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, 2011. For the fourth quarter, the company reported
net income of $10.8 million, a 39.2% increase over the $7.8 million
earned in the 2010 period. Diluted earnings per share increased
40.0% to $0.42 from $0.30 in the 2010 period.
For the year ended Dec. 31, 2011, the company reported net
income of $30.5 million, a 35.8% increase over the $22.4 million
earned in 2010. Diluted earnings per share increased 34.9% to
$1.16, compared to $0.86 in 2010.
“2011 was an outstanding year both financially and operationally
for Insperity,” said Paul J. Sarvadi, Insperity chairman and chief
executive officer. “We exceeded our financial objectives and
successfully implemented a strategic business transformation, which
we expect to be the foundation for dynamic growth and profitability
in the years ahead.”
Fourth Quarter Results
Revenues for the fourth quarter of 2011 increased 13.7% over the
2010 period due to a 9.7% increase in the average number of
worksite employees paid per month and a 3.6% increase in revenues
per worksite employee per month.
Gross profit increased 11.3% to $89.9 million compared to the
fourth quarter of 2010 and included better than expected results
from workers’ compensation and payroll taxes, including a $2.5
million payroll-related tax credit, offset by higher health
insurance costs. The average gross profit per worksite employee per
month increased $4, or 1.7%, to $246 in the fourth quarter of 2011
from $242 in the 2010 period.
Operating expenses increased 7.5% to $73.3 million compared to
$68.2 million in the fourth quarter of 2010, and included $2.1
million associated with the company’s rebranding initiative.
Operating expenses per worksite employee per month decreased $4, or
2.0%, to $200 in the fourth quarter of 2011 from $204 in the 2010
period.
Year End Results
Revenues in 2011 were $2.0 billion, a 14.9% increase over 2010.
Gross profit for the year ended Dec. 31, 2011, increased 17.8% to
$351.8 million. The average gross profit per worksite employee per
month was $251 compared to $232 in 2010.
Operating expenses increased 12.6% to $294.5 million compared to
2010, and included rebranding costs of approximately $11.8 million,
and $9.2 million of expenses associated with acquisitions made in
mid 2010 and early 2011. Operating expenses per worksite employee
per month increased 2.9% to $210 in 2011 from $204 in 2010. The
resulting operating income for the year ended Dec. 31, 2011, was
$57.3 million, a 54.7% increase over 2010.
Other expense includes the previously reported non-operational
expenses of $4.4 million related to the exchange of a corporate
asset and $3.1 million related to the settlement of a dispute with
the Employment Development Department of the State of
California.
Adjusted EBITDA increased 34.6% over 2010 to $82.2 million. The
company returned $40.8 million to stockholders, including dividends
of $15.7 million and the repurchase of just over one million shares
at a cost of $25.1 million. Working capital at Dec. 31, 2011, was
$126.6 million.
“Our 2011 earnings per share, excluding the non-operational
items, increased 54.7% over 2010 to $1.33,” said Douglas S. Sharp,
senior vice-president of finance, chief financial officer and
treasurer. “We are pleased with these results in a year that
included our corporate rebranding and investments in our adjacent
businesses.”
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 2012 and answer questions from investment analysts. To
listen in, call 877-651-0053 and use conference i.d. number
47419880. 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. 47419880, for
one week. The webcast will be archived for one year.
Insperity, a trusted advisor to America’s best businesses for
more than 25 years, provides an array of human resources and
business solutions designed to help improve business performance.
InsperityTM Business Performance Advisors offer the most
comprehensive Workforce OptimizationTM solution in the marketplace
that delivers administrative relief, better benefits, reduced
liabilities and a systematic way to improve productivity.
Additional offerings include MidMarket SolutionsTM, Performance
Management, Expense Management, Time and Attendance, Organizational
Planning, Recruiting Services, Employment Screening, Retirement
Services and Insurance Services. Insperity business performance
solutions support more than 100,000 businesses with over 2 million
employees. With 2011 revenues of $2.0 billion, Insperity operates
in 56 offices throughout the United States. For more information,
visit http://www.insperity.com.
The statements contained herein that are not historical facts
are forward-looking statements within the meaning of the federal
securities laws (Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934). You can
identify such forward-looking statements by the words “expects,”
“intends,” “plans,” “projects,” “believes,” “estimates,” “likely,”
“possibly,” “probably,” “goal,” “opportunity,” “objective,”
“target,” “assume,” “outlook,” “guidance,” “predicts,” “appears,”
“indicator” and similar expressions. Forward-looking statements
involve a number of risks and uncertainties. In the normal course
of business, Insperity, Inc., in an effort to help keep our
stockholders and the public informed about our operations, may from
time to time issue such forward-looking statements, either orally
or in writing. Generally, these statements relate to business plans
or strategies, projected or anticipated benefits or other
consequences of such plans or strategies, or projections involving
anticipated revenues, earnings, unit growth, profit per worksite
employee, pricing, operating expenses or other aspects of operating
results. We base the forward-looking statements on our
expectations, estimates and projections at the time such statements
are made. These statements are not guarantees of future performance
and involve risks and uncertainties that we cannot predict. In
addition, we have based many of these forward-looking statements on
assumptions about future events that may prove to be inaccurate.
Therefore, the actual results of the future events described in
such forward-looking statements could differ materially from those
stated in such forward-looking statements. Among the factors that
could cause actual results to differ materially are: (i) continued
effects of the economic recession and general economic conditions;
(ii) regulatory and tax developments and possible adverse
application of various federal, state and local regulations; (iii)
the ability to secure competitive replacement contracts for health
insurance and workers’ compensation contracts at expiration of
current contracts; (iv) increases in health insurance costs and
workers’ compensation rates and underlying claims trends, health
care reform, financial solvency of workers’ compensation carriers,
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
Adjacent Business strategy, including acquisitions; and (x) an
adverse final judgment or settlement of claims against Insperity.
These factors are discussed in further detail in Insperity’s
filings with the U.S. Securities and Exchange Commission. Any of
these factors, or a combination of such factors, could materially
affect the results of our operations and whether forward-looking
statements we make ultimately prove to be accurate.
Except to the extent otherwise required by federal securities
law, we do not undertake any obligation to update our
forward-looking statements to reflect events or circumstances after
the date they are made or to reflect the occurrence of
unanticipated events.
Insperity, Inc.
Summary Financial Information
(in thousands, except per share amounts
and statistical data)
December 31, December 31,
2011 2010 Assets
Cash and cash equivalents $ 211,208 $ 234,829 Restricted cash
44,737 41,204 Marketable securities 56,987 43,367 Accounts
receivable 170,933 142,107 Prepaid insurance and other current
assets 32,788 33,506 Income taxes receivable 2,902 1,808 Deferred
income taxes
3,233
1,267 Total current assets 522,788 498,088
Property and equipment, net 92,944 76,027 Deposits 63,960
63,371 Other assets
32,567
22,359 Total assets
$
712,259 $ 659,845
Liabilities and Stockholders’ Equity Accounts payable
$ 5,085 $ 3,309 Payroll taxes and other payroll deductions payable
168,652 145,096 Accrued worksite employee payroll expense 130,317
109,697 Accrued health insurance costs 9,427 15,419 Accrued
workers’ compensation costs 46,548 42,081 Other accrued liabilities
36,197 38,007
Total current liabilities 396,226 353,609 Accrued workers’
compensation costs 60,054 55,730 Other accrued liabilities — 1,261
Deferred income taxes
10,772
8,850 Total noncurrent liabilities 70,826
65,841 Stockholders’ equity: Common stock 309 309 Additional
paid-in capital 135,871 135,607 Treasury stock, cost (134,647 )
(124,464 ) Accumulated other comprehensive income, net of tax 24 21
Retained earnings
243,650
228,922 Total stockholders’ equity
245,207 240,395
Total liabilities and stockholders’ equity
$
712,259 $ 659,845
Insperity, Inc.
Summary Financial Information
(continued)
(in thousands, except per share amounts
and statistical data)
Three months ended
December 31,
Year ended
December 31,
2011
2010
Change
2011
2010
Change
(Unaudited)
Operating results: Revenues (gross billings of $3.246 billion,
$2.895 billion, $11.700 billion and $10.169 billion, less worksite
employee payroll cost of $2.751 billion, $2.459 billion, $9.724
billion and $8.449 billion, respectively) $ 495,114 $ 435,526 13.7
% $ 1,976,219 $ 1,719,752 14.9 % Direct costs: Payroll taxes,
benefits and workers’ compensation
costs
405,168 354,718 14.2 % 1,624,444
1,421,216 14.3 % Gross profit 89,946 80,808
11.3 % 351,775 298,536 17.8 % Operating expenses: Salaries, wages
and payroll taxes 37,675 38,343 (1.7 )% 155,233 146,901 5.7 %
Stock-based compensation 2,146 1,978 8.5 % 8,601 8,126 5.8 %
General and administrative expenses 17,517 15,540 12.7 % 75,345
63,214 19.2 % Commissions 3,701 3,387 9.3 % 13,451 11,881 13.2 %
Advertising 8,333 5,267 58.2 % 26,613 16,447 61.8 % Depreciation
and amortization
3,883
3,641 6.6 %
15,218
14,907 2.1 % Total operating expenses
73,255 68,156
7.5 %
294,461
261,476 12.6 % Operating income 16,691 12,652
31.9 % 57,314 37,060 54.7 % Other income (expense): Interest, net
140 247 (43.3 )% 969 991 (2.2 )% Other, net
(11
)
(30 ) (63.3 )%
(7,508 )
(30 ) — Income before income tax expense 16,820
12,869 30.7 % 50,775 38,021 33.5 % Income tax expense
5,976 5,080 17.6 %
20,305 15,581
30.3 % Net income
$ 10,844
$ 7,789 39.2 %
$
30,470 $ 22,440
35.8 %
Less net income allocated to participating
securities
(325
)
(229
)
41.9
%
(908
)
(657
)
38.2
%
Net income allocated to common shares
10,519
7,560 39.1 %
29,562 21,783 35.7 %
Basic net income per share of common
stock
$ 0.42 $
0.30 40.0 %
$ 1.16
$ 0.86 34.9 % Diluted net
income per share of common stock $ 0.42 $ 0.30 40.0 %
$ 1.16 $ 0.86 34.9 %
Insperity, Inc.
Summary Financial Information
(continued)
(in thousands, except per share amounts
and statistical data)
Three months ended Year ended December
31, December 31,
2011
2010
Change
2011
2010
Change
(Unaudited)
Statistical data: Average number of worksite employees paid per
month 122,065 111,249 9.7 % 116,839 107,014 9.2 %
Revenues per worksite employee
per month(1)
$ 1,352 $ 1,305 3.6 % $ 1,410 $ 1,339 5.3 %
Gross profit per worksite employee
per month
246 242 1.7 % 251 232 8.2 %
Operating expenses per worksite
employee per month 200 204 (2.0 )% 210 204 2.9 % Operating income
per worksite employee per month 46 38 21.1 % 41 29 41.4 % Net
income per worksite employee per month 30 23 30.4 % 22 17 29.4 %
(1)
Gross billings of $8,864, $8,675, $8,345
and $7,919 per worksite employee per month, less payroll cost of
$7,512, $7,370, $6,935 and $6,580 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 December
31, December 31,
2011
2010
Change
2011
2010
Change
Payroll cost (GAAP) $ 2,751,184 $ 2,459,803 11.8 % $
9,723,990 $ 8,449,484 15.1 % Less: Bonus payroll cost
415,548 411,903 0.9 %
1,059,677 839,066 26.3 % Non-bonus
payroll cost
$ 2,335,636 $
2,047,900 14.1 %
$ 8,664,313
$ 7,610,418 13.8 % Payroll cost
per worksite employee (GAAP) $ 7,513 $ 7,370 1.9 % $ 6,935 $ 6,580
5.4 % Less: Bonus payroll cost per worksite employee 1,135
1,234 (8.0 )% 755 654 15.4 % Non-bonus payroll
cost per worksite employee $ 6,378 $ 6,136 3.9 % $ 6,180 $ 5,926
4.3 %
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 December 31, December
31,
2011
2010
Change
2011
2010
Change
Net income (loss) (GAAP) $ 10,844 $ 7,789 39.2 % $ 30,470 $ 22,440
35.8 % Interest expense 89
-
-
108
-
-
Income tax expense (benefit) 5,976 5,080 17.6 % 20,305 15,581 30.3
% Depreciation and amortization
3,883
3,641 6.6 %
15,218
14,907 2.1 % EBITDA 20,792 16,510 25.9 % 66,101 52,928
24.9 % Stock-based compensation 2,146 1,978 8.5 % 8,601 8,126 5.8 %
Non-operational items
-
-
-
7,496
-
-
Adjusted EBITDA
$ 22,938 $
18,488 24.1 %
$ 82,198
$ 61,054 34.6 %
EBITDA represents net income computed in accordance with GAAP,
plus interest expense, income tax expense, depreciation and
amortization expense. Insperity management believes EBITDA is often
a useful measure of the company’s operating performance, as it
allows for additional analysis of the company’s operating results
separate from the impact of taxes and capital and financing
transactions on earnings.
Three Months Ended
December 31,
Year Ended
December 31,
2011
2010
Change
2011
2010
Change
Net income (GAAP) $ 10,844 $ 7,789 39.2 % $ 30,470 $ 22,440
35.8 % Non-operational items, net of tax
-
-
-
4,493
-
-
Adjusted net income
$ 10,844
$ 7,789 39.2 %
$
34,963 $ 22,440 55.8 %
Three
Months Ended
December 31,
Year Ended
December 31,
2011
2010
Change
2011
2010
Change
Diluted net income per share of common stock (GAAP) $ 0.42 $
0.30 40.0 % $ 1.16 $ 0.86 34.9 % Non-operational items, net of tax
-
-
-
0.17
-
-
Adjusted diluted net income per share of common stock $ 0.42 $ 0.30
40.0 % $ 1.33 $ 0.86
54.7
%
Adjusted net income and adjusted diluted net income per share of
common stock represent net income and diluted net income per share
computed in accordance with GAAP, excluding the impact of the two
non-operational items (loss on aircraft exchange and California
settlement), net of tax. Insperity management believes adjusted net
income is a useful measure of the company’s operating performance
in this period, as it allows for additional analysis of the
company’s operating results separate from the impact of these
items.
Non-bonus payroll, EBITDA, adjusted 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.
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