What changed in this filing

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Item 1. Financial Statements

2022-04-26 compared with 2021-11-02 · 61 added, 96 removed, 320 unchanged (33% of the section changed)

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands) September 30, 2021 December 31, 2020

(in thousands) March 31, 2022 December 31, 2021

Cash and cash equivalents $ 576,654 $ 575,812

23 unchanged sentences

Other accrued liabilities 86,627 69,303

Income taxes payable 3,784 —

Total current liabilities 1,286,595 1,128,573

2 unchanged sentences

Operating lease liabilities, net of current 62,119 64,192

Other accrued liabilities, net of current 6,293 6,292

Deferred income taxes, net 5,114 —

Total noncurrent liabilities 619,521 626,286

4 unchanged sentences

Retained earnings 604,978 553,581

Total stockholders’ equity 97,006 44,132

Total stockholders’ equity (deficit) 33,961 ( 1,774 )

Total liabilities and stockholders’ equity $ 1,940,077 $ 1,753,085

See accompanying notes.

Insperity | 2021 Third Quarter Form 10-Q

Insperity | 2022 First Quarter Form 10-Q

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF OPERATIONS

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

Three Months Ended March 31,

(in thousands, except per share amounts) 2022 2021

25 unchanged sentences

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

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

Three Months Ended March 31,

(in thousands) 2022 2021

3 unchanged sentences

See accompanying notes.

Insperity | 2021 Third Quarter Form 10-Q

Insperity | 2022 First Quarter Form 10-Q

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2022 2021

22 unchanged sentences

Purchases ( 6,964 ) ( 10,585 )

Proceeds from dispositions — 484

Proceeds from maturities 5,760 10,580

5 unchanged sentences

Dividends paid ( 17,244 ) ( 15,461 )

Borrowings under revolving line of credit — 100,000

Other 799 2,751

3 unchanged sentences

Cash, cash equivalents and restricted cash end of period $ 816,839 $ 734,197

Insperity | 2021 Third Quarter Form 10-Q

Insperity | 2022 First Quarter Form 10-Q

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2022 2021

11 unchanged sentences

See accompanying notes.

Insperity | 2021 Third Quarter Form 10-Q

Insperity | 2022 First Quarter Form 10-Q

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Nine Months Ended September 30, 2021 and 2020

For the Three Months Ended March 31, 2022 and 2021

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

4 unchanged sentences

Stock-based compensation expense — — 9,575 271 — 9,846

Exercise of stock options — — ( 329 ) 569 — 240

Other — — 513 269 — 782

2 unchanged sentences

Net income — — — — 69,884 69,884

Balance at September 30, 2021 55,489 $ 555 $ 104,587 $ ( 645,993 ) $ 637,857 $ 97,006

Balance at March 31, 2022 55,489 $ 555 $ 110,053 $ (681,625) $ 604,978 $ 33,961

Balance at December 31, 2020 55,489 $ 555 $ 95,528 $ (626,984) $ 575,033 $ 44,132

2 unchanged sentences

Stock-based compensation expense — — 10,851 971 — 11,822

Other — — 652 1,565 — 2,217

Dividends paid — — — — ( 46,522 ) ( 46,522 )

Unrealized gain on marketable securities, net of tax

— — — — 19 19

Net income — — — — 133,952 133,952

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

Insperity | 2021 Third Quarter Form 10-Q

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

For the Three Months Ended September 30, 2021 and 2020

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

(in thousands) Shares Amount

Balance at June 30, 2021 55,489 $ 555 $ 94,396 $ ( 635,627 ) $ 627,938 $ 87,262

Purchase of treasury stock, at cost — — — ( 11,234 ) — ( 11,234 )

Issuance of equity based incentive awards and dividend equivalents — — ( 27 ) 28 ( 1 ) —

Stock-based compensation expense — — 9,827 535 — 10,362

Other — — 391 305 — 696

Dividends paid — — — — ( 17,369 ) ( 17,369 )

Unrealized loss on marketable securities, net of tax — — — — ( 7 ) ( 7 )

Net income — — — — 27,296 27,296

Balance at September 30, 2021 55,489 $ 555 $ 104,587 $ ( 645,993 ) $ 637,857 $ 97,006

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 )

Stock-based compensation expense — — 19,552 1,312 — 20,864

Exercise of stock options — — (329) 569 — 240

Other — — 364 318 — 682

2 unchanged sentences

Net income — — — — 61,922 61,922

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

See accompanying notes.

Insperity | 2021 Third Quarter Form 10-Q

Balance at March 31, 2021 55,489 $ 555 $ 81,329 $ (628,391) $ 620,151 $ 73,644

Insperity | 2022 First Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3 unchanged sentences

Our PEO HR Outsourcing solutions encompass a broad range of HR functions, including payroll and employment administration, employee benefits, workers’ compensation, government compliance, performance management, and training and development services, along with our cloud-based human capital management solution, the Insperity Premier TM platform.

In addition to our PEO HR Outsourcing solutions, we offer a comprehensive traditional payroll and human capital management solution, known as Workforce Acceleration TM .

We also offer a number of other business performance solutions, including Comprehensive Traditional Payroll and Human Capital Management, Organizational Planning, Recruiting Services, Employment Screening, Retirement Services and Insurance Services, many of which are offered as a cloud-based software solution.

In addition to our PEO HR Outsourcing solutions, we offer a comprehensive traditional payroll and human capital management solution, known as our Workforce Acceleration TM solution.

We also offer a number of other business performance solutions, including Performance Management, Organizational Planning, Recruiting Services, Employment Screening, Retirement Services, and Insurance Services, many of which are offered as a cloud-based software solution.

These other products or services are offered separately or with our other solutions.

6 unchanged sentences

Our Condensed Consolidated Balance Sheet at December 31, 2021 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 September 30, 2021 and our Consolidated Statements of Operations for the three and nine month periods ended September 30, 2021 and 2020, our Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2021 and 2020 and our Consolidated Statements of Stockholders’ Equity for the three and nine month periods ended September 30, 2021 and 2020, have been prepared by us without audit.

Our Condensed Consolidated Balance Sheet at March 31, 2022 and our Consolidated Statements of Operations for the three month periods ended March 31, 2022 and 2021, our Consolidated Statements of Cash Flows for the three month periods ended March 31, 2022 and 2021 and our Consolidated Statements of Stockholders’ Equity for the three month periods ended March 31, 2022 and 2021, have been prepared by us without audit.

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

Certain prior year amounts have been reclassified to conform to the 2022 presentation.

The results of operations for the interim periods are not necessarily indicative of the operating results for a full year or of future operations.

9 unchanged sentences

(2) estimated completion rates based upon recent claim development patterns under

Insperity | 2021 Third Quarter Form 10-Q

Insperity | 2022 First Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5 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 September 30, 2021, and is included in deposits - health insurance as a long-term asset on our Condensed Consolidated Balance Sheets.

As of September 30, 2021, Plan Costs were less than the net premiums paid and owed to United by $ 15.3 million.

In addition, United requires a deposit equal to approximately one day of claims funding activity, which was $ 6.5 million at March 31, 2022, and is included in deposits - health insurance as a long-term asset on our Condensed Consolidated Balance Sheets.

As of March 31, 2022, Plan Costs were less than the net premiums paid and owed to United by $ 13.3 million.

As this amount is in excess of the agreed-upon $ 9.0 million surplus maintenance level, the $ 4.3 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 September 30, 2021 were $ 33.7 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 2021 included an increase of $ 4.5 million for changes in estimated run-off related to prior periods.

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.

The premiums, including the additional quarterly premiums, owed to United at March 31, 2022 were $ 55.0 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 three months of 2022 included an increase of $ 0.8 million for changes in estimated run-off related to prior periods.

Our benefits costs incurred in the first three months of 2021 included an increase of $ 5.5 million for changes in estimated run-off related to prior periods.

Workers’ Compensation Costs

Our workers’ compensation coverage for our WSEEs in our PEO HR Outsourcing solutions has been provided through an arrangement with the Chubb Group of Insurance Companies or its predecessors (the “Chubb Program”) since 2007.

Our workers’ compensation coverage for our WSEEs in our PEO HR Outsourcing solutions is provided through an arrangement with the Chubb Group of Insurance Companies or its predecessors (the “Chubb Program”).

The Chubb Program is fully insured in that Chubb has the responsibility to pay all claims incurred under the policy regardless of whether we satisfy our responsibilities.

7 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 nine months ended September 30, 2021 and 2020, we reduced accrued workers’ compensation costs by $ 31.4 million and $ 32.4 million, respectively, for changes in estimated losses related to prior reporting periods.

During the three months ended March 31, 2022 and 2021, we reduced accrued workers’ compensation costs by $ 14.9 million and $ 13.2 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 2022 period was 1.5 % and in the 2021 period was 0.5 %) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated Statements of Operations.

Insperity | 2021 Third Quarter Form 10-Q

Insperity | 2022 First Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2022 2021

7 unchanged sentences

Total accrued claims $ 232,317 $ 236,689

The current portion of accrued workers’ compensation costs on our Condensed Consolidated Balance Sheets at September 30, 2021 includes $ 3.6 million of workers’ compensation administrative fees.

As of September 30, 2021 and 2020, the undiscounted accrued workers’ compensation costs were $ 254.5 million and $ 259.4 million, respectively.

The current portion of accrued workers’ compensation costs on our Condensed Consolidated Balance Sheets at March 31, 2022 includes $ 3.9 million of workers’ compensation administrative fees.

As of March 31, 2022 and 2021, the undiscounted accrued workers’ compensation costs were $ 248.0 million and $ 253.2 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.

At September 30, 2021, we had restricted cash of $ 47.8 million and deposits – workers’ compensation of $ 208.2 million.

At March 31, 2022, we had restricted cash of $ 49.4 million and deposits – workers’ compensation of $ 190.8 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 $ 564.6 million and $ 380.8 million at September 30, 2021 and December 31, 2020, respectively, are included in accounts receivable, net on our Condensed Consolidated Balance Sheets.

Revenues that have been recognized but unbilled of $ 655.3 million and $ 490.5 million at March 31, 2022 and December 31, 2021, respectively, are included in accounts receivable, net on our Condensed Consolidated Balance Sheets.

Pursuant to the “practical expedients” provided under Accounting Standards Update 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 | 2021 Third Quarter Form 10-Q

Insperity | 2022 First Quarter Form 10-Q

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 September 30, Nine Months Ended September 30,

(in thousands) 2021 2020 % Change 2021 2020 % Change

Three Months Ended March 31,

(in thousands) 2022 2021 % Change

Northeast $ 449,925 $ 373,629 20.4 %

8 unchanged sentences

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

(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 September 30, 2021 and December 31, 2020 included $ 198.4 million and $ 342.0 million, respectively, of funds associated with federal and state income tax withholdings, employment taxes and other payroll deductions, as well as $ 74.6 million and $ 35.3 million, respectively, in client prepayments.

Our cash, cash equivalents and marketable securities at March 31, 2022 and December 31, 2021 included $ 338.3 million and $ 424.8 million, respectively, of funds associated with federal and state income tax withholdings, employment taxes, and other payroll deductions, as well as $ 117.8 million and $ 20.1 million, respectively, in client prepayments.

Fair Value Measurements

5 unchanged sentences

• Level 3 - significant unobservable inputs

Insperity | 2021 Third Quarter Form 10-Q

Insperity | 2022 First Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 unchanged sentence

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

(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

September 30, 2021

March 31, 2022

Treasury bills $ 6,874 $ — $ ( 18 ) $ 6,856

Municipal bonds 25,837 — ( 83 ) 25,754

Total $ 32,705 $ — $ ( 8 ) $ 32,697

December 31, 2021

1 unchanged sentence

Municipal bonds 26,017 — ( 8 ) 26,009

Total $ 34,524 $ 9 $ ( 4 ) $ 34,529

As of September 30, 2021, the contractual maturities of our marketable securities were as follows:

(in thousands) Amortized Cost Estimated Fair Value

Less than one year $ 31,573 $ 31,566

One to five years 1,132 1,131

Total $ 32,705 $ 32,697

As of March 31, 2022, the contractual maturities of the marketable securities in our portfolio were less than one year.

Fair Value of Other Financial Instruments

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.

As of September 30, 2021, 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 March 31, 2022, 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 | 2021 Third Quarter Form 10-Q

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 other than certain excluded subsidiaries.

At September 30, 2021, 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 March 31, 2022, 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.

Insperity | 2022 First Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 nine month period ended September 30, 2021 was 1.9 %.

The average interest rate for the three month period ended March 31, 2022 was 1.9 %.

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 September 30, 2021.

We were in compliance with all financial covenants under the Credit Agreement at March 31, 2022.

Stockholders' Equity

During the first nine months of 2021, we repurchased or withheld an aggregate of 544,132 shares of our common stock, as described below.

During the first three months of 2022, we repurchased or withheld an aggregate of 308,057 shares of our common stock, as described below.

Repurchase Program

1 unchanged sentence

The purchases may 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 nine months ended September 30, 2021, 253,309 shares were repurchased under the Repurchase Program.

As of September 30, 2021, we were authorized to repurchase an additional 874,828 shares under the Repurchase Program.

During the three months ended March 31, 2022, 209,841 shares were repurchased under the Repurchase Program.

As of March 31, 2022, we were authorized to repurchase an additional 1,493,787 shares under the Repurchase Program.

Withheld Shares

During the nine months ended September 30, 2021, we withheld 290,823 shares to satisfy tax withholding obligations for the vesting of long-term incentive and restricted stock awards.

Insperity | 2021 Third Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the three months ended March 31, 2022, we withheld 98,216 shares to satisfy tax withholding obligations for the vesting of long-term incentive and restricted stock awards.

The Board declared quarterly dividends as follows:

1 unchanged sentence

First quarter $ 0.45 $ 0.40

Second quarter 0.45 0.40

Third quarter 0.45 0.40

During the nine months ended September 30, 2021 and 2020, we paid dividends totaling $ 50.2 million and $ 46.5 million, respectively.

During the three months ended March 31, 2022 and 2021, we paid dividends totaling $ 17.2 million and $ 15.5 million, respectively.

Insperity | 2022 First Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Net Income Per Share

6 unchanged sentences

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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2022 2021

7 unchanged sentences

Adjusted weighted average common shares outstanding 38,693 38,839

Insperity | 2021 Third Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Potentially dilutive securities not included in weighted average share calculation due to anti-dilutive effect 25 —

Commitments and Contingencies

8 unchanged sentences

The Lead Plaintiff filed its opposition to the motion to dismiss on June 10, 2021, and the defendants filed their reply in support of the motion to dismiss on July 12, 2021.

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.

On March 15, 2022, the court granted the defendants’ motion to dismiss with prejudice and the deadline to appeal has passed.

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 | 2021 Third Quarter Form 10-Q

Insperity | 2022 First Quarter Form 10-Q

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