ADP 2013 Annual Report Download - page 30

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Fiscal 2012 Compared to Fiscal 2011
Revenues
Dealer Services' revenues increased $147.8 million , or 10% , to $1,661.3 million for fiscal 2012, as compared to fiscal 2011. Revenues
for our Dealer Services business would have increased approximately 6% for fiscal 2012 without the impact of acquisitions. Revenues without
acquisitions increased $90.9 million due to new clients, improved client retention, and growth in our key products during fiscal 2012, as
compared to fiscal 2011. Revenues increased due to new business started during the year from growth in new business bookings, increased users
of our digital marketing solutions, and an increase in credit report and vehicle registration transaction revenues.
Earnings from Continuing Operations before Income Taxes
Dealer Services' earnings from continuing operations before income taxes increased $46.3 million , or 20% , to $277.6 million
for fiscal
2012, as compared to fiscal 2011. The increase was due to the increase in revenues of $147.8 million
discussed above and was partially offset by
higher operating expenses related to implementing and servicing new clients and products. Overall margin increased approximately 140 basis
points from 15.3% to 16.7% for fiscal 2012, as compared to fiscal 2011, which includes approximately 20 basis points of margin decrease
related to acquisitions. In addition, overall margin increased approximately 50 basis points due to acquisition-related costs incurred during fiscal
2011 related to our acquisition of Cobalt in the prior year.
Other
The primary components of the “Other” segment are the results of operations of ADP Indemnity, non-recurring gains and losses,
miscellaneous processing services, such as customer financing transactions, and certain charges and expenses that have not been allocated to the
reportable segments, such as stock-based compensation expense and the goodwill impairment charge.
Stock-based compensation expense was $96.4 million , $94.1 million , and $90.3 million in fiscal 2013 , 2012 , and 2011 , respectively.
ADP Indemnity provides workers' compensation and employer's liability deductible reimbursement insurance protection for PEO
Services worksite employees up to a $1 million per occurrence. PEO Services has secured specific per occurrence and aggregate stop loss
insurance from a wholly-owned and regulated insurance carrier of AIG that covers all losses in excess of the $1 million per occurrence and also
any aggregate losses within the $1 million retention that collectively exceed a certain level in each policy year. We utilize historical loss
experience and actuarial judgment to determine the estimated claim liability for the PEO Services business. Premiums are charged to PEO
Services to cover the claims expected to be incurred by the PEO Services' worksite employees. Changes in estimated ultimate incurred losses are
recognized by ADP Indemnity. During fiscal 2013 ADP Indemnity paid a premium of $141.4 million to enter into a reinsurance arrangement
with ACE American Insurance Company to cover substantially all losses incurred by ADP Indemnity for the fiscal 2013 policy year up to the $1
million per occurrence related to the workers' compensation and employer's liability deductible reimbursement insurance protection for PEO
Services worksite employees. ADP Indemnity paid a premium of $142.4 million in July 2013 to enter into a reinsurance agreement with ACE
American Insurance Company to cover substantially all losses for the fiscal 2014 policy year on terms substantially similar to the fiscal 2013
reinsurance policy to cover losses up to the $1 million per occurrence related to the workers' compensation and employer's liability deductible
reimbursement insurance protection for PEO Services worksite employees.
Our net realized (gains) on the sale of available-for-sale securities, including impairment losses, were $(28.6) million , $(18.6) million ,
and $(34.4) million in each of fiscal 2013 , 2012 , and 2011 , respectively.
In fiscal 2013 we recorded a goodwill impairment charge of $42.7 million related to our ADP AdvancedMD business which is part of
the Employer Services segment. There were no goodwill impairment charges in fiscal 2012 and 2011 .
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