 | % | ||||||||||||||||
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Operating expenses:
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Salaries, wages and payroll taxes
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39,494 | 34,866 | 13.3 | % | 117,558 | 108,558 | 8.3 | % | ||||||||||||||||
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Stock-based compensation
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2,109 | 1,970 | 7.1 | % | 6,455 | 6,148 | 5.0 | % | ||||||||||||||||
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Commissions
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3,399 | 2,889 | 17.7 | % | 9,750 | 8,494 | 14.8 | % | ||||||||||||||||
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Advertising
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5,235 | 2,605 | 101.0 | % | 18,280 | 11,180 | 63.5 | % | ||||||||||||||||
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General and administrative expenses
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18,912 | 15,546 | 21.7 | % | 57,828 | 47,674 | 21.3 | % | ||||||||||||||||
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Depreciation and amortization
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3,786 | 3,732 | 1.4 | % | 11,335 | 11,266 | 0.6 | % | ||||||||||||||||
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Total operating expenses
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72,935 | 61,608 | 18.4 | % | 221,206 | 193,320 | 14.4 | % | ||||||||||||||||
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Operating income
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14,094 | 12,078 | 16.7 | % | 40,623 | 24,408 | 66.4 | % | ||||||||||||||||
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Other income (expense):
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Interest, net
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245 | 286 | (14.3 | )% | 829 | 744 | 11.4 | % | ||||||||||||||||
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Other, net
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(7,501 | ) | — | — | (7,497 | ) | — | — | ||||||||||||||||
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Income before income tax expense
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6,838 | 12,364 | (44.7 | )% | 33,955 | 25,152 | 35.0 | % | ||||||||||||||||
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Income tax expense
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2,739 | 5,130 | (46.6 | )% | 14,329 | 10,501 | 36.5 | % | ||||||||||||||||
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Net income
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$ | 4,099 | $ | 7,234 | (43.3 | )% | $ | 19,626 | $ | 14,651 | 34.0 | % | ||||||||||||
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Less net income allocated to participating securities
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(120 | ) | (214 | ) | (43.9 | )% | (582 | ) | (428 | ) | 36.0 | % | ||||||||||||
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Net income allocated to common shares
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$ | 3,979 | $ | 7,020 | (43.3 | )% | $ | 19,044 | $ | 14,223 | 33.9 | % | ||||||||||||
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Basic net income per share of common stock
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$ | 0.16 | $ | 0.28 | (42.9 | )% | $ | 0.75 | $ | 0.56 | 33.9 | % | ||||||||||||
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Diluted net income per share of common stock
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$ | 0.16 | $ | 0.28 | (42.9 | )% | $ | 0.74 | $ | 0.56 | 32.1 | % | ||||||||||||
Insperity, Inc.
Page 6
Insperity, Inc.
Summary Financial Information (continued)
(in thousands, except per share amounts and statistical data)
(Unaudited)
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Three months ended
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Nine months ended
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September 30,
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September 30,
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2011
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2010
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Change
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2011
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2010
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Change
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Statistical data:
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Average number of worksite employees paid per month
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118,226 | 108,440 | 9.0 | % | 115,097 | 105,603 | 9.0 | % | ||||||||||||||||
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Revenues per worksite employee per month (1)
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$ | 1,330 | $ | 1,273 | 4.5 | % | $ | 1,430 | $ | 1,351 | 5.8 | % | ||||||||||||
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Gross profit per worksite employee per month
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245 | 227 | 7.9 | % | 253 | 229 | 10.5 | % | ||||||||||||||||
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Operating expenses per worksite employee per month
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206 | 189 | 9.0 | % | 214 | 203 | 5.4 | % | ||||||||||||||||
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Operating income per worksite employee per month
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40 | 37 | 8.1 | % | 39 | 26 | 50.0 | % | ||||||||||||||||
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Net income per worksite employee per month
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12 | 22 | (45.5 | )% | 19 | 15 | 26.7 | % | ||||||||||||||||
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(1) Gross billings of $7,992, $7,513, $8,161 and $7,653 per worksite employee per month, less payroll cost of $6,662, $6,240, $6,731 and $6,302 per worksite employee per month, respectively.
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| Three Months Ended
September 30,
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Nine Months Ended
September 30,
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2011
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2010
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Change
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2011
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2010
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Change
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Payroll cost (GAAP)
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$ | 2,362,941 | $ | 2,030,006 | 16.4 | % | $ | 6,972,806 | $ | 5,989,681 | 16.4 | % | ||||||||||||
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Less: Bonus payroll cost
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174,668 | 105,674 | 65.3 | % | 644,129 | 427,163 | 50.8 | % | ||||||||||||||||
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Non-bonus payroll cost
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$ | 2,188,273 | $ | 1,924,332 | 13.7 | % | $ | 6,328,677 | $ | 5,562,518 | 13.8 | % | ||||||||||||
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Payroll cost per worksite employee (GAAP)
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$ | 6,662 | $ | 6,240 | 6.8 | % | $ | 6,731 | $ | 6,302 | 6.8 | % | ||||||||||||
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Less: Bonus payroll cost per worksite employee
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492 | 325 | 51.4 | % | 621 | 449 | 38.3 | % | ||||||||||||||||
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Non-bonus payroll cost per worksite employee
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$ | 6,170 | $ | 5,915 | 4.3 | % | $ | 6,110 | $ | 5,853 | 4.4 | % | ||||||||||||
Non-bonus payroll cost represents payroll cost excluding the impact of bonus payrolls paid to the company’s worksite employees. Bonus payroll cost varies from period to period, but has no direct impact to the company’s ultimate workers’ compensation costs under the current program. As a result, Insperity management refers to non-bonus payroll cost in analyzing, reporting and forecasting the company’s workers’ compensation costs.
Insperity, Inc.
Page 7
Insperity, Inc.
Summary Financial Information (continued)
(in thousands, except per share amounts and statistical data)
(Unaudited)
GAAP to Non-GAAP Reconciliation Tables
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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2011
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2010
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Change
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2011
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2010
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Change
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Net income (GAAP)
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$ | 4,099 | $ | 7,234 | (43.3 | )% | $ | 19,626 | $ | 14,651 | 34.0 | % | ||||||||||||
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Interest expense
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19 | — | — | 19 | — | — | ||||||||||||||||||
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Income tax expense
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2,739 | 5,130 | (46.6 | )% | 14,329 | 10,501 | 36.5 | % | ||||||||||||||||
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Depreciation and amortization
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3,786 | 3,732 | 1.4 | % | 11,335 | 11,266 | 0.6 | % | ||||||||||||||||
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EBITDA
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10,643 | 16,096 | (33.9 | )% | 45,309 | 36,418 | 24.4 | % | ||||||||||||||||
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Stock-based compensation
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2,109 | 1,970 | 7.1 | % | 6,455 | 6,148 | 5.0 | % | ||||||||||||||||
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Non-operational items
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7,496 | — | — | 7,496 | — | — | ||||||||||||||||||
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Adjusted EBITDA
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$ | 20,248 | $ | 18,066 | 12.1 | % | $ | 59,260 | $ | 42,566 | 39.2 | % | ||||||||||||
EBITDA represents net income computed in accordance with GAAP, plus interest expense, income tax expense, depreciation and amortization expense. Insperity management believes EBITDA is often a useful measure of the company’s operating performance, as it allows for additional analysis of the company’s operating results separate from the impact of taxes and capital and financing transactions on earnings.
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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2011
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2010
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Change
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2011
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2010
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Change
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Net income (GAAP)
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$ | 4,099 | $ | 7,234 | (43.3 | )% | $ | 19,626 | $ | 14,651 | 34.0 | % | ||||||||||||
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Rebranding costs, net of tax
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1,057 | — | — | 5,593 | — | — | ||||||||||||||||||
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Non-operational items, net of tax
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4,493 | — | — | 4,493 | — | — | ||||||||||||||||||
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Adjusted net income
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$ | 9,649 | $ | 7,234 | 33.4 | % | $ | 29,712 | $ | 14,651 | 102.8 | % | ||||||||||||
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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2011
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2010
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Change
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2011
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2010
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Change
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Diluted net income per share of common stock (GAAP)
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$ | 0.16 | $ | 0.28 | (42.9 | )% | $ | 0.74 | $ | 0.56 | 32.1 | % | ||||||||||||
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Rebranding costs, net of tax
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0.04 | — | — | 0.21 | — | — | ||||||||||||||||||
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Non-operational items, net of tax
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0.17 | — | — | 0.17 | — | — | ||||||||||||||||||
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Adjusted diluted net income per share of common stock
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$ | 0.37 | $ | 0.28 | 32.1 | % | $ | 1.12 | $ | 0.56 | 100.0 | % | ||||||||||||
Insperity, Inc.
Page 8
Adjusted net income and adjusted diluted net income per share of common stock represent net income and diluted net income per share computed in accordance with GAAP, excluding the impact of the rebranding initiative and the two non-operational items (loss on aircraft exchange and California settlement), net of tax. Insperity management believes adjusted net income is a useful measure of the company’s operating performance in this period, as it allows for additional analysis of the company’s operating results separate from the impact of these items.
Non-bonus payroll, EBITDA, adjusted net income and adjusted diluted net income per share of common stock are not financial measures prepared in accordance with GAAP and may be different from similar measures used by other companies. Non-bonus payroll, EBITDA, adjusted net income and adjusted diluted net income per share of common stock should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Insperity includes non-bonus payroll, EBITDA, adjusted net income and adjusted diluted net income per share of common stock in this press release because the company believes they are useful to investors in allowing for greater transparency related to the costs incurred under the company’s workers’ compensation program and the company’s operating performance during the periods presented. Investors are encouraged to review the reconciliation of the non-GAAP financial measures used in this press release to their most directly comparable GAAP financial measures as provided in the tables above.