NSP 10-Q Quarterly Report March 31, 2012 | Alphaminr
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NSP 10-Q Quarter ended March 31, 2012

Balance Sheet
Cash Flow
Income Statement
INSPERITY, INC.
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10-Q 1 form10q.htm INSPERITY, INC. 10-Q 3-31-2012 form10q.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q
(Mark One)
x
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2012.
or
o
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to
Commission File No. 1-13998

Insperity, Inc.
(Exact name of registrant as specified in its charter)

Delaware
76-0479645
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
19001 Crescent Springs Drive
Kingwood, Texas
77339
(Address of principal executive offices)
(Zip Code)

(Registrant’s Telephone Number, Including Area Code):  (281) 358-8986

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ Accelerated filer o Non-accelerated filer o Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes o No þ
As of April 23, 2012, 26,018,120 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.


PART I


INSPERITY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)

ASSETS
March 31,
2012
December 31,
2011
(Unaudited)
Current assets:
Cash and cash equivalents
$ 234,548 $ 211,208
Restricted cash
45,068 44,737
Marketable securities
56,981 56,987
Accounts receivable, net:
Trade
3,601 7,893
Unbilled
167,785 158,508
Other
4,575 4,532
Prepaid insurance
24,662 21,300
Other current assets
11,529 11,488
Income taxes receivable
617 2,902
Deferred income taxes
— 3,233
Total current assets
549,366 522,788
Property and equipment:
Land
3,653 3,653
Buildings and improvements
68,727 67,496
Computer hardware and software
77,287 76,105
Software development costs
33,519 32,699
Furniture and fixtures
36,207 36,133
Aircraft
35,866 35,866
255,259 251,952
Accumulated depreciation and amortization
(162,662 ) (159,008 )
Total property and equipment, net
92,597 92,944
Other assets:
Prepaid health insurance
9,000 9,000
Deposits – health insurance
2,840 2,640
Deposits – workers’ compensation
55,665 52,320
Goodwill and other intangible assets, net
27,999 28,433
Other assets
4,163 4,134
Total other assets
99,667 96,527
Total assets
$ 741,630 $ 712,259


INSPERITY, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
(in thousands)

LIABILITIES AND STOCKHOLDERS’ EQUITY
March 31,
2012
December 31,
2011
(Unaudited)
Current liabilities:
Accounts payable
$ 3,437 $ 5,085
Payroll taxes and other payroll deductions payable
177,991 168,652
Accrued worksite employee payroll cost
144,840 130,317
Accrued health insurance costs
9,200 9,427
Accrued workers’ compensation costs
47,094 46,548
Accrued corporate payroll and commissions
13,703 22,383
Other accrued liabilities
14,092 13,814
Deferred income taxes
3,089 —
Total current liabilities
413,446 396,226
Noncurrent liabilities:
Accrued workers’ compensation costs
61,895 60,054
Deferred income taxes
9,814 10,772
Total noncurrent liabilities
71,709 70,826
Commitments and contingencies
Stockholders’ equity:
Common stock
309 309
Additional paid-in capital
136,670 135,871
Treasury stock, at cost
(134,198 ) (134,647 )
Accumulated other comprehensive income, net of tax
59 24
Retained earnings
253,635 243,650
Total stockholders’ equity
256,475 245,207
Total liabilities and stockholders’ equity
$ 741,630 $ 712,259

See accompanying notes.
INSPERITY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
2012
2011
Revenues (gross billings of $3.231 billion and $2.888 billion, less worksite employee payroll cost of $2.636 billion and $2.352 billion, respectively)
$ 595,177 $ 536,381
Direct costs:
Payroll taxes, benefits and workers’ compensation costs
492,173 445,422
Gross profit
103,004 90,959
Operating expenses:
Salaries, wages and payroll taxes
43,323 39,597
Stock-based compensation
2,155 1,790
General and administrative expenses
22,078 21,893
Commissions
3,435 3,096
Advertising
4,755 5,506
Depreciation and amortization
4,212 3,948
79,958 75,830
Operating income
23,046 15,129
Other income (expense):
Interest, net
164 280
Other, net
124 4
Income before income tax expense
23,334 15,413
Income tax expense
9,450 6,627
Net income
$ 13,884 $ 8,786
Less net income allocated to participating securities
(402 ) (264 )
Net income allocated to common shares
$ 13,482 $ 8,522
Basic net income per share of common stock
$ 0.54 $ 0.33
Diluted net income per share of common stock
$ 0.54 $ 0.33

See accompanying notes.

INSPERITY, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(Unaudited)

Three Months Ended
March 31,
2012
2011
Net income
$ 13,884 $ 8,786
Other comprehensive income:
Unrealized gains on available-for-sale securities, net of tax
35 14
Comprehensive income
$ 13,919 $ 8,800
See accompanying notes.

INSPERITY, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
THREE MONTHS ENDED MARCH 31, 2012
(in thousands)
(Unaudited)
Common Stock
Issued
Additional
Paid-In
Treasury
Accumulated
Other
Comprehensive
Retained
Shares Amount
Capital
Stock Income (Loss) Earnings Total
Balance at December 31, 2011
30,839 $ 309 $ 135,871 $ (134,647 ) $ 24 $ 243,650 $ 245,207
Purchase of treasury stock, at cost
― ― 8 (3,261 ) — ― (3,253 )
Exercise of stock options
― ― (446 ) 1,249 — ― 803
Income tax benefit from stock-based compensation, net
― ― 1,283 — — ― 1,283
Stock-based compensation expense
— — (48 ) 2,203 — — 2,155
Other
― ― 2 258 — ― 260
Dividends paid
— — — — — (3,899 ) (3,899 )
Unrealized gain on marketable securities, net of tax
— — — — 35 — 35
Net income
— — — — — 13,884 13,884
Balance at March 31, 2012
30,839 $ 309 $ 136,670 $ (134,198 ) $ 59 $ 253,635 $ 256,475
See accompanying notes.
INSPERITY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Three Months Ended
March 31,
2012
2011
Cash flows from operating activities:
Net income
$ 13,884 $ 8,786
Adjustments to reconcile net income to net cash provided by  operating activities:
Depreciation and amortization
4,212 3,948
Amortization of marketable securities
657 507
Stock-based compensation
2,155 1,790
Deferred income taxes
5,341 2,012
Changes in operating assets and liabilities, net of effects from acquisitions:
Restricted cash
(331 ) 397
Accounts receivable
(5,028 ) (13,955 )
Prepaid insurance
(3,362 ) 593
Other current assets
(41 ) (3,415 )
Other assets
(3,570 ) (1,965 )
Accounts payable
(1,648 ) (681 )
Payroll taxes and other payroll deductions payable
9,339 6,467
Accrued worksite employee payroll expense
14,523 56,563
Accrued health insurance costs
(227 ) 1,871
Accrued workers’ compensation costs
547 2,329
Accrued corporate payroll, commissions and other accrued liabilities
(5,362 ) (8,646 )
Income taxes payable/receivable
2,167 2,487
Total adjustments
19,372 50,302
Net cash provided by operating activities
33,256 59,088
Cash flows from investing activities:
Marketable securities purchases
(1,443 ) (5,154 )
Marketable securities proceeds from dispositions
— 1,365
Marketable securities proceeds from maturities
850 4,402
Cash exchanged for acquisitions
(1,200 ) (10,800 )
Property and equipment
(3,435 ) (3,326 )
Net cash used in investing activities
(5,228 ) (13,513 )
INSPERITY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands)
(Unaudited)

Three Months Ended
March 31,
2012
2011
Cash flows from financing activities:
Purchase of treasury stock
$ (3,253 ) $ (3,089 )
Dividends paid
(3,899 ) (3,971 )
Proceeds from the exercise of stock options
803 2,534
Income tax benefit from stock-based compensation
1,401 1,711
Other
260 216
Net cash used in financing activities
(4,688 ) (2,599 )
Net increase in cash and cash equivalents
23,340 42,976
Cash and cash equivalents at beginning of period
211,208 234,829
Cash and cash equivalents at end of period
$ 234,548 $ 277,805
See accompanying notes.


INSPERITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
(Unaudited)
1.
Basis of Presentation

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 business offering is provided through our professional employer organization (“PEO”) services, known as Workforce Optimization TM , which encompasses a broad range of HR functions, including payroll and employment administration, employee benefits, workers’ compensation, government compliance, performance management, and training and development services.

In addition to Workforce Optimization, we offer Performance Management, Expense Management, Time and Attendance, Organizational Planning, Recruiting Services, Employment Screening, Retirement Services and Business Insurance, (collectively “Adjacent Businesses”), many of which are offered via desktop applications and software as a service (“SaaS”) delivery models.  These other products or services are offered separately, as a bundle, or along with Workforce Optimization (“Bundle Plus”).

We provide our Workforce Optimization solution to small and medium-sized businesses in strategically selected markets throughout the United States.  For the three months ended March 31, 2012 and 2011, Workforce Optimization revenues from Insperity’s Texas markets represented 26% and 27%, while Workforce Optimization revenues from Insperity’s California markets represented 17% and 16%, of Insperity’s total Workforce Optimization revenues, respectively.

The Consolidated Financial Statements include the accounts of Insperity and its subsidiaries, all of which are wholly owned.  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 as of and for the year ended December 31, 2011. Our Consolidated Balance Sheets at December 31, 2011 have been derived from the audited financial statements at that date, but do not include all of the information or footnotes required by GAAP for complete financial statements.  Our Consolidated Balance Sheets at March 31, 2012 and the Consolidated Statements of Operations, Comprehensive Income and Cash Flows for the periods ended March 31, 2012 and 2011, and Stockholders’ Equity for the period ended March 31, 2012, 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.

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

2.
Accounting Policies

Health Insurance Costs

We provide group health insurance coverage to our worksite employees through a national network of carriers, including UnitedHealthcare (“United”), Kaiser Permanente, Blue Shield of California, HMS BlueCross BlueShield, Unity Health Plan 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, Insperity has accounted for this plan since its inception using a partially self-funded insurance accounting model.  Accordingly, Insperity records 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 the 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 Insperity 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 $2.8 million as of March 31, 2012, and is reported as a long-term asset.  As of March 31, 2012, Plan Costs were less than the net premiums paid and owed to United by $28.9 million.  As this amount is in excess of the agreed-upon $9.0 million surplus maintenance level, the $19.9 million balance is included in prepaid insurance, a current asset, in our Consolidated Balance Sheets.  The premiums owed to United at March 31, 2012 were $5.8 million, which is included in accrued health insurance costs, a current liability in our Consolidated Balance Sheets.

Workers’ Compensation Costs

Insperity’s workers’ compensation coverage has been provided through an arrangement with the ACE Group of Companies (“the ACE Program”) since 2007.  The ACE Program is fully insured in that ACE has the responsibility to pay all claims incurred regardless of whether Insperity satisfies its responsibilities.  Through September 30, 2010, Insperity bore the economic burden for the first $1 million layer of claims per occurrence and the insurance carrier was and remains responsible for the economic burden for all claims in excess of such first $1 million layer.

Effective October 1, 2010, in addition to our bearing the economic burden for the first $1 million layer of claims per occurrence, we also bear the economic burden for those claims exceeding $1 million, up to a maximum aggregate amount of $5 million per policy year.

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.

Insperity employs a third party actuary to estimate its 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.  During the three months ended March 31, 2012 and 2011, Insperity reduced accrued workers’ compensation costs by $3.5 million and $1.9 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 rates utilized in 2012 and 2011 were 1.0% and 1.5%, respectively) 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:

Three Months Ended March 31,
2012
2011
(in thousands)
Beginning balance, January 1,
$ 104,791 $ 96,934
Accrued claims
9,495 9,790
Present value discount
(347 ) (530 )
Paid claims
(6,976 ) (7,533 )
Ending balance
$ 106,963 $ 98,661
Current portion of accrued claims
$ 45,068 $ 40,807
Long-term portion of accrued claims
61,895 57,854
$ 106,963 $ 98,661

The current portion of accrued workers’ compensation costs on the Consolidated Balance Sheets at March 31, 2012 includes $2.0 million of workers’ compensation administrative fees.

As of March 31, 2012 and 2011, the undiscounted accrued workers’ compensation costs were $120.1 million and $113.1 million, respectively.

At the beginning of each policy period, the 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, a long-term asset in our Consolidated Balance Sheets.  As of March 31, 2012, we had restricted cash of $45.1 million and deposits of $55.7 million.

Insperity’s estimate of incurred claim costs expected to be paid within one year are recorded as accrued workers’ compensation costs and included in short-term liabilities, while its estimate of incurred claim costs expected to be paid beyond one year are included in long-term liabilities on our Consolidated Balance Sheets.
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:

March 31,
December 31,
2012
2011
(in thousands)
Overnight Holdings
Money market funds (cash equivalents)
$ 87,470 $ 71,350
Investment Holdings
Money market funds (cash equivalents)
59,372 59,587
Marketable securities
56,981 56,987
203,823 187,924
Cash held in demand accounts
102,157 113,968
Outstanding checks
(14,451 ) (33,697 )
Total cash, cash equivalents and marketable securities
$ 291,529 $ 268,195
Cash and cash equivalents
$ 234,548 $ 211,208
Marketable securities
56,981 56,987
$ 291,529 $ 268,195

Our cash and overnight holdings fluctuate based on the timing of the client’s payroll processing cycle.  Included in the cash balance as of March 31, 2012 and December 31, 2011, are $165.8 million and $150.8 million, respectively, in funds associated with federal and state income tax withholdings, employment taxes and other payroll deductions, as well as $10.7 million and $10.4 million in client prepayments, respectively.

Insperity accounts for its financial assets in accordance with Accounting Standard Codification (“ASC”) 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)
March 31,
2012
Level 1
Level 2
Level 3
Money market funds
$ 146,842 $ 146,842 $ — $ —
Municipal bonds
56,981 –– 56,981 —
Total
$ 203,823 $ 146,842 $ 56,981 $ —
Fair Value Measurements
(in thousands)
December 31,
2011
Level 1
Level 2
Level 3
Money market funds
$ 130,937 $ 130,937 $ — $ —
Municipal bonds
56,987 — 56,987 —
Total
$ 187,924 $ 130,937 $ 56,987 $ —

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. Valuation techniques used by Insperity 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:

Gross
Gross
Amortized
Unrealized
Unrealized
Estimated
Cost
Gains
Losses
Fair Value
(in thousands)
March 31, 2012:
Municipal bonds
$ 56,882 $ 117 $ (18 ) $ 56,981
December 31, 2011:
Municipal bonds
$ 56,945 $ 90 $ (48 ) $ 56,987

During the periods ended March 31, 2012 and 2011, we had no realized gains or losses recognized on sales of marketable securities.


As of March 31, 2012, the contractual maturities of our marketable securities were as follows:

Amortized
Cost
Estimated
Fair Value
(in thousands)
Less than one year
$ 33,566 $ 33,576
One to five years
23,316 23,405
Total
$ 56,882 $ 56,981

4.
Acquisitions

Insperity accounts for its acquisitions in accordance with ASC 805, Business Combinations, which requires allocation of the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on the fair value at the date of purchase.  The purchase price in excess of the identifiable assets and liabilities is recorded to goodwill.  All acquisition related costs are expensed as incurred and recorded in operating expenses.  We include operations associated with acquisitions from the date of acquisition forward.

In January 2011, Insperity acquired from HumanConcepts, a provider of workforce decision support solutions, ownership of its OrgPlus desktop software product line for small and medium-sized businesses, and its associated customer base, as well as a source code license for a SaaS-based version. OrgPlus facilitates creation, management and communication of detailed organizational charts. The acquisition reflects Insperity’s continued business strategy to expand its HR services as well as the solutions available to our current and prospective clients.  We paid $10.8 million upon the closing of the transaction and paid an additional $1.2 million in January 2012 based on the terms of the agreement.

5.
Revolving Credit Facility
On September 15, 2011, we entered into a four-year, $100 million revolving credit facility (the “Facility”), which may be increased to $150 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. Insperity’s 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 2012, we issued an irrevocable standby letter of credit for $285,000 under the Facility to a state workers’ compensation agency.  At March 31, 2012, we had not drawn on the Facility.
The Facility matures on September 15, 2015.  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%. Interest expense and unused commitment fees are recorded in other income (expense).

The Facility contains both affirmative and negative covenants, which 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 March 31, 2012.

6.
Stockholders’ Equity

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.  During the three months ended March 31, 2012, no shares were repurchased under the Repurchase Program; however, 105,923 shares were withheld to satisfy tax withholding obligations for the vesting of restricted stock awards.  These shares are not subject to the Repurchase Program.  As of March 31, 2012, we were authorized to repurchase an additional 1,236,872 shares under the program.

The Board declared quarterly dividends of $0.15 per share of common stock in the first quarter of 2012 and 2011, resulting in a total of $3.9 million and $4.0 million, respectively, in dividend payments made by Insperity during the three months ended March 31 of each year.

7.
Net Income per Share

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.  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 March 31,
2012
2011
(in thousands)
Net income
$ 13,884 $ 8,786
Less income allocated to participating securities
(402 ) (264 )
Net income allocated to common shares
$ 13,482 $ 8,522
Weighted average common shares outstanding
25,087 25,488
Incremental shares from assumed conversions of common stock options
71 119
Adjusted weighted average common shares outstanding
25,158 25,607
Potentially dilutive securities not included in weighted average share calculation due to anti-dilutive effect
16 —

8.           Commitments and Contingencies

Insperity is a defendant in various 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.

Pennsylvania Sales Taxes

Pennsylvania imposes a sales tax on “help supply services.”  The Pennsylvania Department of Revenue (“Department”) has maintained that PEO services constitute help supply services and are subject to the tax.  On February 21, 2012, the Pennsylvania Supreme Court (“Supreme Court”) affirmed the Appeals Court decision in the matter titled All Staffing vs. Commonwealth of Pennsylvania, which ruled that PEO services are not subject to the Pennsylvania sales tax.

Based upon our belief that our PEO services are not subject to the Pennsylvania sales tax, we filed a refund claim for $2.9 million with the Department for the sales taxes paid in error for the period April 1, 2007 through December 31, 2009.  The refund claim is still under consideration with the Department and the ultimate outcome and timing of our recovery, if any, is uncertain. Accordingly, we have not recognized any asset for the refund claim in our financial statements.  In the event we are successful in our refund claim, we will recognize a gain equal to the recovered amount.



You should read the following discussion in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2011, as well as our Consolidated Financial Statements and notes thereto included in this quarterly report on Form 10-Q.

New Accounting Pronouncements

We believe we have implemented the accounting pronouncements with a material impact on our financial statements .

Results of Operations

Three Months Ended March 31, 2012 Compared to Three Months Ended March 31, 2011.

The following table presents certain information related to our results of operations:

Three Months Ended March 31,
2012
2011
% Change
(in thousands, except per share and statistical data)
Revenues (gross billings of $3.231 billion and $2.888 billion, less worksite employee payroll cost of $2.636 billion and $2.352 billion, respectively)
$ 595,177 $ 536,381 11.0 %
Gross profit
103,004 90,959 13.2 %
Operating expenses
79,958 75,830 5.4 %
Operating income
23,046 15,129 52.3 %
Other income (expense)
288 284 1.4 %
Net income
13,884 8,786 58.0 %
Diluted net income per share of common stock
0.54 0.33 63.6 %
Statistical Data:
Average number of worksite employees paid per month
121,938 112,409 8.5 %
Revenues per worksite employee per month (1)
$ 1,627 $ 1,591 2.3 %
Gross profit per worksite employee per month
282 270 4.4 %
Operating expenses per worksite employee per month
219 225 (2.7 )%
Operating income per worksite employee per month
63 45 40.0 %
Net income per worksite employee per month
38 26 46.2 %
(1)
Gross billings of $8,833 and $8,566 per worksite employee per month, less payroll cost of $7,206 and $6,975 per worksite employee per month, respectively.

Revenues

Our revenues for the first quarter of 2012 increased 11.0% over the 2011 period, primarily due to an 8.5% increase in the average number of worksite employees paid per month and a 2.3%, or $36 increase in revenues per worksite employee per month.

By region, our Workforce Optimization revenue change from the first quarter of 2011 and distribution for the quarters ended March 31, 2012 and 2011 were as follows:

Three Months Ended March 31,
Three Months Ended March 31,
2012
2011
% Change
2012
2011
(in thousands)
(% of total revenues)
Northeast
$ 158,965 $ 140,745 12.9 % 27.0 % 26.6 %
Southeast
53,348 51,375 3.8 % 9.1 % 9.7 %
Central
87,294 78,599 11.1 % 14.8 % 14.8 %
Southwest
163,806 153,750 6.5 % 27.9 % 29.0 %
West
124,606 105,092 18.6 % 21.2 % 19.9 %
588,019 529,651 11.0 % 100.0 % 100.0 %
Other revenue
7,158 6,820 5.0 %
Total revenue
$ 595,177 $ 536,381 11.0 %

Other revenue is comprised primarily of revenues generated by our Adjacent Businesses.

Our Workforce Optimization growth rate is affected by three primary sources – worksite employees paid from new client sales, client retention and the net change in existing clients through worksite employee new hires and layoffs.  During the first quarter of 2012, the net change in existing clients improved as compared to the first quarter of 2011, while worksite employees paid from new client sales declined and client retention remained consistent with the first quarter of 2011.

Gross Profit

Gross profit for the first quarter of 2012 increased 13.2% over the first quarter of 2011 to $103.0 million.  The average gross profit per worksite employee increased 4.4% to $282 per month in the 2012 period from $270 per month in the 2011 period.  Included in gross profit in 2012 is a $10 per worksite employee per month contribution from our Adjacent Businesses compared to $11 per worksite employee per month in the 2011 period.  Our pricing objectives attempt to maintain or improve the gross profit per worksite employee by increasing revenue per worksite employee to match or exceed changes in primary direct costs and operating expenses.

While our revenues increased 2.3% per worksite employee per month, our direct costs, which primarily include payroll taxes, benefits and workers’ compensation expenses, increased 1.8% to $1,345 per worksite employee per month in the first quarter of 2012 versus $1,321 in the first quarter of 2011.

·
Benefits costs – The cost of group health insurance and related employee benefits increased $7 per worksite employee per month, or 3.6% on a cost per covered employee basis compared to the first quarter of 2011.  These results reflect typical annual cost increases and were favorably impacted by plan design changes implemented on January 1, 2012, and a decrease in the number of COBRA participants.  The number of participants electing COBRA coverage in the United plan declined from 4.5% in the first quarter of 2011 to 3.1% in the first quarter of 2012 due primarily to the August 2011 expiration of the 65% federal premium subsidy provided to COBRA eligible participants under the American Recovery and Reinvestment Act of 2009.  Historically, the net costs of COBRA claims per enrollee are approximately double the cost of claims associated with active enrollees.  The percentage of worksite employees covered under our health insurance plans was 72.8% in the 2012 period compared to 74.5% in the 2011 period.  Please read Note 2 to the Consolidated Financial Statements, “Accounting Policies – Health Insurance Costs,” for a discussion of our accounting for health insurance costs.
·
Workers’ compensation costs – Workers’ compensation costs increased 1.7%, but decreased $2 per worksite employee per month, compared to the first quarter of 2011.  As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.56% in the 2012 period compared to 0.61% in the 2011 period.  During the 2012 period, we recorded reductions in workers’ compensation costs of $3.5 million, or 0.15% of non-bonus payroll costs, for changes in estimated losses related to prior reporting periods, compared to $1.9 million, or 0.09% of non-bonus payroll costs, in the 2011 period.  Please read Note 2 to the Consolidated Financial Statements, “Accounting Policies – Workers’ Compensation Costs,” for a discussion of our accounting for workers’ compensation costs.

·
Payroll tax costs – Payroll taxes increased 11.5%, or $19 per worksite employee per month compared to the first quarter of 2011, primarily due to the 12.1% increase in payroll costs.  Payroll taxes as a percentage of payroll cost were 9.6% in both the 2012 and 2011 periods.

Operating Expenses

The following table presents certain information related to our operating expenses:
Three Months Ended March 31,
Three Months Ended March 31,
2012 2011 % Change 2012 2011 % Change
(in thousands) (per worksite employee per month)
Salaries, wages and payroll taxes
$ 43,323 $ 39,597 9.4 % $ 119 $ 118 0.8 %
Stock–based compensation
2,155 1,790 20.4 % 6 5 20.0 %
Commissions
3,435 3,096 10.9 % 9 9 —
Advertising
4,755 5,506 (13.6 )% 13 16 (18.8 )%
General and administrative expenses
22,078 21,893 0.8 % 60 65 (7.7 )%
Depreciation and amortization
4,212 3,948 6.7 % 12 12 —
Total operating expenses
$ 79,958 $ 75,830 5.4 % $ 219 $ 225 (2.7 )%

Operating expenses increased 5.4% to $80.0 million compared to $75.8 million in the first quarter of 2011.  Operating expenses in the first quarter of 2011 included costs associated with the launch of our new brand.  Operating expenses per worksite employee per month decreased to $219 in the 2012 period from $225 in the 2011 period.  The components of operating expenses changed as follows:

·
Salaries, wages and payroll taxes of corporate and sales staff increased 9.4%, or $1 per worksite employee per month compared to the 2011 period.  This increase was primarily due to a 9.4% rise in headcount, due in part to our adjacent business strategy.

·
Stock-based compensation increased 20.4%, or $1 per worksite employee per month compared to the 2011 period, due primarily to an increase in the weighted average market value on the date of grant associated with restricted awards.  The stock-based compensation expense represents amortization of restricted stock awards granted to employees.

·
Commissions expense increased 10.9%, due primarily to an 8.5% increase in the average number of worksite employees paid per month.  Commissions expense remained flat on a per worksite employee per month basis compared to the 2011 period.

·
Advertising costs decreased 13.6%, or $3 per worksite employee per month compared to the 2011 period, primarily due to the non-recurrence of expenses in 2012 related to our rebranding initiative.

·
General and administrative expenses increased 0.8%, but decreased $5 per worksite employee per month compared to the first quarter of 2011, primarily due to increased professional services, office and repairs and maintenance, offset by the non-recurrence of expenses in 2012 related to our rebranding initiative.

·
Depreciation and amortization expense increased 6.7%, but remained flat on a per worksite employee per month basis compared to the 2011 period.

Income Tax Expense

Our effective income tax rate was 40.5% in the 2012 period compared to 43.0% in the 2011 period.  Our provision for income taxes differed from the U.S. statutory rate of 35% primarily due to state income taxes and non-deductible expenses.

Operating and Net Income

Operating and net income per worksite employee per month was $63 and $38 in the 2012 period, versus $45 and $26 in the 2011 period.

Non-GAAP Financial Measures

Non-bonus payroll cost is a non-GAAP financial measure that excludes the impact of bonus payrolls paid to our worksite employees.  Bonus payroll cost varies from period to period, but has no direct impact to our ultimate workers’ compensation costs under the current program.  As a result, our management refers to non-bonus payroll cost in analyzing, reporting and forecasting our workers’ compensation costs.  Non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies.  Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.  We include these non-GAAP financial measures because we believe they are useful to investors in allowing for greater transparency related to the costs incurred under our current workers’ compensation program.  Investors are encouraged to review the reconciliation of the non-GAAP financial measures used to their most directly comparable GAAP financial measures as provided in the table below.

Three Months Ended March 31,
2012
2011
% Change
(in thousands, except per worksite employee per month data)
Payroll cost (GAAP)
$ 2,636,129 $ 2,352,263 12.1 %
Less: Bonus payroll cost
(367,823 ) (304,849 ) 20.7 %
Non-bonus payroll cost
$ 2,268,306 $ 2,047,414 10.8 %
Payroll cost per worksite employee per month (GAAP)
$ 7,206 $ 6,975 3.3 %
Less: Bonus payroll cost per worksite employee per month
(1,005 ) (904 ) 11.2 %
Non-bonus payroll cost per worksite employee per month
$ 6,201 $ 6,071 2.1 %

Liquidity and Capital Resources

We periodically evaluate our liquidity requirements, capital needs and availability of resources in view of, among other things, our expansion plans, acquisition plans and other operating cash needs.  To meet short- and long-term liquidity requirements, including payment of direct and operating expenses and repaying debt, we rely primarily on cash from operations.  However, we have in the past sought, and may in the future seek, to raise additional capital or take other steps to increase or manage our liquidity and capital resources.  We had $291.5 million in cash, cash equivalents and marketable securities at March 31, 2012, of which approximately $165.8 million was payable in early April 2012 for withheld federal and state income taxes, employment taxes and other payroll deductions, and approximately $10.7 million of client prepayments that were payable in April 2012.  At March 31, 2012, we had working capital of $135.9 million compared to $126.6 million at December 31, 2011.  We currently believe that our cash on hand and cash flows from operations will be adequate to meet our liquidity requirements for the remainder of 2012.  We will rely on these same sources, as well as public and private debt or equity financing, to meet our longer-term liquidity and capital needs.

In September 2011, we completed the financing for a new four-year, $100 million revolving credit facility (“Facility”), with a syndicate of financial institutions.  The Facility is available for working capital and general corporate purposes, including acquisitions, and was undrawn at March 31, 2012.  Please read Note 5 to our Consolidated Financial Statements, “Revolving Credit Facility,” for additional information.

Cash Flows from Operating Activities

Net cash provided by operating activities in 2012 was $33.3 million.  Our primary source of cash from operations is the comprehensive service fee and payroll funding we collect from our clients.  The level of cash and cash equivalents, and thus our reported cash flows from operating activities are significantly impacted by various external and internal factors, which are reflected in part by the changes in our balance sheet accounts.  These include the following:

·
Timing of client payments / payrolls – We typically collect our comprehensive service fee, along with the client’s payroll funding, from clients at least one day prior to the payment of worksite employee payrolls and associated payroll taxes.  Therefore, the last business day of a reporting period has a substantial impact on our reporting of operating cash flows.  For example, many worksite employees are paid on Fridays; therefore, operating cash flows decrease in the reporting periods that end on a Friday.  In the period ended March 31, 2012, the last business day of the reporting period was a Friday and client prepayments were $10.7 million and accrued worksite employee payroll was $144.8 million.  In the period ended March 31, 2011, the last business day of the reporting period was a Thursday and client prepayments were $57.7 million and accrued worksite employee payroll was $166.3 million.

·
Workers’ compensation plan funding – Under our workers’ compensation insurance arrangements, we make monthly payments to the carriers comprised of premium costs and funds to be set aside for payment of future claims (“claim funds”).  These pre-determined amounts are stipulated in our agreements with the carriers, and are based primarily on anticipated worksite employee payroll levels and workers’ compensation loss rates during the policy year.  Changes in payroll levels from those that were anticipated in the arrangements can result in changes in the amount of cash payments, which will impact our reporting of operating cash flows.  Our claim funds paid, based upon anticipated worksite employee payroll levels and workers’ compensation loss rates, were $10.6 million in the first three months of 2012 and $9.1 million in the first three months of 2011. However, our estimate of workers’ compensation loss costs was $9.1 million and $9.3 million in 2012 and 2011, respectively.
·
Medical plan funding – Our health care contract with United establishes participant cash funding rates 90 days in advance of the beginning of a reporting quarter.  Therefore, changes in the participation level of the United plan have a direct impact on our operating cash flows.  In addition, changes to the funding rates, which are solely determined by United based primarily upon recent claim history and anticipated cost trends, also have a significant impact on our operating cash flows.  At March 31, 2012, premiums owed and cash funded to United have exceeded Plan Costs, resulting in a $28.9 million surplus, $19.9 million of which is reflected as a current asset, and $9.0 million of which is reflected as a long-term asset on our Consolidated Balance Sheets.  The premiums owed to United at March 31, 2012, were $5.8 million, which is included in accrued health insurance costs, a current liability, on our Consolidated Balance Sheets.

·
Operating results – Our net income has a significant impact on our operating cash flows.  Our net income increased 58.0% to $13.9 million in the three months ended March 31, 2012, compared to $8.8 million in the three months ended March 31, 2011.  Please read “Results of Operations – Three Months Ended March 31, 2012 Compared to Three Months Ended March 31, 2011 .”

Cash Flows from Investing Activities

Net cash flows used in investing activities were $5.2 million for the three months ended March 31, 2012, primarily due to $3.4 million in capital expenditures primarily related to our technology infrastructure.

Cash Flows from Financing Activities

Net cash flows used in financing activities were $4.7 million for the three months ended March 31, 2012, including $3.3 million in stock repurchases related to shares withheld to satisfy tax withholding obligations for the vesting of restricted stock awards and $3.9 million in dividends paid.



We are primarily exposed to market risks from fluctuations in interest rates and the effects of those fluctuations on the market values of our cash equivalent short-term investments.   In addition, borrowings under our Facility bear interest at a variable market rate.  As of March 31, 2012, we had not drawn on the Facility.  Please read Note 5 to the Consolidated Financial Statements, “Revolving Credit Facility,” for additional information.  Our cash equivalent short-term investments consist primarily of overnight investments and money market funds, which are not significantly exposed to interest rate risk, except to the extent that changes in interest rates will ultimately affect the amount of interest income earned on these investments.  The available-for-sale marketable securities are subject to interest rate risk because these securities generally include a fixed interest rate.  As a result, the market values of these securities are affected by changes in prevailing interest rates.

We attempt to limit our exposure to interest rate risk primarily through diversification and low investment turnover.  Our investment policy is designed to maximize after-tax interest income while preserving our principal investment.  As a result, our marketable securities consist of tax-exempt short and intermediate-term debt securities, which are primarily prefunded municipal bonds that are secured by escrow funds containing U.S. Government Securities.

ITEM 4.  CONTROLS AND PROCEDURES .

In accordance with the Securities Exchange Act of 1934 Rules 13a-15 and 15d-15, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report.  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2012.
There has been no change in our internal controls over financial reporting that occurred during the three months ended March 31, 2012, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II

ITEM 1.  LEGAL PROCEEDINGS .

Please read Note 8 to our Consolidated Financial Statements, which is incorporated herein by reference.

ITEM 1A.  RISK FACTORS

Forward-Looking Statements

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 and other insurers, 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 return 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 our 2011 Annual Report on Form 10-K under “Factors That May Affect Future Results and the Market Price of Common Stock” on page 19, and elsewhere in this report.  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.

There have been no material changes in the risk factors disclosed pursuant to Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2011.


The following table provides information about purchases by Insperity during the three months ended March 31, 2012, of equity securities that are registered by Insperity pursuant to Section 12 of the Exchange Act:

Period
Total Number
of Shares
Purchased
Average Price
Paid per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced
Program (1)
Maximum
Number of Shares
that may yet be
Purchased under
the Program (1)
01/01/2012 – 01/31/2012
307 (2) $ 25.35 13,263,128 1,236,872
02/01/2012 – 02/29/2012
105,616 (2) 30.81 13,263,128 1,236,872
03/01/2012 – 03/31/2012
— — 13,263,128 1,236,872
Total
105,923 (2) $ 30.79 13,263,128 1,236,872
(1)
The Board has approved a repurchase program of Insperity common stock. During the three months ended March 31, 2012, no shares were repurchased under the program and 105,923 shares were withheld to satisfy tax withholding obligations for the vesting of restricted stock awards.  As of March 31, 2012, we were authorized to repurchase an additional 1,236,872 shares under the program. Unless terminated earlier by resolution of the Board, the repurchase program will expire when we have repurchased all shares authorized for repurchase under the repurchase program.

(2)
These shares were shares of restricted stock that were withheld to satisfy tax-withholding obligations arising in conjunction with the vesting of restricted stock.  The required withholding is calculated using the closing sales price reported by the New York Stock Exchange on the date prior to the applicable vesting date.  These shares are not subject to the repurchase program described above.


ITEM 6. EXHIBITS
(a)
List of exhibits.
*           Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*           Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
**         Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
**         Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
**         XBRL Instance Document. (1)
101.SCH
**         XBRL Taxonomy Extension Schema Document.
101.DEF
**         XBRL Extension Definition Document.
*
Filed with this report.

**
Furnished with this report.

(1)
Attached as exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Operations for the three month periods ended March 31, 2012 and 2011; (ii) the Consolidated Statements of Comprehensive Income for the three month periods ended March 31, 2012 and 2011; (iii) the Consolidated Balance Sheets at March 31, 2012 and December 31, 2011; (iv) the Consolidated Statement of Stockholders’ Equity; (v) the Consolidated Statements of Cash Flows for the periods ended March 31, 2012 and 2011; and (vi) Notes to the Consolidated Financial Statements.  Users of this data are advised pursuant to Rule 406T of Regulation S-T this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, additionally the data is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and is not subject to liability under these sections.


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Insperity, Inc.
Date:  April 30, 2012
By:
/s/ Douglas S. Sharp
Douglas S. Sharp
Senior Vice President of Finance,
Chief Financial Officer and Treasurer
(Principal Financial and Duly Authorized Officer)
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