NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2016
(Unaudited)
Insperity, Inc., a Delaware corporation (“Insperity,” “we,” “our,” and “us”), provides an array of human resources (“HR”) and business solutions designed to help improve business performance. Our most comprehensive HR services offerings are provided through our professional employer organization (“PEO”) services, known as Workforce Optimization
®
and Workforce Synchronization
TM
solutions (together, our “PEO HR Outsourcing solutions”), which 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 platform, the Employee Service Center
SM
.
In addition to our PEO HR Outsourcing solutions, we offer a number of other business performance solutions, including Human Capital Management, Payroll Software, Time and Attendance, Performance Management, Organizational Planning, Recruiting Services, Employment Screening, Financial and Expense Management services, Retirement Services and Insurance Services, many of which are offered via desktop applications and cloud-based delivery models. These other products and services are offered separately, as a bundle, or along with our PEO HR Outsourcing solutions.
The Consolidated Financial Statements include the accounts of Insperity and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
The accompanying Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements at and for the year ended
December 31, 2015
. Our Consolidated Balance Sheet at
December 31, 2015
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 Consolidated Balance Sheet at
June 30, 2016
and our Consolidated Statements of Operations for the
three and six
month periods ended
June 30, 2016
and
2015
, our Consolidated Statements of Cash Flows for the
six
month periods ended
June 30, 2016
and
2015
, and our Consolidated Statement of Stockholders’ Equity for the
six
month period ended
June 30, 2016
, 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. Certain prior year amounts have been reclassified to conform to the 2016 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.
Health Insurance Costs
We provide group health insurance coverage to our worksite employees through a national network of carriers, including UnitedHealthcare (“United”), UnitedHealthcare of California, Kaiser Permanente, Blue Shield of California, HMSA BlueCross BlueShield, and Tufts, all of which provide fully insured policies or service contracts.
The policy with United provides the majority of our health insurance coverage. As a result of certain contractual terms, we have accounted for this plan since its inception using a partially self-funded insurance accounting model. Accordingly, we record the costs of the United plan, including an estimate of the incurred claims, taxes and administrative fees (collectively the “Plan Costs”) as benefits expense in our Consolidated Statements of Operations. The estimated incurred claims are based upon: (i) the level of claims processed during the quarter; (ii) estimated completion rates based upon recent claim development patterns under the plan; and (iii) the number of participants in the plan, including both active and COBRA
enrollees. Each reporting period, changes in the estimated ultimate costs resulting from claim trends, plan design and migration, participant demographics and other factors are incorporated into the benefits costs.
Additionally, since the plan’s inception, under the terms of the contract, United establishes cash funding rates
90
days in advance of the beginning of a reporting quarter. If the Plan Costs for a reporting quarter are greater than the premiums paid and owed to United, a deficit in the plan would be incurred and a liability for the excess costs would be accrued in our Consolidated Balance Sheets. On the other hand, if the Plan Costs for the reporting quarter are less than the premiums paid and owed to United, a surplus in the plan would be incurred and we would record an asset for the excess premiums in our Consolidated Balance Sheets. 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
$4.5 million
as of
June 30, 2016
, and is reported as a long-term asset. As of
June 30, 2016
, Plan Costs were less than the net premiums paid and owed to United by
$22.9 million
. As this amount is in excess of the agreed-upon
$9.0 million
surplus maintenance level, the
$13.9 million
difference is included in prepaid insurance, a current asset, in our Consolidated Balance Sheets. The premiums owed to United at
June 30, 2016
were
$23.0 million
, which is included in accrued health insurance costs, a current liability in our Consolidated Balance Sheets. Our benefits costs incurred in the first six months of 2016 included costs of
$3.7 million
for changes in estimated run-off related to prior periods.
Workers’ Compensation Costs
Our workers’ compensation coverage has been provided through an arrangement with the Chubb Group of Insurance Companies (the “Chubb Program”) since 2007. The Chubb Program is fully insured in that Chubb has the responsibility to pay all claims incurred regardless of whether we satisfy our responsibilities. Under the Chubb Program, we bear the economic burden for the first
$1 million
layer of claims per occurrence, as well as a maximum aggregate amount of
$5 million
per policy year for claim amounts that exceed
$1 million
. Chubb bears the economic burden for all claims in excess of these levels.
Because we bear the economic burden for claims up to the levels noted above, such claims, which are the primary component of our workers’ compensation costs, are recorded in the period incurred. Workers’ compensation insurance includes ongoing health care and indemnity coverage whereby claims are paid over numerous years following the date of injury. Accordingly, the accrual of related incurred costs in each reporting period includes estimates, which take into account the ongoing development of claims and therefore requires a significant level of judgment.
We employ a third party actuary to estimate our loss development rate, which is primarily based upon the nature of worksite employees’ job responsibilities, the location of worksite employees, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends. 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. 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 both the
2016
period and the
2015
period was
1.0%
) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated Statements of Operations.
The following table provides the activity and balances related to incurred but not paid workers’ compensation claims:
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
2016
|
|
2015
|
|
|
(in thousands)
|
|
|
|
|
|
Beginning balance, January 1,
|
|
$
|
162,184
|
|
|
$
|
136,088
|
|
Accrued claims
|
|
35,045
|
|
|
32,720
|
|
Present value discount
|
|
(1,274
|
)
|
|
(1,189
|
)
|
Paid claims
|
|
(19,038
|
)
|
|
(19,794
|
)
|
Ending balance
|
|
$
|
176,917
|
|
|
$
|
147,825
|
|
|
|
|
|
|
Current portion of accrued claims
|
|
$
|
41,236
|
|
|
$
|
48,887
|
|
Long-term portion of accrued claims
|
|
135,681
|
|
|
98,938
|
|
|
|
$
|
176,917
|
|
|
$
|
147,825
|
|
The current portion of accrued workers’ compensation costs on our Consolidated Balance Sheets at
June 30, 2016
includes
$2.1 million
of workers’ compensation administrative fees.
As of
June 30, 2016
and
2015
, the undiscounted accrued workers’ compensation costs were
$187.0 million
and
$157.4 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”). The level of claim funds is primarily based upon anticipated worksite employee payroll levels and expected workers’ compensation loss rates, as determined by the insurance carrier. 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 Consolidated Balance Sheets. During the first
six
months of 2016, we
received
$12.8 million
for the return of excess claim funds related to the workers’ compensation program. This resulted in a net
decrease to deposits. As of
June 30, 2016
, we had restricted cash of
$41.2 million
and deposits - workers’ compensation of
$130.7 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 Consolidated Balance Sheets.
New Accounting Pronouncements
We believe we have implemented the accounting pronouncements with a material impact on our financial statements and do not believe there are any new or pending pronouncements that will materially impact our financial position or results of operations, other than discussed below.
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09,
Revenue from Contracts with Customers (Topic 606)
. ASU No. 2014-09 outlines a single comprehensive revenue recognition model for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. Under ASU No. 2014-09, an entity recognizes revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 is effective for annual reporting periods ending after December 15, 2017, and early adoption is not permitted. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU No. 2014-09. We are currently evaluating the guidance and have not determined the impact this standard may have on our Consolidated Financial Statements.
In April 2015, FASB issued ASU No. 2015-05,
Intangibles—Goodwill and Other—Internal-Use Software
providing guidance on the accounting for fees paid by a customer in a cloud computing arrangement, including whether a cloud
computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer is required to account for the software license consistent with the acquisition of other software licenses. Conversely, if the arrangement does not include a software license, the customer should account for the arrangement as a service contract. The guidance is effective for fiscal years beginning after December 15, 2015. The adoption of this guidance did not have a material impact on our consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02,
Leases
. The new standard requires recognition of lease assets and lease liabilities for leases previously classified as operating leases. The guidance is effective for fiscal years beginning after December 15, 2018. We are currently reviewing the guidance and assessing the impact on our consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09,
Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting
. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based compensation payments, including (i) permitting the election of estimated or actual forfeitures for share grants, (ii) allowing excess tax benefits for share-based payments to be recorded as a reduction of income taxes reflected in operating cash flows in place of excess tax benefits currently recorded in equity and as financing activity in the cash flow statement, and (iii) providing for statutory withholding requirements. This guidance is effective for annual and interim reporting periods for public entities beginning after December 15, 2016; however, it can be elected early in any interim or annual period. We have elected to prospectively adopt this pronouncement for calendar year 2016, resulting in the recognition of an income tax benefit of
$1.0 million
, or
$0.05
per diluted share in the first quarter of 2016 related to excess tax benefits from vesting of restricted stock awards. Prior to the adoption of this pronouncement excess tax benefits were required to be reported as an increase in additional paid in capital. Prior periods have not been adjusted.
|
|
|
3.
|
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,
2016
|
|
December 31,
2015
|
|
|
(in thousands)
|
Overnight Holdings
|
|
|
|
|
Money market funds (cash equivalents)
|
|
$
|
233,080
|
|
|
$
|
247,720
|
|
Investment Holdings
|
|
|
|
|
|
|
Money market funds (cash equivalents)
|
|
24,010
|
|
|
26,048
|
|
Marketable securities
|
|
1,881
|
|
|
9,875
|
|
|
|
258,971
|
|
|
283,643
|
|
Cash held in demand accounts
|
|
24,666
|
|
|
19,377
|
|
Outstanding checks
|
|
(10,183
|
)
|
|
(23,607
|
)
|
Total cash, cash equivalents and marketable securities
|
|
$
|
273,454
|
|
|
$
|
279,413
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
271,573
|
|
|
$
|
269,538
|
|
Marketable securities
|
|
1,881
|
|
|
9,875
|
|
Total cash, cash equivalents and marketable securities
|
|
$
|
273,454
|
|
|
$
|
279,413
|
|
Our cash and overnight holdings fluctuate based on the timing of clients’ payroll processing cycles. Included in the cash, cash equivalents and marketable securities at
June 30, 2016
and
December 31, 2015
, are
$121.4 million
and
$185.7 million
, respectively, of funds associated with federal and state income tax withholdings, employment taxes and other payroll deductions, as well as
$100.7 million
and
$17.0 million
in client prepayments, respectively.
We account for our financial assets in accordance with Accounting Standard Codification 820,
Fair Value Measurement
. This standard defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The fair value measurement disclosures are grouped into three levels based on valuation factors:
|
|
•
|
Level 1 - quoted prices in active markets using identical assets
|
|
|
•
|
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
|
|
|
•
|
Level 3 - significant unobservable inputs
|
The following table summarizes the levels of fair value measurements of our financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
|
|
|
(in thousands)
|
|
|
June 30,
2016
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
257,090
|
|
|
$
|
257,090
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Municipal bonds
|
|
1,881
|
|
|
—
|
|
|
1,881
|
|
|
—
|
|
Total
|
|
$
|
258,971
|
|
|
$
|
257,090
|
|
|
$
|
1,881
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
|
|
|
(in thousands)
|
|
|
December 31,
2015
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
273,768
|
|
|
$
|
273,768
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Municipal bonds
|
|
9,875
|
|
|
—
|
|
|
9,875
|
|
|
—
|
|
Total
|
|
$
|
283,643
|
|
|
$
|
273,768
|
|
|
$
|
9,875
|
|
|
$
|
—
|
|
The municipal bond securities valued as Level 2 investments are primarily pre-refunded municipal bonds that are secured by escrow funds containing U.S. Government securities. Our valuation techniques used to measure fair value for these securities during the period consisted primarily of third party pricing services that utilized actual market data such as trades of comparable bond issues, broker/dealer quotations for the same or similar investments in active markets and other observable inputs.
The following is a summary of our available-for-sale marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair Value
|
|
|
|
|
(in thousands)
|
|
|
June 30, 2016
|
|
|
|
|
|
|
|
|
Municipal bonds
|
|
$
|
1,879
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
1,881
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal bonds
|
|
$
|
9,875
|
|
|
$
|
3
|
|
|
$
|
(3
|
)
|
|
$
|
9,875
|
|
As of
June 30, 2016
, the contractual maturities of our marketable securities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
|
|
(in thousands)
|
|
|
|
|
|
Less than one year
|
|
$
|
1,351
|
|
|
$
|
1,351
|
|
One to five years
|
|
528
|
|
|
530
|
|
Total
|
|
$
|
1,879
|
|
|
$
|
1,881
|
|
|
|
|
4.
|
Impairment Charges and Other
|
In the first quarter of 2015, we entered into a plan to sell our two aircraft, and as a result, we recorded impairment and other charges of
$9.8 million
, representing the difference between the carrying value and the estimated fair value of the assets as well as a provision for potential settlement of a Texas sales and use tax assessment. The fair value of assets held for sale of
$13.5 million
was determined based on the estimated selling price less costs incurred to sell and was classified as Level 2 in the fair value hierarchy. In July 2015, we received proceeds, net of selling costs, of
$12.2 million
for both aircraft and recorded an additional
$1.3 million
impairment charge in the second quarter of 2015.
We have a revolving credit facility (the “Facility”), which was increased from
$125 million
to
$200 million
in the first quarter of 2016. The Facility may be further increased to
$250 million
based on the terms and subject to the conditions set forth in the agreement relating to the Facility (the “Credit Agreement”). The Facility is available for working capital and general corporate purposes, including acquisitions, stock repurchases and issuances of letters of credit. 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. In January 2016, we had net borrowings of
$104.4 million
to fund a portion of the purchase price of our modified Dutch auction tender offer. In addition, as of
June 30, 2016
, we had an outstanding
$1.0 million
letter of credit issued under the Facility. As of
June 30, 2016
, our outstanding balance on the Facility was
$104.4 million
.
The Facility matures on
February 6, 2020
. Borrowings under the Facility bear interest at an
alternate base rate
or
LIBOR
, at our option, plus an applicable margin. Depending on our leverage ratio, the applicable margin varies (i) in the case of LIBOR loans, from
2.00%
to
2.75%
and (ii) in the case of
alternate base rate
loans, from
0.00%
to
0.75%
. The alternate base rate is the highest of (i) the prime rate most recently published in The Wall Street Journal, (ii) the federal funds rate plus
0.50%
and (iii) the 30-day LIBOR rate plus
2.00%
. We also pay an unused commitment fee on the average daily unused portion of the Facility at a rate of
0.25%
. The interest rate at
June 30, 2016
was
2.19%
. Interest expense and unused commitment fees are recorded in other income (expense).
The Facility contains both affirmative and negative covenants that we believe are customary for arrangements of this nature. Covenants include, but are not limited to, limitations on our ability to incur additional indebtedness, sell material assets, retire, redeem or otherwise reacquire our capital stock, acquire the capital stock or assets of another business, make investments and pay dividends. 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, 2016
.
During the first
six
months of
2016
, we repurchased or withheld an aggregate of
3.1 million
shares of our common stock, as described below.
Tender Offer for Common Stock
In December 2015, we commenced a modified Dutch auction tender offer to purchase up to
$125 million
in value of our common stock at a price not less than
$43.50
per share and not more than
$50.00
per share. In January 2016, we exercised our right to increase the size of the tender offer by up to 2.0% of our outstanding common stock. The tender offer period expired on January 7, 2016 and on January 13, 2016, we purchased
3,013,531
shares of our common stock at a per share price of
$47.50
and an aggregate price of
$143.1 million
, excluding
$1.1 million
of transaction costs. The shares were immediately canceled and retired.
The tender offer was funded through borrowings of
$104.4 million
under the Facility and the remainder with cash on hand.
Repurchase Program
Our Board of Directors (the “Board”) has authorized a program to repurchase shares of our outstanding common stock (“Repurchase Program”). 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. In May 2016, the Board increased the authorized number of shares to be repurchased under the Repurchase Program by
one million
. During the
six months ended June 30, 2016
,
no
shares were repurchased under the Repurchase Program. As of
June 30, 2016
, we were authorized to repurchase an additional
1,524,332
shares under the Repurchase Program.
Withheld Shares
During the
six
months ended,
June 30, 2016
, we withheld
100,595
shares to satisfy tax withholding obligations for the vesting of restricted stock awards.
Dividends
The Board declared quarterly dividends as follows:
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
(amounts per share)
|
|
|
|
|
|
First quarter
|
|
$
|
0.22
|
|
|
$
|
0.19
|
|
Second quarter
|
|
0.25
|
|
|
0.22
|
|
During the
six months ended June 30, 2016
and
2015
, we paid dividends totaling
$10.0 million
and
$10.4 million
, respectively.
|
|
|
7.
|
Long-Term Incentive Program
|
On March 30, 2015, we adopted the Insperity, Inc. Long-Term Incentive Program (the “LTIP”) under the Insperity, Inc. 2012 Incentive Plan. The LTIP provides for performance-based long-term compensation awards in the form of performance units to certain employees based on the achievement of pre-established performance goals.
Each performance unit represents the right to receive one common share at a future date based on our performance against specified targets. Performance units have a vesting schedule of
three
years. The fair value of each performance unit is the market price of one common share on the date of grant in the case of performance condition awards. In the case of market condition awards, the fair value is determined using a Monte Carlo lattice model approach at the date of grant. The compensation expense for such awards is recognized on a straight-line basis over the vesting term. For performance condition awards, the number of shares expected to be issued is adjusted upward or downward based upon the probability of achievement of the performance targets.
The ultimate number of shares issued and the related compensation cost recognized is based on a comparison of the final performance metrics to the specified targets.
The following is a summary of LTIP award activity for 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Performance Units at Target
|
|
Weighted Average Grant Date Fair Value
|
|
Maximum Shares Eligible to Receive
|
|
|
|
|
|
|
|
Unvested - December 31, 2015
|
|
100,900
|
|
|
$
|
52.80
|
|
|
183,401
|
|
Granted
|
|
118,525
|
|
|
59.13
|
|
|
237,050
|
|
Vested
|
|
—
|
|
|
—
|
|
|
—
|
|
Canceled
|
|
(2,550
|
)
|
|
52.80
|
|
|
(4,635
|
)
|
Unvested - June 30, 2016
|
|
216,875
|
|
|
56.26
|
|
|
415,816
|
|
As of
June 30, 2016
, we estimate
178,770
shares and
127,429
shares will vest with
$5.4 million
and
$6.0 million
in unamortized compensation expense related to the 2015 and 2016 grants, respectively.
We utilize the two-class method to compute net income per share. The two-class method allocates a portion of net income to participating securities, which include unvested awards of share-based payments with non-forfeitable rights to receive dividends. Net income allocated to unvested share-based payments is excluded from net income allocated to common shares. Any undistributed losses resulting from dividends exceeding net income are not allocated to participating securities. Basic 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. 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.
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,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
9,713
|
|
|
$
|
7,314
|
|
|
$
|
42,406
|
|
|
$
|
21,101
|
|
Less distributed and undistributed earnings allocated to participating securities
|
|
(229
|
)
|
|
(179
|
)
|
|
(962
|
)
|
|
(521
|
)
|
Net income allocated to common shares
|
|
$
|
9,484
|
|
|
$
|
7,135
|
|
|
$
|
41,444
|
|
|
$
|
20,580
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
20,869
|
|
|
24,766
|
|
|
20,921
|
|
|
24,741
|
|
Incremental shares from assumed conversions of common stock options
|
|
15
|
|
|
7
|
|
|
10
|
|
|
8
|
|
Adjusted weighted average common shares outstanding
|
|
20,884
|
|
|
24,773
|
|
|
20,931
|
|
|
24,749
|
|
|
|
|
9.
|
Commitments and Contingencies
|
Worksite Employee 401(k) Retirement Plan Class Action Litigation
In December 2015, a class action lawsuit was filed against us and our third party discretionary trustee of the Insperity 401(k) retirement plan 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. This suit generally alleges that the Company’s 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. We believe we
have meritorious defenses 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.
We are a defendant in various other lawsuits and claims arising in the normal course of business. Management believes it has valid defenses in these cases and is defending them vigorously. 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.