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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K(Mark One)ýAnnual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the fiscal year ended December 31, 2014.oroTransition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the transition period from toCommission File No. 1-13998Insperity, Inc.(Exact name of registrant as specified in its charter)Delaware(State or other jurisdiction of incorporation or organization)76-0479645(I.R.S. Employer Identification No.)19001 Crescent Springs DriveKingwood, Texas(Address of principal executive offices)77339(Zip Code)Registrant’s Telephone Number, Including Area Code: (281) 358-8986Securities Registered Pursuant to Section 12(b) of the Act:Common Stock, par value 0.01 per shareRights to Purchase Series A Junior Participating PreferredStockNew York Stock ExchangeNew York Stock Exchange(Title of class)(Name of Exchange on Which Registered)Securities Registered Pursuant to Section 12(g) of the Act: NONEIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ý No oIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yes o No ýIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required tofile such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any,every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment to this Form 10-K. ýIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, ora smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company”in Rule 12b-2 of the Exchange Act.Large accelerated filer xNon-accelerated filer o (Do not check if a smaller reporting company)Accelerated filer oSmaller reporting company oIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o No ýAs of February 3, 2015, 25,338,512 shares of the registrant’s common stock, par value 0.01 per share, wereoutstanding. As of the last business day of the registrant’s most recently completed second quarter, the aggregate market valueof the common stock held by non-affiliates (based upon the June 30, 2014, closing price of the common stock as reported by theNew York Stock Exchange) was approximately 749 million.DOCUMENTS INCORPORATED BY REFERENCEPart III information is incorporated by reference from the proxy statement for the 2015 annual meeting ofstockholders, which the registrant intends to file within 120 days of the end of the fiscal year.
TABLE OF CONTENTSPart IItem 1.Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2Item 1A.Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18Item 1B.Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23Item 2.Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23Item 3.Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24Item S-K 401(b). Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24Part IIItem 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases ofEquity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26Item 6.Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations. . . . . . .30Item 7A.Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46Item 8.Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . .47Item 9A.Controls and Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47Item 9B.Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47Part IIIItem 10.Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48Item 11.Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48Item 12.Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48Item 13.Certain Relationships and Related Transactions, and Director Independence. . . . . . . . . . . . . . . . . .48Item 14.Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48Part IVItem 15.Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
PART IUnless otherwise indicated, “Insperity,” “we,” “our” and “us” are used in this annual report to refer to Insperity, Inc.and its consolidated subsidiaries. This annual report contains forward-looking statements within the meaning of Section 27A ofthe Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify such forward-lookingstatements by the words “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “likely,” “possibly,” “probably,”“goal,” “opportunity,” “objective,” “target,” “assume,” “outlook,” “guidance,” “predicts,” “appears,” “indicator” and similarexpressions. In the normal course of business, in an effort to help keep our stockholders and the public informed about ouroperations we may, from time to time, issue such forward-looking statements, either orally or in writing. Generally, thesestatements relate to business plans or strategies, projected or anticipated benefits or other consequences of such plans orstrategies, or projections involving anticipated revenues, earnings or other operating results. We base the forward-lookingstatements on our current expectations, estimates and projections. We caution you that these statements are not guarantees offuture performance and involve risks, uncertainties and assumptions that we cannot predict. In addition, we have based manyof these forward-looking statements on assumptions about future events that may prove to be inaccurate. Therefore, the actualresults of the future events described in such forward-looking statements in this annual report, or elsewhere, could differmaterially from those stated in such forward-looking statements. Among the factors that could cause actual results to differmaterially are the risks and uncertainties discussed in this annual report, including, without limitation, factors discussed in Item1, “Business,” Item 1A, “Risk Factors,” and Item 7, “Management’s Discussion and Analysis of Financial Condition andResults of Operations.”ITEM 1. BUSINESS.GeneralInsperity, Inc., (“Insperity”) provides an array of human resources (“HR”) and business solutions designed to helpimprove business performance. Since our formation 28 years ago, we have evolved from being solely a professional employerorganization (“PEO”), an industry we pioneered, to our current position as a comprehensive business performance solutionsprovider. We were organized as a corporation in 1986 and have provided PEO services since inception.Our long-term strategy is to provide the best small and medium-sized businesses in the United States with ourspecialized human resources service offering and to leverage our buying power and expertise to provide additional valuableservices to clients. Our most comprehensive HR services offerings are provided through our Workforce Optimization andWorkforce Synchronization solutions (together, our “PEO HR Outsourcing solutions”), which encompass a broad range ofhuman resources functions, including payroll and employment administration, employee benefits, workers’ compensation,government compliance, performance management and training and development services. Our Workforce Optimizationsolution is our most comprehensive HR outsourcing solution and is our primary offering. Our Workforce Synchronizationsolution, which is generally offered only to our mid-market client segment, is a lower cost offering with a longer commitmentthat includes the same compliance and administrative services as our Workforce Optimization solution and makes available, foran additional fee, the strategic HR products and organizational development services that are included with our WorkforceOptimization solution.In addition to our PEO HR Outsourcing solutions, we offer a number of other business performance solutions,including Human Capital Management, Payroll Services, Time and Attendance, Performance Management, OrganizationalPlanning, Recruiting Services, Employment Screening, Financial and Expense Management Services, Retirement Services andInsurance Services (collectively “Strategic Businesses” and formerly known as “Adjacent Businesses”), many of which areoffered via desktop applications and cloud-based delivery models. These other products and services are offered separately, asa bundle or along with our PEO HR Outsourcing solutions.Our PEO HR Outsourcing solutions are designed to improve the productivity and profitability of small and mediumsized businesses. These solutions relieve business owners and key executives of many employer-related administrative andregulatory burdens, which enables them to focus on the core competencies of their businesses. Our PEO HR Outsourcingsolutions also promote employee performance through human resources management techniques designed to improveemployee satisfaction. We provide our PEO HR Outsourcing solutions by entering into a Client Service Agreement (“CSA”),pursuant to which we and our client act as co-employers of the employees who work at the client’s worksite (“worksiteemployees”). Under the CSA, we assume responsibility for personnel administration and assist our clients in complying withemployment-related governmental regulations, while the client retains the employees’ services in its business and remains theemployer for various other purposes. We charge a comprehensive service fee (“comprehensive service fee” or “gross billing”),which is invoiced concurrently with the processing of payroll for the worksite employees of the client. The comprehensive-2-
service fee consists of the payroll of our worksite employees plus an additional amount reflected as a percentage of the payrollcost of the worksite employees.We accomplish the objectives of our PEO HR Outsourcing solutions through a “high-touch/high-tech” approach toservice delivery. In advisory areas, such as recruiting, employee performance management and employee training, we employa high-touch approach designed to ensure that our clients receive the personal attention and expertise needed to create acustomized human resources solution. For transactional processing, we employ a high-tech approach that provides secure,convenient information exchange among Insperity, our clients and our worksite employees, creating efficiencies for all parties.The primary component of the high-tech portion of our strategy is the Employee Service CenterSM (“ESC”). The ESC is ourcloud-based PEO HR Outsourcing solutions portal, which is designed to provide automated, personalized PEO HR Outsourcingsolutions to our clients and worksite employees.As of December 31, 2014, we had 57 offices, including 48 PEO HR Outsourcing solutions sales offices in 25 markets.In addition, we had four regional service centers along with human resources and client service personnel located in a majorityof our 25 sales markets, which serviced an average of 136,764 worksite employees per month in the fourth quarter of 2014.Our service centers coordinate PEO HR Outsourcing solutions for clients on a regional basis and localized face-to-face humanresources services.Our principal executive offices are located at 19001 Crescent Springs Drive, Kingwood, Texas 77339. Our telephonenumber at that address is (281) 358-8986 and our website address is insperity.com. Our stock is traded on the New York StockExchange under the symbol “NSP.” We file or furnish periodic reports with the Securities and Exchange Commission (“SEC”),including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and if applicable,amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934.Through the investor relations section of our website, we make available electronic copies of the documents that we file orfurnish to the SEC, the charters of the committees of our Board of Directors and other documents related to our corporategovernance, including our Code of Conduct. Access to these electronic filings is available free of charge as soon as reasonablypracticable after filing or furnishing them to the SEC. Printed copies of our committee charters or other governance documentsand filings can be requested by writing to our corporate secretary at the address on the cover of this report.PEO IndustryThe PEO industry began to evolve in the early 1980s largely in response to the burdens placed on small and mediumsized employers by an increasingly complex legal and regulatory environment. While various service providers were availableto assist these businesses with specific tasks, PEOs emerged as providers of a more comprehensive range of services relating tothe employer/employee relationship. In a PEO arrangement, the PEO assumes certain aspects of the employer/employeerelationship as defined in the contract between the PEO and its client. Because PEOs provide employer-related services to alarge number of employees, they can achieve economies of scale that allow them to perform employment-related functionsmore efficiently, provide a greater variety of employee benefits, and devote more attention to human resources managementthan a client can individually.We believe the key factors driving demand for PEO services include: the focus on growth and productivity of the small and medium-sized business community in the United States,utilizing outsourcing to concentrate on core competenciesthe need to provide competitive health care and related benefits to attract and retain employeesthe increasing costs associated with health and workers’ compensation insurance coverage, workplace safetyprograms, employee-related complaints and litigationcomplex regulation of employment issues and the related costs of compliance, including the allocation of time andeffort to such functions by owners and key executivesA significant factor in the development of the PEO industry has been increasing recognition and acceptance of PEOsand the co-employer relationship by federal and state governmental authorities. Insperity and other industry leaders, in concertwith the National Association of Professional Employer Organizations (“NAPEO”), have worked with the relevantgovernmental entities for the establishment of a regulatory framework that protects clients and employees, discouragesunscrupulous and financially unsound companies, and promotes further development of the industry. Currently, 41 states haveenacted legislation either recognizing PEOs or requiring licensing, registration, or certification, and several others areconsidering such regulation. Such laws vary from state to state but generally provide for monitoring the fiscal responsibility ofPEOs. State regulation assists in screening insufficiently capitalized PEO operations and helps to resolve interpretive issuesconcerning employee status for specific purposes under applicable state law. We have actively supported such regulatory-3-
efforts and are currently recognized, licensed, registered, certified or pursuing registration in all 41 of these states. The cost ofcompliance with these regulations is not material to our financial position or results of operations.In 2014, the United States Congress passed and the President signed into law the Small Business Efficiency Act(“SBEA”), which creates a federal regulatory framework for the payment of wages to worksite employees and the reportingand remittance of payroll taxes on those wages by PEOs certified under the statute (“CPEOs”). We actively supported theenactment of this law. The law is effective with respect to wages for services performed on or after January 1, 2016. The lawinstructs the Secretary of the Treasury to establish a certification program not later than July 1, 2015. It clarifies that a CPEO,rather than the client, will be treated as the employer for purposes of reporting and remitting payroll taxes. It also clarifies thata CPEO shall be treated as a successor employer for purposes of the wage base of worksite employees on which federal payrolltaxes are applied. In addition, the law clarifies that clients of a CPEO remain eligible for specified tax credits for which theywould have been eligible absent the CPEO relationship. We intend to become a CPEO. Implementation of these provisions willrequire us to modify our internal processes and systems. The cost of implementation and compliance with the new law is notexpected to be material to our financial position or results of operations.Service OfferingsPEO HR Outsourcing SolutionsWe serve small and medium-sized businesses by providing our PEO HR Outsourcing solutions, which encompass abroad range of services. Both of our PEO HR Outsourcing solutions include the following: benefits and payroll administrationhealth and workers’ compensation insurance programspersonnel records managementemployer liability managementassistance with government compliancegeneral HR adviceOur Workforce Optimization solution also provides additional services that our Workforce Synchronization clients canpurchase for an additional fee, including the following: employee recruiting and supportemployee performance managementtraining and development servicesOur PEO HR Outsourcing solutions are designed to attract and retain high-quality employees, while relieving clientowners and key executives of many employer-related administrative and regulatory burdens. Among the employment-relatedlaws and regulations that may affect a client are the following: Internal Revenue Code (the “Code”)Federal Income Contribution Act (FICA)Federal Unemployment Tax Act (FUTA)Fair Labor Standards Act (FLSA)Employee Retirement Income Security Act, as amended(ERISA)Consolidated Omnibus Budget Reconciliation Act of 1985(COBRA)Immigration Reform and Control Act (IRCA)Title VII (Civil Rights Act of 1964)Health Insurance Portability and Accountability Act(HIPAA)Age Discrimination in Employment Act (ADEA)Americans with Disabilities Act (ADA) The Family and Medical Leave Act (FMLA)Genetic Information Nondiscrimination Act of 2008Drug-Free Workplace ActOccupational Safety and Health Act (OSHA)Worker Adjustment and Retraining Notification Act(WARN)Uniformed Services Employment and ReemploymentRights Act (USERRA)State unemployment and employment security lawsState workers’ compensation lawsHealth Care and Education Reconciliation Act of 2010 (the“Reconciliation Act”)Patient Protection and Affordable Care Act (PPACA) State and local law equivalents of the foregoing-4-
While these laws and regulations are complex, and in some instances overlapping, we assist our PEO HR Outsourcingsolutions clients in complying with these laws and regulations by providing services in the following categories:Administrative Functions. Administrative functions encompass a wide variety of processing and recordkeeping tasks,mostly related to payroll administration and government compliance. Specific examples include: payroll processingpayroll tax depositsquarterly payroll tax reportingemployee file maintenanceunemployment claims processingworkers’ compensation claims reportingBenefit Plans Administration. We maintain several benefit plans including the following: a group health plana health savings account programa health care flexible spending account planan educational assistance planan adoption assistance plangroup term life insurancegroup universal life insuranceaccidental death and dismemberment insuranceshort-term and long-term disability insurancea 401(k) retirement plancafeteria plans for group health and health savings account contributionsThe group health plan includes medical, dental, vision and prescription drug coverage, as well as a work-life program.All benefit plans are provided to eligible employees based on the specific eligibility provisions of each plan. We are thepolicyholder responsible for the costs and premiums associated with any group insurance policies that provide benefits underthese plans, and we act as plan sponsor and administrator of the plans. We negotiate the terms and costs of the plans, maintainthe plans in accordance with applicable federal and state regulations and serve as liaison for the delivery of these benefits toworksite and corporate employees. COBRA coverage is extended to eligible terminated worksite and corporate employees andother eligible individuals, in accordance with applicable law. We believe that the variety and comprehensive nature of ourbenefit plan offerings are generally not available to employees in our small and medium-sized business target market and areusually offered only by larger companies that can spread program costs over a much larger group of employees. As a result, webelieve the availability of these benefit plans provides our clients with a competitive advantage that small and medium-sizedbusinesses are typically unable to attain on their own.Employee Service Center. The ESC is our cloud-based interactive delivery platform for our PEO HR Outsourcingsolutions, which is designed to provide automated, personalized content, data and services to our PEO HR Outsourcingsolutions clients and worksite employees. The ESC provides a wide range of functionality, including: WebPayroll for the submission, approval and reporting of payroll dataclient-specific payroll informationemployee information, including online check stubs, pay history reports and W-2semployee on-boarding including payroll enrollment, policy acknowledgments and employment verificationemployee benefits enrollment and changesemployee-specific benefits content, including summary plan descriptions and enrollment statusaccess to 401(k) plan information through the Retirement Service CenterSM powered by Insperity self-service and customizable access to payroll and other data through an interactive reporting environmentonline human resources formsbest practices human resources management process maps and process overviewse-Learning web-based trainingonline recruiting serviceslinks to benefits providers and other key vendorsanswers to frequently asked questions-5-
Personnel Management. In addition to our cloud-based solutions provided through the ESC, we provide a widevariety of personnel management services that give our clients access to HR advisors and additional resources normally foundonly in the human resources departments of large companies. All PEO HR Outsourcing solutions clients have access to ouradvice concerning personnel policies and practices, including recruiting, discipline and termination procedures. Otherpersonnel management services we provide include: drafting and reviewing personnel policies and employee handbooksdesigning job descriptionsperforming prospective employee screening and background investigationsdesigning performance appraisal processes and formsprofessional development and issues-oriented trainingemployee counselingsubstance abuse awareness trainingoutplacement servicescompensation guidanceEmployer Liability Management. Under the CSA, we assume many of the employment-related responsibilitiesassociated with the administrative functions, benefit plans administration and personnel management services we provide. Formany of those employment-related responsibilities that are the responsibility of the client or that we share with our clients, wemay assist our clients in managing and limiting exposure. This includes first-time and ongoing safety-related risk managementreviews, as well as the implementation of safety programs designed to reduce workplace accidents and consequently, workers’compensation claims. We also provide guidance to clients for avoiding discrimination, sexual harassment and civil rightsviolations, and we assist with termination decisions when consulted to attempt to minimize liability on those grounds. Whilewe do not provide legal services to our clients, we employ in-house and external counsel who specialize in several areas ofemployment law, have broad experience in disputes concerning the employer/employee relationship and provide support to ourhuman resources service specialists. As part of our comprehensive service, we also maintain employment practice liabilityinsurance coverage for ourselves and our clients, monitor changing government laws and regulations, and notify clients of thepotential effect of such changes on employer liability.MarketPlaceSM provided by Insperity . Through our many alliances with best-of-class providers, Insperity’sMarketPlace is an eCommerce portal that brings a wide range of products and services to our clients, worksite employees andtheir families. Through MarketPlace, our clients also have the opportunity to offer their products and services to other clientsand worksite employees.MidMarket Solutions . We believe the mid-market sector, which we generally define as those companies withemployees ranging from 150 to 2,000 worksite employees, has historically been under-served by the PEO industry. Currently,we have a dedicated sales management and consulting staff who concentrate solely on the mid-market sector. In addition, wehave service personnel who have been trained and specialize in the mid-market sector. Our average number of worksiteemployees per month with our mid-market clients increased 1.6% over 2013, representing approximately 23.3% of our totalpaid worksite employees during 2014.Strategic Business Unit OfferingsOur Strategic Business Unit (“SBU”) strategy is designed to expand the type of business performance improvementservices we offer to our current and prospective clients and to increase our overall client base by providing services that can beoffered separately from our PEO HR Outsourcing solutions. We also strive to leverage our SBU client relationships to crosssell our PEO HR Outsourcing solutions as well as other SBU services. We offer all of our SBU services to both PEO HROutsourcing solutions clients and non-PEO HR Outsourcing solutions clients, with the exception of Human CapitalManagement and Payroll Services, which are offered to non-PEO HR Outsourcing solutions clients because comparablesolutions are already included within the PEO HR Outsourcing solutions.During 2014 and 2013, total SBU revenues unrelated to our PEO HR Outsourcing solutions as a percentage of ourtotal revenues were 1.5% and 1.4%, respectively. Also during 2014 and 2013, our SBU gross profit unrelated to our PEO HROutsourcing solutions as a percentage of our total gross profit was 6.5% and 5.6%, respectively.-6-
The following are the key components of our SBU services, which are offered separately or as a bundle:Human Capital Management. Insperity HCM is a comprehensive human capital management solution for humanresources data and processes. This cloud-based solution is a unified human resources suite that includes payroll processing, taxcompliance, employee administration, benefits management and enrollment, reporting and analytics, and employee andmanager self-service. The solution is offered as a stand-alone cloud-based solution or in conjunction with our Payroll Servicesoffering and/or our Time and Attendance products. We initially launched this product in late 2012.Payroll Services. Insperity Payroll Services offers a robust cloud-based payroll solution that is designed to helpalleviate administrative burdens associated with payroll p
Insperity, Inc., (“Insperity”) provides an array of human resources (“HR”) and business solutions designed to help improve business performance. . that includes the same compliance and administrative services as our Workforc
