ADP 2008 Annual Report Download - page 21

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Earnings from Continuing Operations before Income Taxes
The fiscal 2007 and 2006 reportable segments’ revenues and earnings from continuing operations before income taxes have been adjusted
to reflect updated fiscal 2008 budgeted foreign exchange rates. This adjustment is made for management purposes so that the reportable
segments’ revenues are presented on a consistent basis without the impact of fluctuations in foreign currency exchange rates. This adjustment is
a reconciling item to revenues and earnings from continuing operations before income taxes and results in the elimination of this adjustment in
consolidation.
Certain revenues and expenses are charged to the reportable segments at a standard rate for management reasons. Other costs are charged to
the reportable segments based on management’ s responsibility for the applicable costs. Lastly, various income and expense items, including
certain non-recurring gains and losses and stock-based compensation expenses of $123.6 million, $130.5 million and $142.7 million in fiscal
2008, 2007 and 2006, respectively, are recorded in “Other.”
In addition, the reconciling items include an adjustment for the difference between actual interest income earned on invested funds held for
clients and interest credited to Employer Services and PEO Services at a standard rate of 4.5%. This allocation is made for management reasons
so that the reportable segments’ results are presented on a consistent basis without the impact of fluctuations in interest rates. This allocation is
a reconciling item to our reportable segments’ revenues and earnings from continuing operations before income taxes and results in the
elimination of this adjustment in consolidation.
Finally, the reportable segments’ results include a cost of capital charge related to the funding of acquisitions and other investments. This
charge is a reconciling item to earnings from continuing operations before income taxes and results in the elimination of this charge in
consolidation.
E
mployer Services
Fiscal 2008 Compared to Fiscal 2007
R
evenues
Employer Services' revenues increased 9% in fiscal 2008 due to new business started in the period, an increase in the number of employees
on our clients’ payrolls, the impact of price increases, which contributed approximately 2% to our revenue growth, and an increase in average
client funds balances, which increased interest revenues. Internal revenue growth, which represents revenue growth excluding the impact of
acquisitions and divestitures, was approximately 8% for fiscal 2008. Revenue from our traditional payroll and payroll tax filing business grew
7%. The number of employees on our clients’ payrolls, “pays per control,” in the United States increased 1.3% in fiscal 2008. This employment
metric represents over 141,000 payrolls of small to large businesses and reflects a broad range of U.S. geographic regions. Our worldwide
client retention increased 0.2 percentage points in fiscal 2008, as compared to fiscal 2007. Revenues from our “beyond payroll” services,
excluding PEO Services, which is a separate reportable segment, increased 16% in fiscal 2008 due to an increase in our Time and Labor
Management services revenues of 17% and due to the impact of business acquisitions. The increase in revenues related to our Time and Labor
Management services was due to an increase in the number of clients utilizing these services.
21
(Dollars in millions)
Years ended June 30, Change
2008 2007 2006 2008 2007
Employer Services $1,601.4 $1,412.4 $1,259.3 13% 12%
PEO Services 104.9
80.4 54.9 30% 46%
Dealer Services 232.0 204.4 159.7 14% 28%
Other (238.9) (177.0) (143.9) (35)% (23)%
Reconciling items:
Foreign exchange 15.9
(7.1) (12.1)
Client funds interest (15.1) (2.9) (56.8)
Cost of capital charge 111.8 113.3 100.1
Total earnings from continuing operations before income taxes $1,812.0 $1,623.5 $1,361.2 12% 19%