ADP 2010 Annual Report Download - page 21

Our total costs of revenues increased $207.0 million to $5,029.7 million in fiscal 2010, as compared to fiscal 2009 due to the increase in
operating expenses discussed below.
Operating expenses increased $190.2 million, or 5%, in fiscal 2010 as compared to fiscal 2009, due to an increase in PEO Services
pass
- through costs that are re - billable, including costs for benefits coverage, workers ’ compensation coverage and state
unemployment taxes for worksite employees. These pass
- through costs were $988.5 million in fiscal 2010, which included costs for
benefits coverage of $811.5 million and costs for workers
’ compensation and payment of state unemployment taxes of $176.9 million.
These costs were $874.8 million in fiscal 2009, which included costs for benefits coverage of $724.3 million and costs for workers
compensation and payment of state unemployment taxes of $150.5 million. In addition, operating expenses increased $30.1 million
due to changes in foreign currency exchange rates and $14.7 million due to additional service personnel. These increases were
partially offset by a decrease of $8.9 million in stock - based compensation expense and our costs savings initiatives, which included
lower compensation from reduced headcount and a reduction in travel and entertainment expenses.
Systems development and programming expenses increased $15.6 million, or 3%, in fiscal 2010 as compared to fiscal 2009, due to
incremental investments in our products during fiscal 2010. Additionally, systems development and programming expenses
increased by $2.1 million due to expenses of acquired businesses and by $3.6 million due to the impact from changes in foreign
currency exchange rates. These increases were partially offset by a $5.0 million decline in stock
- based compensation expense.
Selling, general and administrative expenses decreased $62.9 million, or 3%, in fiscal 2010 as compared to fiscal 2009. The decrease in
expenses was due to a decrease in severance expenses of $76.8 million, a reduction in expenses of $31.1 million related to cost saving
initiatives, which included lower compensation from reduced headcount and a reduction in travel and entertainment expenses and a
decline of $14.5 million in stock
- based compensation expense. In addition, selling, general and administrative expenses decreased
due to the $15.5 million charge we recorded during fiscal 2009 to increase our allowance for doubtful accounts as a result of an
increase in estimated credit losses related to our notes receivable from automotive, truck and powersports dealers. These decreases
in expenses were partially offset by an asset impairment charge of $6.8 million, recorded during fiscal 2010 as a result of the
announcement by General Motors Corporation (“
GM ” ) that it will shut down its Saturn division. In addition, there was an increase of
$13.7 million due to the impact of changes in foreign currency exchange rates and an increase of $9.5 million in expenses of acquired
businesses.
Interest expense decreased $24.7 million in fiscal 2010 as compared to fiscal 2009. In fiscal 2010 and 2009, the Company
’ s average
borrowings under the commercial paper program were $1.6 billion and $1.9 billion, respectively, at weighted average interest rates of
0.2% and 1.0%, respectively, which resulted in a decrease of $15.8 million in interest expense. In fiscal 2010 and 2009, the Company
’ s
average borrowings under the reverse repurchase program were approximately $425.0 million and $425.9 million, respectively, at
weighted average interest rates of 0.2% and 1.3%, respectively, which resulted in a decrease of $4.6 million in interest expense.
Other Income, net
18
Years ended June 30,
2010
2009
$ Change
(Dollars in millions)
Interest income on corporate funds
$
(98.8
)
$
(134.2
)
$
(35.4
)
Realized gains on available - for - sale securities
(15.0
)
(11.4
)
3.6
Realized losses on available - for - sale securities
13.4
23.8
10.4
Realized (gain) loss on investment in Reserve Fund
(15.2
)
18.3
33.5
Impairment losses on available - for - sale securities
14.4
-
(14.4
)
Net loss (gain) on sales of buildings
2.3
(2.2
)
(4.5
)
Other, net
(2.3
)
(2.3
)
-
Other income, net
$
(101.2
)
$
(108.0
)
$
(6.8
)