ADP 2010 Annual Report Download - page 26

Our total costs of revenues increased $165.5 million, to $4,822.7 million in fiscal 2009, from $4,657.2 million in fiscal 2008, due to an
increase in our operating expenses of $188.6 million, partially offset by a decrease in our systems development and programming
costs of $22.8 million.
Operating expenses increased $188.6 million, or 5%, in fiscal 2009 compared to fiscal 2008 due to the increase in revenues described
above, including the increases in PEO Services, which have pass
- through costs that are re - billable including costs for benefits
coverage, workers
’ compensation coverage and state unemployment taxes for worksite employees. These pass - through costs were
$874.8 million in fiscal 2009, which included costs for benefits coverage of $724.3 million and costs for workers compensation and
payment of state unemployment taxes of $150.5 million. These costs were $755.3 million in fiscal 2008, which included costs for
benefits coverage of $621.6 million and costs for workers compensation and payment of state unemployment taxes of $133.7 million.
The increase in operating expenses is also due to higher expenses in Employer Services of $64.5 million related to increased service
costs for investment in client
- facing associates. Such increases were partially offset by a decrease in operating expenses of
approximately $83.7 million due to changes in foreign currency exchange rates.
Systems development and programming expenses decreased $22.8 million, or 4%, in fiscal 2009 compared to fiscal 2008 due to
decreases related to the impact of changes in foreign currency exchange rates of $15.8 million, a decrease in stock
- based
compensation expenses of $6.5 million and a decrease in programming expenses related to our systems of $3.9 million. The decrease
in programming expenses was a result of a decrease in the average cost per associate as a larger percentage of our associates are
located in off
- shore and smart - shore locations. In addition, depreciation and amortization expenses decreased $0.3 million in fiscal
2009 compared to fiscal 2008 due to decreases related to the impact of changes in foreign currency exchange rates of $5.4 million,
which were partially offset by increased amortization expenses of $4.7 million resulting from the intangible assets acquired with new
businesses and the purchases of software and software licenses.
Selling, general and administrative expenses decreased $168.8 million, or 7%, in fiscal 2009 compared to fiscal 2008, which was
attributable to decreases related to the impact of changes in foreign currency exchange rates of $55.5 million, a decrease in selling
expenses related to a decline in our new client sales of $45.6 million and a reversal of $23.3 million in expenses due to a favorable
ruling related to an international business capital tax. In addition, the decrease is attributable to our cost saving initiatives that
commenced in fiscal 2008 and continued in fiscal 2009, which included a reduction in payroll and payroll related expenses of $32.3
million and a decrease in stock
- based compensation expenses of $16.3 million. Such decreases were partially offset by an increase in
severance charges of $67.6 million and an increase in the provision for our allowance for doubtful accounts of $15.5 million due to
losses related to our notes receivable from automotive, truck and powersports dealers.
Interest expense decreased $47.2 million in fiscal 2009 as a result of a decrease of $40.6 million related to our short
- term commercial
paper program and a decrease of $6.6 million related to our reverse repurchase program. In the aggregate, interest expense decreased
by approximately $68.4 million related to decreases in interest rates and increased approximately $21.2 million related to increases in
borrowings. In fiscal 2009 and 2008, the Company ’ s average borrowings under the commercial paper program were $1.9 billion and
$1.4 billion, respectively, at weighted average interest rates of 1.0% and 4.2%, respectively. In fiscal 2009 and 2008, the Company
’ s
average borrowings under the reverse repurchase program were approximately $425.9 million and $360.4 million, respectively, at
weighted average interest rates of 1.3% and 3.4%, respectively.
Other Income, net
22
Years ended June 30,
2009
2008
$ Change
(Dollars in millions)
Interest income on corporate funds
$
(134.2
)
$
(149.5
)
$
(15.3
)
Realized gains on available - for - sale securities
(11.4
)
(10.1
)
1.3
Realized losses on available - for - sale securities
23.8
11.4
(12.4
)
Realized loss on investment in Reserve Fund
18.3
-
(18.3
)
Gains on sales of building
(2.2
)
(16.0
)
(13.8
)
Other, net
(2.3
)
(2.3
)
-
Other income, net
$
(108.0
)
$
(166.5
)
$
(58.5
)