Paychex 2012 Annual Report Download - page 38

$ in billions
As of May 31, 2012 Change 2011 Change 2010
Paychex HR Solutions client employees served(1) .... 615,000 8% 569,000 12% 505,000
Paychex HR Solutions clients(1) .................. 23,000 8% 21,000 8% 20,000
Insurance services clients(2) ...................... 107,000 6% 100,000 8% 92,000
Health and benefits services applicants ............. 121,000 23% 99,000 23% 80,000
Retirement services clients(3) ..................... 59,000 4% 57,000 12% 51,000
Asset value of retirement services client employees’
funds(3) .................................... $ 15.7 3% $ 15.3 35% $ 11.3
(1) Includes Paychex HR Essentials as of May 31, 2012 and 2011.
(2) Includes workers’ compensation insurance services clients and health and benefits services clients.
(3) Includes ePlan as of May 31, 2012 and 2011. Organic growth in retirement services clients would have been
approximately 3% for fiscal 2012 and 5% for fiscal 2011. Organic growth in the asset value of retirement
services client employees’ funds would have been approximately 2% for fiscal 2012 and 26% for fiscal
2011.
Total service revenue: Total service revenue increased 7% for fiscal 2012 and 5% for fiscal 2011,
attributable to the factors previously discussed. Organic service revenue growth was approximately 6% for fiscal
2012 and 4% for fiscal 2011.
Interest on funds held for clients: Interest on funds held for clients decreased 9% for fiscal 2012 and 13%
for fiscal 2011 compared to the respective prior year periods. These declines were the result of lower average
interest rates earned, partially offset by an increase in average investment balances.
Average investment balances for funds held for clients increased 7% for fiscal 2012 and 6% for fiscal 2011.
The increase for fiscal 2012 was the result of the inclusion of SurePayroll client funds, wage inflation, increase in
state unemployment insurance rates, and the increase in checks per payroll. The increase in average investment
balances for fiscal 2011 was the result of increases in state unemployment insurance rates and the increase in
checks per payroll, offset somewhat by the lingering effects of the difficult economic conditions on our client
base.
Refer to the “Market Risk Factors” section, contained in Item 7A of this Form 10-K, for more information
on changing interest rates.
Combined operating and SG&A expenses: The following table summarizes total combined operating and
selling, general and administrative (“SG&A”) expenses for fiscal years:
In millions 2012 Change 2011 Change 2010
Compensation-related expenses ............ $ 920.8 5% $ 877.7 3% $ 854.9
Facilities expenses ...................... 58.1 (3%) 60.0 (1%) 60.4
Depreciation and amortization ............. 97.8 10% 88.7 3% 86.5
Other expenses ......................... 299.2 10% 271.5 6% 255.5
1,375.9 6% 1,297.9 3% 1,257.3
Expense charge to increase the Rapid Payroll
litigation reserve ...................... — — — (100%) 18.7
Total operating and SG&A expenses ........ $1,375.9 6% $1,297.9 2% $1,276.0
A significant portion of the increases in expenses for fiscal 2012 and fiscal 2011 were driven by the
acquisitions during these periods. Organic growth in combined operating and SG&A expenses (exclusive of
acquisitions and the aforementioned $18.7 million expense charge in fiscal 2010) was approximately 3% for
fiscal 2012 and 2% for fiscal 2011. Increases in product innovation and the supporting technology contributed to
the increases in total expenses. Expenses related to information technology increased at a faster pace than total
expenses for both fiscal 2012 and fiscal 2011. Improvements in operations productivity with related lower
headcount have moderated these increases.
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