What changed in this filing

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Item 1. Financial Statements

2020-11-02 compared with 2020-08-04 · 82 added, 76 removed, 370 unchanged (30% of the section changed)

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands) June 30, 2020 December 31, 2019

(in thousands) September 30, 2020 December 31, 2019

Cash and cash equivalents $ 372,356 $ 367,342

7 unchanged sentences

Property and equipment, net of accumulated depreciation 196,210 147,706

Right-of-use leased assets 57,421 56,886

Right-of-use (“ROU”) leased assets 60,682 56,886

Prepaid health insurance 9,000 9,000

29 unchanged sentences

See accompanying notes.

Insperity | 2020 Second Quarter Form 10-Q 4

Insperity | 2020 Third Quarter Form 10-Q 4

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands, except per share amounts) 2020 2019 2020 2019

25 unchanged sentences

(1) Revenues are comprised of gross billings less worksite employee (“WSEE”) payroll costs as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2020 2019 2020 2019

3 unchanged sentences

See accompanying notes.

Insperity | 2020 Second Quarter Form 10-Q 5

Insperity | 2020 Third Quarter Form 10-Q 5

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands) 2020 2019

32 unchanged sentences

Other 6,302 7,215

Net cash provided by (used in) financing activities 11,943 ( 34,773 )

Net increase in cash, cash equivalents and restricted cash 90,009 20,448

Net cash used in financing activities ( 31,436 ) ( 88,230 )

Net increase (decrease) in cash, cash equivalents and restricted cash 6,705 ( 76,752 )

Cash, cash equivalents and restricted cash beginning of period 592,550 535,474

Cash, cash equivalents and restricted cash end of period $ 599,255 $ 458,722

Insperity | 2020 Second Quarter Form 10-Q 6

Insperity | 2020 Third Quarter Form 10-Q 6

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands) 2020 2019

11 unchanged sentences

See accompanying notes.

Insperity | 2020 Second Quarter Form 10-Q 7

Insperity | 2020 Third Quarter Form 10-Q 7

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Six Months Ended June 30, 2020 and 2019

For the Nine Months Ended September 30, 2020 and 2019

Common Stock Issued Additional Paid-In Capital Treasury Stock Retained Earnings and AOCI Total

10 unchanged sentences

Net income — — — — 133,952 133,952

Balance at June 30, 2020 55,489 $ 555 $ 54,783 $ ( 592,313 ) $ 581,613 $ 44,638

Balance at September 30, 2020 55,489 $ 555 $ 74,598 $ ( 620,638 ) $ 586,124 $ 40,639

Balance at December 31, 2018 55,489 $ 555 $ 36,752 $ ( 357,569 ) $ 397,938 $ 77,676

8 unchanged sentences

Net income — — — — 130,704 130,704

Balance at June 30, 2019 55,489 $ 555 $ 41,009 $ ( 383,830 ) $ 477,155 $ 134,889

Insperity | 2020 Second Quarter Form 10-Q 8

Balance at September 30, 2019 55,489 $ 555 $ 46,401 $ ( 496,917 ) $ 490,949 $ 40,988

Insperity | 2020 Third Quarter Form 10-Q 8

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

For the Three Months Ended June 30, 2020 and 2019

For the Three Months Ended September 30, 2020 and 2019

Common Stock Issued Additional Paid-In Capital Treasury Stock Retained Earnings and AOCI Total

(in thousands) Shares Amount

Balance at March 31, 2020 55,489 $ 555 $ 46,327 $ ( 595,487 ) $ 545,295 $ ( 3,310 )

Balance at June 30, 2020 55,489 $ 555 $ 54,783 $ ( 592,313 ) $ 581,613 $ 44,638

Purchase of treasury stock, at cost — — — ( 29,986 ) — ( 29,986 )

5 unchanged sentences

Net income — — — — 20,009 20,009

Balance at September 30, 2020 55,489 $ 555 $ 74,598 $ ( 620,638 ) $ 586,124 $ 40,639

Balance at June 30, 2019 55,489 $ 555 $ 41,009 $ ( 383,830 ) $ 477,155 $ 134,889

Balance at March 31, 2019 55,489 $ 555 $ 33,833 $ ( 376,097 ) $ 460,903 $ 119,194

Purchase of treasury stock, at cost — — — ( 114,872 ) — ( 114,872 )

2 unchanged sentences

Dividends paid — — — — ( 12,037 ) ( 12,037 )

Unrealized gain on marketable securities, net of tax

— — — — 50 50

Unrealized loss on marketable securities, net of tax — — — — ( 28 ) ( 28 )

Net income — — — — 25,859 25,859

Balance at June 30, 2019 55,489 $ 555 $ 41,009 $ ( 383,830 ) $ 477,155 $ 134,889

Balance at September 30, 2019 55,489 $ 555 $ 46,401 $ ( 496,917 ) $ 490,949 $ 40,988

See accompanying notes.

Insperity | 2020 Second Quarter Form 10-Q 9

Insperity | 2020 Third Quarter Form 10-Q 9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12 unchanged sentences

Our Condensed Consolidated Balance Sheet at December 31, 2019 has been derived from the audited financial statements at that date, but does not include all of the information or footnotes required by GAAP for complete financial statements.

Our Condensed Consolidated Balance Sheet at June 30, 2020 and our Consolidated Statements of Operations for the three and six month periods ended June 30, 2020 and 2019, our Consolidated Statements of Cash Flows for the six month periods ended June 30, 2020 and 2019 and our Consolidated Statements of Stockholders’ Equity for the six month periods ended June 30, 2020 and 2019, have been prepared by us without audit.

Our Condensed Consolidated Balance Sheet at September 30, 2020 and our Consolidated Statements of Operations for the three and nine month periods ended September 30, 2020 and 2019, our Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2020 and 2019 and our Consolidated Statements of Stockholders’ Equity for the nine month periods ended September 30, 2020 and 2019, have been prepared by us without audit.

In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary to present fairly the consolidated financial position, results of operations and cash flows, have been made.

12 unchanged sentences

Each reporting period, changes in the estimated ultimate costs resulting from claim trends, plan design and migration, participant

Insperity | 2020 Second Quarter Form 10-Q 10

Insperity | 2020 Third Quarter Form 10-Q 10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4 unchanged sentences

The terms of the arrangement require us to maintain an accumulated cash surplus in the plan of $ 9.0 million, which is reported as long-term prepaid insurance.

In addition, United requires a deposit equal to approximately one day of claims funding activity, which was $ 6.5 million at June 30, 2020, and is included in deposits - health insurance as a long-term asset on our Condensed Consolidated Balance Sheets.

As of June 30, 2020, Plan Costs were less than the net premiums paid and owed to United by $ 19.5 million.

In addition, United requires a deposit equal to approximately one day of claims funding activity, which was $ 6.5 million at September 30, 2020, and is included in deposits - health insurance as a long-term asset on our Condensed Consolidated Balance Sheets.

As of September 30, 2020, Plan Costs were less than the net premiums paid and owed to United by $ 32.8 million.

As this amount is in excess of the agreed-upon $ 9.0 million surplus maintenance level, the $ 23.8 million difference is included in prepaid insurance, a current asset, in our Condensed Consolidated Balance Sheets.

The premiums, including the additional quarterly premiums, owed to United at June 30, 2020 were $ 23.4 million, which is included in accrued health insurance costs, a current liability in our Condensed Consolidated Balance Sheets.

Our benefits costs incurred in the first six months of 2020 included a reduction of $ 3.0 million for changes in estimated run-off related to prior periods.

Our benefits costs incurred in the first six months of 2019 included a charge of $ 3.5 million for changes in estimated run-off related to prior periods.

The premiums, including the additional quarterly premiums, owed to United at September 30, 2020 were $ 38.3 million, which is included in accrued health insurance costs, a current liability in our Condensed Consolidated Balance Sheets.

Our benefits costs incurred in the first nine months of 2020 included a reduction of $ 1.9 million for changes in estimated run-off related to prior periods.

Our benefits costs incurred in the first nine months of 2019 included a charge of $ 2.9 million for changes in estimated run-off related to prior periods.

Workers’ Compensation Costs

9 unchanged sentences

Each reporting period, changes in the actuarial assumptions resulting from changes in actual claims experience and other trends are incorporated into our workers’ compensation claims cost estimates.

During the six months ended June 30, 2020 and 2019, we reduced accrued workers’ compensation costs by $ 22.2 million and $ 19.0 million, respectively, for changes in estimated losses related to prior reporting periods.

During the nine months ended September 30, 2020 and 2019, we reduced accrued workers’ compensation costs by $ 32.4 million and $ 26.0 million, respectively, for changes in estimated losses related to prior reporting periods.

Workers’ compensation cost estimates are discounted to present value at a rate based upon the U.S.

Treasury rates that correspond with the weighted average estimated claim payout period (the average discount rate utilized in the 2020 period was 0.7% and in the 2019 period was 2.0%) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated Statements of Operations.

Insperity | 2020 Second Quarter Form 10-Q 11

Insperity | 2020 Third Quarter Form 10-Q 11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table provides the activity and balances related to incurred but not paid workers’ compensation claims:

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands) 2020 2019

7 unchanged sentences

Total accrued claims $ 241,512 $ 235,640

The current portion of accrued workers’ compensation costs on our Condensed Consolidated Balance Sheets at June 30, 2020 includes $ 3.4 million of workers’ compensation administrative fees.

As of June 30, 2020 and 2019, the undiscounted accrued workers’ compensation costs were $ 261.4 million and $ 250.9 million, respectively.

The current portion of accrued workers’ compensation costs on our Condensed Consolidated Balance Sheets at September 30, 2020 includes $ 2.7 million of workers’ compensation administrative fees.

As of September 30, 2020 and 2019, the undiscounted accrued workers’ compensation costs were $ 259.4 million and $ 255.3 million, respectively.

At the beginning of each policy period, the workers’ compensation insurance carrier establishes monthly funding requirements comprised of premium costs and funds to be set aside for payment of future claims (“claim funds”).

1 unchanged sentence

Monies funded into the program for incurred claims expected to be paid within one year are recorded as restricted cash, a short-term asset, while the remainder of claim funds are included in deposits – workers’ compensation, a long-term asset in our Condensed Consolidated Balance Sheets.

During the first six months of 2020, we received $ 24.8 million for the return of excess claim funds related to the workers’ compensation program, which resulted in a net decrease to deposits – workers’ compensation.

During the first six months of 2019, we funded a collateral deposit of $6.4 million for policy years prior to 2017, which increased deposits – workers’ compensation.

At June 30, 2020, we had restricted cash of $ 45.2 million and deposits – workers’ compensation of $ 177.9 million.

During the first nine months of 2020 and 2019, we received $ 24.8 million and $ 16.7 million, respectively, for the return of excess claim funds related to the workers’ compensation program, which resulted in a decrease to deposits – workers’ compensation.

At September 30, 2020, we had restricted cash of $ 45.3 million and deposits – workers’ compensation of $ 181.6 million.

Our estimate of incurred claim costs expected to be paid within one year is included in short-term liabilities, while our estimate of incurred claim costs expected to be paid beyond one year is included in long-term liabilities on our Condensed Consolidated Balance Sheets.

8 unchanged sentences

Customers are invoiced concurrently with each periodic payroll of its WSEEs.

Revenues that have been recognized but unbilled of $ 463.1 million and $ 448.1 million at June 30, 2020 and December 31, 2019, respectively, are included in accounts receivable, net on our Condensed Consolidated Balance Sheets.

Revenues that have been recognized but unbilled of $ 520.9 million and $ 448.1 million at September 30, 2020 and December 31, 2019, respectively, are included in accounts receivable, net on our Condensed Consolidated Balance Sheets.

Pursuant to the “practical expedients” provided under Accounting Standards Update (“ASU”) No 2014-09, we expense sales commissions when incurred because the terms of our contracts generally are cancellable by either party with a 30-day notice.

These costs are recorded in commissions in our Consolidated Statements of Operations.

Insperity | 2020 Second Quarter Form 10-Q 12

Insperity | 2020 Third Quarter Form 10-Q 12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Our revenue for our PEO HR Outsourcing solutions by geographic region and for our other products and services offerings are as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2020 2019 % Change 2020 2019 % Change

12 unchanged sentences

As such, we generally do not require collateral.

As of June 30, 2020, allowance for bad debts was immaterial.

As of September 30, 2020, allowance for bad debts was immaterial.

Cash, Cash Equivalents and Marketable Securities

The following table summarizes our cash and investments in cash equivalents and marketable securities held by investment managers and overnight investments:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

(in thousands) Cash & Cash Equivalents Marketable Securities Total Cash & Cash Equivalents Marketable Securities Total

5 unchanged sentences

Our cash and overnight holdings fluctuate based on the timing of clients’ payroll processing cycles.

Our cash, cash equivalents and marketable securities at June 30, 2020 and December 31, 2019 included $ 190.9 million and $ 234.6 million, respectively, of funds associated with federal and state income tax withholdings, employment taxes and other payroll deductions, as well as $ 31.5 million and $ 59.6 million, respectively, in client prepayments.

Our cash, cash equivalents and marketable securities at September 30, 2020 and December 31, 2019 included $ 147.1 million and $ 234.6 million, respectively, of funds associated with federal and state income tax withholdings, employment taxes and other payroll deductions, as well as $ 46.5 million and $ 59.6 million, respectively, in client prepayments.

Fair Value Measurements

2 unchanged sentences

The fair value measurement disclosures are grouped into three levels based on valuation factors:

Insperity | 2020 Second Quarter Form 10-Q 13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

• Level 1 - quoted prices in active markets using identical assets

Insperity | 2020 Third Quarter Form 10-Q 13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

• 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

2 unchanged sentences

The following table summarizes the levels of fair value measurements of our financial assets:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

(in thousands) Total Level 1 Level 2 Total Level 1 Level 2

8 unchanged sentences

(in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

June 30, 2020

September 30, 2020

Treasury bills $ 10,410 $ 1 $ — $ 10,411

4 unchanged sentences

Total $ 34,716 $ 13 $ ( 1 ) $ 34,728

As of June 30, 2020, the contractual maturities of our marketable securities were as follows:

As of September 30, 2020, the contractual maturities of our marketable securities were as follows:

(in thousands) Amortized Cost Estimated Fair Value

4 unchanged sentences

The carrying amounts of cash, cash equivalents, restricted cash, accounts receivable, deposits and accounts payable approximate their fair values due to the short-term maturities of these instruments.

Insperity | 2020 Second Quarter Form 10-Q 14

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2020, the carrying value of borrowings under our revolving credit facility approximates fair value and was classified as Level 2 in the fair value hierarchy.

As of September 30, 2020, the carrying value of borrowings under our revolving credit facility approximates fair value and was classified as Level 2 in the fair value hierarchy.

Please read Note 5, “Long-Term Debt,” for additional information.

Insperity | 2020 Third Quarter Form 10-Q 14

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Long-Term Debt

3 unchanged sentences

Our obligations under the Facility are secured by 65 % of the stock of our captive insurance subsidiary and are guaranteed by all of our domestic subsidiaries.

At June 30, 2020, our outstanding balance on the Facility was $ 369.4 million, and we had an outstanding $ 1.0 million letter of credit issued under the Facility, resulting in an available borrowing capacity of $ 129.6 million.

At September 30, 2020, our outstanding balance on the Facility was $ 369.4 million, and we had an outstanding $ 1.0 million letter of credit issued under the Facility, resulting in an available borrowing capacity of $ 129.6 million.

The Facility matures on September 13, 2024.

3 unchanged sentences

We also pay an unused commitment fee on the average daily unused portion of the Facility at a rate of 0.25 % per year.

The average interest rate for the six month period ended June 30, 2020 was 2.82 %.

The average interest rate for the nine month period ended September 30, 2020 was 2.52 %.

Interest expense and unused commitment fees are recorded in other income (expense).

3 unchanged sentences

In addition, the Credit Agreement requires us to comply with financial covenants limiting our total funded debt, minimum interest coverage ratio and maximum leverage ratio.

We were in compliance with all financial covenants under the Credit Agreement at June 30, 2020.

We were in compliance with all financial covenants under the Credit Agreement at September 30, 2020.

Stockholders' Equity

During the first six months of 2020, we repurchased or withheld an aggregate of 878,884 shares of our common stock, as described below.

During the first nine months of 2020, we repurchased or withheld an aggregate of 1,336,884 shares of our common stock, as described below.

Repurchase Program

1 unchanged sentence

The purchases are to be made from time to time in the open market or directly from stockholders at prevailing market prices based on market conditions and other factors.

During the six months ended June 30, 2020, 728,000 shares were repurchased under the Repurchase Program.

As of June 30, 2020, we were authorized to repurchase an additional 685,833 shares under the Repurchase Program.

During the nine months ended September 30, 2020, 1,186,000 shares were repurchased under the Repurchase Program.

As of September 30, 2020, we were authorized to repurchase an additional 227,833 shares under the Repurchase Program.

Withheld Shares

During the six months ended June 30, 2020, we withheld 150,884 shares to satisfy tax withholding obligations for the vesting of long-term incentive and restricted stock awards.

During the nine months ended September 30, 2020, we withheld 150,884 shares to satisfy tax withholding obligations for the vesting of long-term incentive and restricted stock awards.

The Board declared quarterly dividends as follows:

2 unchanged sentences

Second quarter 0.40 0.30

Insperity | 2020 Second Quarter Form 10-Q 15

Third quarter 0.40 0.30

Insperity | 2020 Third Quarter Form 10-Q 15

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the six months ended June 30, 2020 and 2019, we paid dividends totaling $ 31.1 million and $ 24.7 million, respectively.

During the nine months ended September 30, 2020 and 2019, we paid dividends totaling $ 46.5 million and $ 36.8 million, respectively.

On May 21, 2020, the Board declared a dividend of one right (“Right”) for each outstanding share of common stock to common stockholders of record at the close of business on June 1, 2020 (the “Rights Plan”).

Each Right entitles the registered holder to purchase from us a unit consisting of one one-hundredth of a share (a “Fractional Share”) of Series A Junior Participating Preferred Stock, par value $0.01 per share, at a purchase price of $ 255.00 per Fractional Share, subject to adjustment.

Each Right, if and when it becomes exercisable, entitles the registered holder to purchase from us one unit consisting of one one-hundredth of a share of Series A Junior Participating Preferred Stock, par value $0.01 per share.

Initially, the Rights are attached to all outstanding shares of our common stock.

The Rights will be separate from our common stock and a “Distribution Date” will occur, with certain exceptions, upon the earlier of (i) ten days following a public announcement that a person or group of affiliated or associated persons (an “Acquiring Person”) has acquired, or obtained the right to acquire, beneficial ownership of 10% (or 20% in the case of a “13G Investor,” as defined in the Rights Plan) or more of the outstanding shares of our common stock, or (ii) ten business days following the commencement of a tender offer or exchange offer that would result in a person’s becoming an Acquiring Person.

The Rights are not exercisable until the Distribution Date and will expire at the close of business on May 20, 2021, unless earlier redeemed or exchanged by us.

If the rights become exercisable, each holder other than the Acquiring Person (and certain related parties) will be entitled to acquire shares of our common stock at a 50% discount or we may exchange each right held by such holders for one share of common stock.

The Rights are not currently exercisable and the Rights Plan will expire at the close of business on May 20, 2021 , unless the Rights are earlier redeemed or exchanged by us.

Incentive Plans

13 unchanged sentences

Diluted net income per share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the period, plus the dilutive effect of outstanding stock options.

Insperity | 2020 Second Quarter Form 10-Q 16

Insperity | 2020 Third Quarter Form 10-Q 16

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the net income allocated to common shares and the basic and diluted shares used in the net income per share computations:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2020 2019 2020 2019

10 unchanged sentences

Worksite Employee 401(k) Retirement Plan Class Action Litigation

In December 2015, a class action lawsuit was filed against us and a third-party who served as the discretionary trustee of the Insperity 401(k) retirement plan that is available to eligible worksite employees (the “Plan”) in the United States District Court for the Northern District of Georgia, Atlanta Division, on behalf of Plan participants.

In December 2015, a class action lawsuit was filed against us and a third-party who served as the discretionary trustee (the “Co-Defendant”) of the Insperity 401(k) retirement plan that is available to eligible worksite employees (the “Plan”) in the United States District Court for the Northern District of Georgia, Atlanta Division, on behalf of Plan participants.

The suit generally alleges the third-party discretionary trustee of the Plan and Insperity breached their fiduciary duties to plan participants by selecting an Insperity subsidiary to serve as the recordkeeper for the Plan, by causing participants in the Plan to pay excessive recordkeeping fees to the Insperity subsidiary, by failing to monitor other fiduciaries, and by making imprudent investment choices.

1 unchanged sentence

On March 28, 2019, the court partially granted Insperity’s motion for summary judgment, resulting in the dismissal of the claims concerning allegations of excessive recordkeeping fees.

The court denied plaintiffs’ request for a jury trial and set a bench trial, which was held from March 2, 2020 to March 13, 2020.

At trial, plaintiffs alleged damages up to approximately $ 146 million against all defendants.

All parties filed proposed findings of fact and conclusions of law on June 15, 2020, and we are now awaiting judgment from the court.

We believe we presented meritorious defenses, and we intend to continue to vigorously defend this litigation in the post-trial proceedings.

As a result of uncertainty regarding the outcome of this matter, no provision has been made in the accompanying Consolidated Financial Statements.

The court denied the plaintiffs’ request for a jury trial and set a bench trial, which was held from March 2, 2020 to March 13, 2020.

At trial, the plaintiffs alleged damages up to approximately $ 146 million against all defendants.

All parties filed proposed findings of fact and conclusions of law on June 15, 2020.

On September 18, 2020, the plaintiffs and Co-Defendant informed the court that they reached an agreement in principle to settle the entire case, including a full and final release of all claims against Insperity.

Insperity did not participate in the settlement discussions and will make no financial contribution to the settlement.

In connection with the settlement, the plaintiffs and Co-Defendant filed a motion to extend the class period to March 31, 2019, which the court granted.

The court has also granted preliminary approval of the settlement and has set the final approval hearing on March 5, 2021.

As a result of the uncertainty regarding the outcome of this matter and the subsequent settlement agreement that, if approved by the court, will end the case with no financial contribution from Insperity, no provision has been made in the accompanying Consolidated Financial Statements.

Securities Class Action Lawsuit

In July 2020, the Building Trades Pension Fund of Western Pennsylvania, individually and on behalf of all others similarly situated, filed a federal securities class action against us and certain officers in the United States District Court for the Southern District of New York.

In July 2020, a federal securities class action was filed against us and certain of our officers in the United States District Court for the Southern District of New York.

The name of the case is Building Trades Pension Fund of Western Pennsylvania v.

Insperity, Inc., et al., Case No.

1:20-cv-05635-NRB.

On October 23, 2020, the court issued an order appointing Oakland County Employees’ Retirement System and Oakland County Voluntary Employees’ Beneficiary Association Trust as lead plaintiff.

The complaint alleges that we made materially false and misleading statements regarding our business and operations in violation of the federal securities laws and seeks unspecified damages, the payment of reasonable attorneys’ fees, expert fees and other costs, and such other relief that may be deemed proper.

We believe these allegations are without merit, and we intend to vigorously defend this litigation.

We believe the allegations in the action are without merit, and we intend to vigorously defend this litigation.

As a result of uncertainty regarding the outcome of this matter, no provision has been made in the accompanying Consolidated Financial Statements.

Insperity | 2020 Third Quarter Form 10-Q 17

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Litigation

2 unchanged sentences

While the results of litigation cannot be predicted with certainty, management believes the final outcome of such litigation will not have a material adverse effect on our financial position or results of operations.

Insperity | 2020 Second Quarter Form 10-Q 17

Insperity | 2020 Third Quarter Form 10-Q 18

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements