Paychex 2015 Annual Report Download - page 31

We may be adversely impacted by changes in health insurance and workers’ compensation rates and
underlying claims trends: Within our PEO business, we maintain health and workers’ compensation insurance
covering worksite employees. The insurance costs are impacted by claim experience and are a significant portion of
our PEO costs. If we experience a sudden or unexpected increase in claim activity, our costs could increase. In
addition, in the event of expiration or cancellation of existing contracts, we may not be able to secure replacement
contracts on competitive terms. Also, as a co-employer in the PEO, we assume or share many of the employer-
related responsibilities associated with health care reform, which may result in increased costs. Increases in costs
not incorporated into service fees timely or fully could have a material adverse effect on our results of operations.
Incorporating cost increases into service fees could also impact our ability to attract and retain clients.
Our interest earned on funds held for clients may be impacted by changes in government regulations
mandating the amount of tax withheld or timing of remittance: We receive interest income from investing
client funds collected but not yet remitted to applicable tax or regulatory agencies or to client employees. A
change in regulations either decreasing the amount of taxes to be withheld or allowing less time to remit taxes to
applicable tax or regulatory agencies could adversely impact interest income.
We may be adversely impacted by volatility in the financial and economic environment: During periods of
weak economic conditions, employment levels tend to decrease and interest rates may become more volatile. These
conditions may impact our business due to lower transaction volumes or an increase in the number of clients going
out of business. Current or potential clients may decide to reduce their spending on payroll and other outsourcing
services. In addition, new business formation may be affected by an inability to obtain credit. The interest we earn
on funds held for clients may decrease as a result of a decline in funds available to invest and lower interest rates. In
addition, during periods of volatility in the credit markets, certain types of investments may not be available to us or
may become too risky for us to invest in, further reducing the interest we may earn on client funds. Constriction in
the credit markets may impact the availability of financing, even to borrowers with the highest credit ratings.
Historically, we have rarely borrowed against available credit arrangements to meet liquidity needs. However,
should we require additional short-term liquidity during days of large outflows of client funds, a credit constriction
may limit our ability to access those funds or the flexibility to obtain them at interest rates that would be acceptable
to us. If all of these financial and economic circumstances were to remain in effect for an extended period of time,
there could be a material adverse effect on our results of operations and financial condition.
Quantitative and qualitative disclosures about market risk: Refer to Item 7A of this Form 10-K for a
discussion on Market Risk Factors, which could have a material adverse effect on our business and results of
operations.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We owned and leased the following properties as of May 31, 2015:
Square feet
Owned facilities:
Rochester, New York ..................................................... 721,000
Other U.S. locations ...................................................... 65,000
Total owned facilities ..................................................... 786,000
Leased facilities:
Rochester, New York ..................................................... 189,000
Other U.S. locations ...................................................... 2,032,000
International locations ..................................................... 28,000
Total leased facilities ...................................................... 2,249,000
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