ADP 2014 Annual Report Download - page 21

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During the twelve months ended J une 30, 2015 ("fiscal 2015 "), we more narrowly focused our attention on our global HCM strategy and our results
continue to reflect the strength of our underlying business model and our success in the market. The increased focus is evidenced by the separation of our former
Dealer Services business into its own independent, publicly traded company called CDK Global, Inc. ("CDK ") on September 30, 2014 and our investments in
product innovation and our salesforce. Our increased focus on product development, the high demand for additional HCM solutions, including products that assist
businesses in complying with the Affordable Care Act ("ACA"), improved productivity, and an improving economic backdrop in the United States of America
("U.S."), led our salesforce to deliver exceptionally strong new business bookings, which represent annualized recurring revenues anticipated from sales orders to
new and existing clients in Employer Services and Professional Employer Organization ("PEO") Services. We are pleased with the financial performance of our
business segments which have driven solid organic revenue growth and pretax margin expansion. This was achieved despite pressure on Employer Services
revenues from foreign currency translation, margin pressure from our high-margin client funds interest revenue (which grew at a slower rate than overall revenue),
and increased selling expenses which were driven by an exceptionally strong new business booking performance. Revenue retention remains at record levels and
we continue to benefit from the strength of the pays per control in our client base, which we measure as the number of employees on our clients' payrolls as
measured on a same-store-sales basis utilizing a representative subset of payrolls ranging from small to large businesses that are reflective of a broad range of the
U.S. geographic regions.
Consolidated revenues in fiscal 2015 increased 7% , to $10,938.5 million , as compared to the fiscal year ended June 30, 2014 ("fiscal 2014 "). Earnings
from continuing operations before income taxes increased 10% , to $2,070.7 million , as compared to fiscal 2014 and net earnings from continuing operations
increased 11% , to $1,376.5 million , as compared to fiscal 2014 . Our diluted earnings per share from continuing operations increased 12% to $2.89 in fiscal 2015
, as compared to $2.57 in fiscal 2014 .
Despite pressure from foreign currency translation and higher selling expenses to support our exceptionally strong new business bookings in our
Employer Services segment, our business segment results were solid. Employer Services' revenues increased 5% to $8,897.3 million and earnings from continuing
operations before income taxes increased 7% to $2,694.2 million . PEO Services' revenues increasing 17% to $2,647.2 million and earnings from continuing
operations before income taxes increased 30% to $303.6 million in fiscal 2015 . Total new business bookings grew 13% worldwide to over $1.6 billion in fiscal
2015 . Our key business metrics continue to reflect the core strength of our business model, with our Employer Services' worldwide client revenue retention rate
remaining strong at 91.4% and our pays per control increasing 3.0% in fiscal 2015.
Although interest on funds held for clients increased for the first time in seven years, to $377.7 million in fiscal 2015 from $373.4 million in fiscal 2014 ,
we still felt the pressure from declining interest rates on our client funds investment portfolio. This decline in the average interest rate earned to 1.7% in fiscal 2015
, as compared to 1.8% in fiscal 2014 , was more than offset by growth in average client funds balances of 5% resulting from the continued strength and growth of
our Employer Services segment.
We invest our funds held for clients in accordance with A DP's prudent and conservative investment guidelines, where the safety of principal, liquidity,
and diversification are the foremost objectives of our investment strategy. The portfolio is predominantly invested in AAA/A A rated fixed-income securities. Our
client funds investment strategy is structured to allow us to average our way through an interest rate cycle by laddering the maturities of our investments out to five
years (in the case of the extended portfolio) and out to ten years (in the case of the long portfolio). This investment strategy is supported by our short-term
financing arrangements necessary to satisfy short-term funding requirements relating to client funds obligations.
Our financial condition and balance sheet remain solid at J une 30, 2015 , with cash and cash equivalents and marketable securities of $1.7 billion . Our
net cash flows provided by operating activities were $1,905.6 million in fiscal 2015 , as compared to $1,821.4 million in fiscal 2014 . This increase in cash flows
provided by operating activities from fiscal 2014 to fiscal 2015 was due to the sale of notes receivable related to our Dealer Services financing arrangements and
lower pension contributions. The change in cash used in investing activities of $4,573.6 million is due to the timing of receipts and disbursements of restricted cash
and cash equivalents held to satisfy client funds obligations, partially offset by the receipt of an $825.0 million tax-free dividend received from CDK in connection
with the spin-off earlier this fiscal year. The increase in cash provided by financing activities of $3,974.9 million is primarily due to the net change in client fund
obligations, partially offset by the timing of cash received and repaid under our commercial paper issuances and an increase in repurchases of common stock in
fiscal 2015.
We have a strong business model with a high percentage of recurring revenues with strong client retention, good margins, the ability to generate
consistent, healthy cash flows, and low capital expenditure requirements. We continue to enhance value to our shareholders, and in fiscal 2015 paid dividends of
$927.6 million and returned $1,557.2 million in cash through our share buyback program. These share repurchases were partially funded by the $825.0 million
dividend we received
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