Insperity Announces Fourth Quarter and Full Year Results

Fri Feb 8, 2013 8:00am EST

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* 2012 adjusted EPS increases 26% on 9% revenue growth
* 2012 adjusted EBITDA increases 23% to over $100 million
* $43 million returned to stockholders in 2012 through dividends
* Working capital of $116 million and no debt at Dec. 31, 2012

HOUSTON--(Business Wire)--
Insperity, Inc. (NYSE: NSP), a leading provider of human resources and business
performance solutions for America`s best businesses, today reported results for
the fourth quarter and year ended Dec. 31, 2012. For the fourth quarter, the
company`s adjusted net income was $11.9 million. Adjusted diluted earnings per
share was $0.47, an 11.9% increase over 2011. Adjusted net income excludes an
after-tax non-cash impairment charge of $2.5 million, or $0.10 per share,
associated with a write-down of goodwill related to a 2006 acquisition.
Additionally, there was a $0.03 effect to earnings per share, related to the
accounting treatment associated with the $1.00 per share special dividend paid
in December 2012. Reported fourth quarter net income and earnings per share were
$9.4 million and $0.34, respectively. 

For the year ended Dec. 31, 2012, the company had adjusted diluted earnings per
share of $1.67, a 25.6% increase over 2011. Adjusted results exclude $0.10 per
share related to the impairment charge and $0.01 per share related to the
accounting treatment associated with the special dividend in 2012, and $0.17 per
share for two non-operational items in 2011. Reported 2012 net income was $40.4
million, or $1.56 per share, a 34.5% increase compared to 2011. 

"We are pleased with these strong results for both the quarter and the year,
achieved in spite of the effects of the election and fiscal cliff on our
customer base comprised of highly successful U.S. small businesses," said Paul
J. Sarvadi, Insperity chairman and chief executive officer. "Our plan for growth
in 2013 is to invest in expanding our number of business performance advisors,
leverage opportunities related to health care reform, and accelerate the growth
of our adjacent businesses." 

Fourth Quarter Results

Revenues for the fourth quarter of 2012 increased 7.5% over the fourth quarter
of 2011 due to a 6.0% increase in the average number of worksite employees paid
per month and a 1.5% increase in revenues per worksite employee per month. Gross
profit increased 4.0% over the fourth quarter of 2011 to $93.5 million, as
expected. 

Operating expenses increased 5.9% to $77.6 million compared to the fourth
quarter of 2011. Excluding the $4.2 million impairment charge, operating
expenses increased less than 1.0% to $73.4 million. 

Year-to-Date Results

Revenues in 2012 were $2.2 billion, an increase of 9.2% over 2011. Gross profit
for the year ended Dec. 31, 2012, increased 8.7% to $382.2 million. The average
gross profit per worksite employee per month increased $2, or 0.8%, to $253 in
2012 from $251 in 2011. 

Reported 2012 operating expenses were $314.7 million. Excluding the $4.2 million
impairment charge, operating expenses increased 5.5% over 2011 to $310.5
million. 

Reported operating income for the year ended Dec. 31, 2012, was $67.5 million.
Excluding the impairment charge, operating income was $71.7 million, a 25.1%
increase over 2011. 

Adjusted EBITDA increased 22.8% to $100.9 million compared to 2011. These
results exclude the impairment charge in 2012 and $7.5 million in costs
associated with two non-operational items in 2011. Cash outlays in 2012 included
the repurchase of 595,676 shares at a cost of $16.9 million, including 80,983
shares repurchased in a modified "Dutch auction" tender offer in the fourth
quarter; dividends of $42.7 million, including a special cash dividend of $25.7
million paid in the fourth quarter; and capital expenditures of $17.6 million.
Working capital at Dec. 31, 2012, was $115.7 million. 

"Our strong balance sheet and cash flow have allowed us to continue to invest in
the business while returning significant value to stockholders, including a
$1.00 per share special dividend paid in December," said Douglas S. Sharp,
senior vice-president of finance, chief financial officer and treasurer. "Going
forward, we intend to continue to invest in our growth initiatives, continue our
dividend program, and apply the $47 million balance authorized in our $50
million Dutch tender offer to future share repurchases." 

Insperity will be hosting a conference call today at 10 a.m. ET to discuss these
results, give guidance for the first quarter and full year 2013 and answer
questions from investment analysts. To listen in, call 877-651-0053 and use
conference i.d. number 87449063. 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. 87449063, for one week. The
webcast will be archived for one year. 

Insperity, a trusted advisor to America`s best businesses for more than 26
years, provides an array of human resources and business solutions designed to
help improve business performance. InsperityTM Business Performance Advisors
offer the most comprehensive suite of products and services available in the
marketplace. Insperity delivers administrative relief, better benefits, reduced
liabilities and a systematic way to improve productivity through its premier
Workforce OptimizationTM solution. Additional company offerings include Human
Capital Management, Payroll Services, Time and Attendance, Performance
Management, Organizational Planning, Recruiting Services, Employment Screening,
Financial Services, Expense Management, Retirement Services and Insurance
Services. Insperity business performance solutions support more than 100,000
businesses with over 2 million employees. With 2012 revenues of $2.2 billion,
Insperity operates in 57 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, other insurers or financial institutions, 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 returns on our 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.                                                                                       
 
Summary Financial Information                                                                        
 
(in thousands, except per share amounts and statistical data)                                        
                                                                                                       
                                                         Dec. 31,                  Dec. 31,            
                                                         2012                      2011                
                                                                                                       
 Assets                                                                                                
 Cash and cash equivalents                               $    264,544              $    211,208        
 Restricted cash                                              47,149                    44,737         
 Marketable securities                                        16,904                    56,987         
 Accounts receivable                                          190,386                   170,933        
 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, net                                  93,942                    92,944         
 Prepaid health insurance                                     9,000                     9,000          
 Deposits                                                     67,201                    54,960         
 Goodwill and other intangible assets, net                    23,775                    28,433         
 Other assets                                                 4,817                     4,134          
 Total assets                                            $    750,200              $    712,259        
                                                                                                       
 Liabilities and Stockholders` Equity                                                                  
 Accounts payable                                        $    3,660                $    5,085          
 Payroll taxes and other payroll deductions payable           178,534                   168,652        
 Accrued worksite employee payroll expense                    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 taxes payable                                         4,054                     -              
 Total current liabilities                                    435,759                   396,226        
                                                                                                       
 Accrued workers` compensation costs                          64,536                    60,054         
 Deferred income taxes                                        9,000                     10,772         
 Total noncurrent liabilities                                 73,536                    70,826         
                                                                                                       
 Stockholders` equity:                                                                                 
 Common stock                                                 308                       309            
 Additional paid-in capital                                   133,207                   135,871        
 Treasury stock, cost                                         (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        


                                                                                                                                                                                       
 Insperity, Inc.                                                                                                                                                                       
 
Summary Financial Information (continued)                                                                                                                                            
 
(in thousands, except per share amounts and statistical data)                                                                                                                        
                                                                                                                                                                                       
                                                   Three months ended                                                   Year ended                                                     
                                                   Dec. 31,                                                             Dec. 31,                                                       
                                                   2012                         2011                   Change           2012                       2011                   Change       
 Operating results:                                                                                                                                                                    
 Revenues (gross billings of $3.653 billion,                                                                                                                                           
 $3.246 billion, $12.992 billion and $11.7                                                                                                                                             
 billion, less worksite employee payroll cost                                                                                                                                          
 of $3.121 billion, $2.751 billion, $10.833                                                                                                                                            
 billion and $9.724 billion, respectively)         $    532,438                 $    495,114           7.5    %         $   2,158,824              $   1,976,219          9.2    %     
 Direct costs:                                                                                                                                                                         
 Payroll taxes, benefits and workers`                                                                                                                                                  
 compensation costs                                     438,935                      405,168           8.3    %             1,776,603                  1,624,444          9.4    %     
 Gross profit                                           93,503                       89,946            4.0    %             382,221                    351,775            8.7    %     
 Operating expenses:                                                                                                                                                                   
 Salaries, wages and payroll taxes                      41,405                       37,675            9.9    %             168,807                    155,233            8.7    %     
 Stock-based compensation                               2,429                        2,146             13.2   %             9,814                      8,601              14.1   %     
 Commissions                                            4,216                        3,701             13.9   %             14,515                     13,451             7.9    %     
 Advertising                                            4,585                        8,333             (45.0  )%            21,586                     26,613             (18.9  )%    
 General and administrative expenses                    15,870                       17,517            (9.4   )%            77,564                     75,345             2.9    %     
 Impairment charge                                      4,191                        -                 -                    4,191                      -                  -            
 Depreciation and amortization                          4,914                        3,883             26.6   %             18,250                     15,218             19.9   %     
 Total operating expenses                               77,610                       73,255            5.9    %             314,727                    294,461            6.9    %     
 Operating income                                       15,893                       16,691            (4.8   )%            67,494                     57,314             17.8   %     
 Other income (expense):                                                                                                                                                               
 Interest income, net                                   147                          140               5.0    %             609                        969                (37.2  )%    
 Other, net                                             46                           (11      )        518.2  %             187                        (7,508     )       102.5  %     
 Income before income tax expense                       16,086                       16,820            (4.4   )%            68,290                     50,775             34.5   %     
 Income tax expense                                     6,641                        5,976             11.1   %             27,888                     20,305             37.3   %     
 Net income                                        $    9,445                   $    10,844            (12.9  )%        $   40,402                 $   30,470             32.6   %     
 Less distributed and undistributed earnings                                                                                                                                           
 allocated to participating securities                  (858     )                   (325     )        164.0  %             (1,224     )               (908       )       34.8   %     
 Net income allocated to common shares             $    8,587                   $    10,519            (18.4  )%        $   39,178                 $   29,562             32.5   %     
 Basic net income per share of common stock        $    0.34                    $    0.42              (19.0  )%        $   1.57                   $   1.16               35.3   %     
 Diluted net income per share of                                                                                                                                                       
 common stock                                      $    0.34                    $    0.42              (19.0  )%        $   1.56                   $   1.16               34.5   %     


                                                                                                                                                                         
 Insperity, Inc.                                                                                                                                                         
 
Summary Financial Information (continued)                                                                                                                              
 
(in thousands, except per share amounts and statistical data)                                                                                                          
                                                                                                                                                                         
                                           Three months ended                                                  Year ended                                                
                                           Dec. 31,                                                            Dec. 31,                                                  
                                           2012                         2011                Change             2012                      2011                Change      
                                                                                                                                                                         
 Statistical data:                                                                                                                                                       
 Average number of worksite                                                                                                                                              
 employees paid per month                       129,345                      122,065        6.0    %                125,650                   116,839        7.5   %     
 Revenues per worksite employee                                                                                                                                          
 per month(1)                              $    1,372                   $    1,352          1.5    %           $    1,432                $    1,410          1.6   %     
 Gross profit per worksite employee                                                                                                                                      
 per month                                      241                          246            (2.0   )%               253                       251            0.8   %     
 Operating expenses per worksite                                                                                                                                         
 employee per month                             200                          200            -                       208                       210            (1.0  )%    
 Operating income per worksite                                                                                                                                           
 employee per month                             41                           46             (10.9  )%               45                        41             9.8   %     
 Net income per worksite                                                                                                                                                 
 employee per month                             24                           30             (20.0  )%               27                        22             22.7  %     
                                                                                                                                                                         


 (1)    Gross billings of $9,414, $8,864, $8,617 and $8,345 per worksite employee per month, less payroll cost of $8,042,  
        $7,512, $7,185 and $6,935 per worksite employee per month, respectively.                                           


                                                                                                                                                                
 Insperity, Inc.                                                                                                                                                
 
Summary Financial Information (continued)                                                                                                                     
 
(in thousands, except per share amounts and statistical data)                                                                                                 
 
(Unaudited)                                                                                                                                                   
 
                                                                                                                                                              
 
GAAP to Non-GAAP Reconciliation Tables                                                                                                                        
                                                                                                                                                                
                                     Three months ended                                                Year ended                                               
                                     Dec. 31,                                                          Dec. 31,                                                 
                                     2012                         2011                 Change          2012                     2011                Change      
                                                                                                                                                                
 Payroll cost (GAAP)                 $     3,120,665              $     2,751,184      13.4  %         $    10,832,966          $    9,723,990      11.4  %     
 Less: Bonus payroll cost                  597,854                      415,548        43.9  %              1,326,442                1,059,677      25.2  %     
 Non-bonus payroll cost              $     2,522,811              $     2,335,636      8.0   %         $    9,506,524           $    8,664,313      9.7   %     
                                                                                                                                                                
 Payroll cost per worksite                                                                                                                                      
 employee per month (GAAP)           $     8,042                  $     7,513          7.0   %         $    7,185               $    6,935          3.6   %     
 Less: Bonus payroll cost per                                                                                                                                   
 worksite employee per month               1,541                        1,135          35.8  %              880                      755            16.6  %     
 Non-bonus payroll cost per                                                                                                                                     
 worksite employee per month         $     6,501                  $     6,378          1.9   %         $    6,305               $    6,180          2.0   %     


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.

                                        Three months ended                                                Year ended                                                
                                        Dec. 31,                                                          Dec. 31,                                                  
                                        2012                        2011               Change             2012                      2011               Change       
 Net income (GAAP)                      $    9,445                  $    10,844        (12.9  )%          $    40,402               $    30,470        32.6   %     
 Income tax expense                          6,641                       5,976         11.1   %                27,888                    20,305        37.3   %     
 Interest expense                            89                          89            -                       354                       108           227.8  %     
 Depreciation and amortization               4,914                       3,883         26.6   %                18,250                    15,218        19.9   %     
 EBITDA                                      21,089                      20,792        1.4    %                86,894                    66,101        31.5   %     
 Impairment charge                           4,191                       -             -                       4,191                     -             -            
 Stock-based compensation                    2,429                       2,146         13.2   %                9,814                     8,601         14.1   %     
 Non-operational items                       -                           -             -                       -                         7,496         -            
 Adjusted EBITDA                        $    27,709                 $    22,938        20.8   %           $    100,899              $    82,198        22.8   %     


EBITDA represents net income computed in accordance with generally accepted
accounting principles ("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.

                                            Three Months Ended                                                Year Ended                                              
                                            Dec. 31,                                                          Dec. 31,                                                
                                            2012                        2011               Change             2012                     2011               Change      
                                                                                                                                                                      
 Net income (GAAP)                          $    9,445                  $    10,844        (12.9  )%          $    40,402              $    30,470        32.6  %     
 Impairment charge, net of tax                   2,460                       -             -                       2,460                    -             -           
 Non-operational items, net of tax               -                           -             -                       -                        4,493         -           
 Adjusted net income                        $    11,905                 $    10,844        9.8    %           $    42,862              $    34,963        22.6  %     
                                                                                                                                                                      
                                                                                                                                                                      
                                            Three Months Ended                                                Year Ended                                              
                                            Dec. 31,                                                          Dec. 31,                                                
                                            2012                        2011               Change             2012                     2011               Change      
                                                                                                                                                                      
 Diluted net income per share of                                                                                                                                      
 common stock (GAAP)                        $    0.34                   $    0.42          (19.0  )%          $    1.56                $    1.16          34.5  %     
 Impairment charge, net of tax                   0.10                        -             -                       0.10                     -             -           
 Impact of dividends exceeding                                                                                                                                        
 earnings                                        0.03                        -             -                       0.01                     -             -           
 Non-operational items, net of tax               -                           -             -                       -                        0.17          -           
 Adjusted diluted net income per                                                                                                                                      
 share of common stock                      $    0.47                   $    0.42          11.9   %           $    1.67                $    1.33          25.6  %     
                                                                                                                                                                      


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 a $4.2 million impairment charge associated
with the Performance Management reporting unit in 2012, and two non-operational
items in 2011 (loss on aircraft exchange and California settlement), net of tax.
Under the two-class earnings per share method, the undistributed losses
resulting from dividends exceeding net income are not allocated to participating
securities. 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 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 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
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.

Insperity, Inc.
Investor Relations Contact:
Douglas S. Sharp, 281-348-3232
Senior Vice President of Finance,
Chief Financial Officer and Treasurer
or
News Media Contact:
Jason Cutbirth, 281-312-3085
Senior Vice President of Marketing
jason.cutbirth@insperity.com

Copyright Business Wire 2013

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