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Insperity Announces Fourth Quarter and Full Year Results

Insperity, Inc.a leading provider of human resources and business performance solutionsfor America’s best businesses, today reported results for the fourth quarter and year ended Dec. 31, 2012. For the fourth quarter, the company’s adjusted net income was $11.9 million. Adjusted diluted earnings per share was $0.47, an 11.9% increase over 2011. Adjusted net income excludes an after-tax non-cash impairment charge of $2.5 million, or $0.10 per share, associated with a write-down of goodwill related to a 2006 acquisition. Additionally, there was a $0.03 effect to earnings per share, related to the accounting treatment associated with the $1.00 per share special dividend paid in December 2012. Reported fourth quarter net income and earnings per share were $9.4 million and $0.34, respectively.

For the year ended Dec. 31, 2012, the company had adjusted diluted earnings per share of $1.67, a 25.6% increase over 2011. Adjusted results exclude $0.10 per share related to the impairment charge and $0.01 per share related to the accounting treatment associated with the special dividend in 2012, and $0.17 per share for two non-operational items in 2011. Reported 2012 net income was $40.4 million, or $1.56 per share, a 34.5% increase compared to 2011.

“We are pleased with these strong results for both the quarter and the year, achieved in spite of the effects of the election and fiscal cliff on our customer base comprised of highly successful U.S. small businesses,” said Paul J. Sarvadi, Insperity chairman and chief executive officer. “Our plan for growth in 2013 is to invest in expanding our number of business performance advisors, leverage opportunities related to health care reform, and accelerate the growth of our adjacent businesses.”

Fourth Quarter Results

Revenues for the fourth quarter of 2012 increased 7.5% over the fourth quarter of 2011 due to a 6.0% increase in the average number of worksite employees paid per month and a 1.5% increase in revenues per worksite employee per month. Gross profit increased 4.0% over the fourth quarter of 2011 to $93.5 million, as expected.

Operating expenses increased 5.9% to $77.6 million compared to the fourth quarter of 2011. Excluding the $4.2 million impairment charge, operating expenses increased less than 1.0% to $73.4 million.

Year-to-Date Results

Revenues in 2012 were $2.2 billion, an increase of 9.2% over 2011. Gross profit for the year ended Dec. 31, 2012, increased 8.7% to $382.2 million. The average gross profit per worksite employee per month increased $2, or 0.8%, to $253 in 2012 from $251 in 2011.

Reported 2012 operating expenses were $314.7 million. Excluding the $4.2 million impairment charge, operating expenses increased 5.5% over 2011 to $310.5 million.

Reported operating income for the year ended Dec. 31, 2012, was $67.5 million. Excluding the impairment charge, operating income was $71.7 million, a 25.1% increase over 2011.

Adjusted EBITDA increased 22.8% to $100.9 million compared to 2011. These results exclude the impairment charge in 2012 and $7.5 million in costs associated with two non-operational items in 2011. Cash outlays in 2012 included the repurchase of 595,676 shares at a cost of $16.9 million, including 80,983 shares repurchased in a modified “Dutch auction” tender offer in the fourth quarter dividends of $42.7 million, including a special cash dividend of $25.7 million paid in the fourth quarter and capital expenditures of $17.6 million. Working capital at Dec. 31, 2012, was $115.7 million.

“Our strong balance sheet and cash flow have allowed us to continue to invest in the business while returning significant value to stockholders, including a $1.00 per share special dividend paid in December,” said Douglas S. Sharp, senior vice-president of finance, chief financial officer and treasurer. “Going forward, we intend to continue to invest in our growth initiatives, continue our dividend program, and apply the $47 million balance authorized in our $50 million Dutch tender offer to future share repurchases.”

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