ADP 2011 Annual Report Download - page 24

Earnings from Continuing Operations before Income Taxes
The fiscal 2010 and 2009 reportable segments ’ revenues and earnings from continuing operations before income taxes have been
adjusted to reflect updated fiscal 2011 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 changes in foreign currency exchange
rates. This adjustment is a reconciling item to revenues and earnings from continuing operations before income taxes and is
eliminated 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. The primary components of the
“Other” segment are the results of operations of ADP Indemnity (a wholly
- owned captive insurance company that provides workers ’
compensation insurance coverage for PEO Services worksite employees), non - recurring gains and losses, miscellaneous processing
services, such as customer financing transactions, and certain expenses that have not been charged to the reportable segments,
such as stock
- based compensation expense.
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 is eliminated in consolidation.
Finally, the reportable segments
’ results also 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 is eliminated in
consolidation.
Employer Services
Fiscal 2011 Compared to Fiscal 2010
Revenues
Employer Services' revenues increased $485.0 million, or 8%, to $6,861.7 million in fiscal 2011 as compared to fiscal 2010. Revenues
for our Employer Services business would have increased approximately 5.5% without the impact of acquisitions.
Revenues from our payroll and tax filing business increased 3% in fiscal 2011 due to higher average client funds balances, improved
worldwide client retention and an increase in pays per control in the U.S. We credit Employer Services with interest on client funds at
a standard rate of 4.5%; therefore, Employer Services' results are not influenced by changes in interest rates. Interest on client funds
recorded within the Employer Services segment increased $73.0 million in fiscal 2011 due to the increase in average client funds
balances from $15.0 billion to $16.6 billion. Our worldwide client retention rate increased 1.2 percentage points in fiscal 2011 to 91.1%,
from 89.9% in fiscal 2010. Pays per control, which represents the number of employees on our clients' payrolls as measured on a
same
- store - sales basis utilizing a subset of over 125,000 payrolls of small to large businesses that are reflective of a broad range of
U.S. geographic regions, increased 2.4% for the twelve months ended June 30, 2011. Revenues from our “beyond payroll” services
increased 13% in fiscal 2011 due to an increase in the number of clients utilizing our HR Benefits, Compliance and Retirement
Services solutions, and approximately 3% growth related to acquisitions.
24
(Dollars in millions)
Years ended June 30,
$ Change
% Change
2011
2010
2009
2011
2010
2011
2010
Employer Services
$
1,831.5
$
1,720.6
$
1,755.4
$
110.9
$
(34.8
)
6
%
(2
)%
PEO Services
137.4
127.3
117.6
10.1
9.7
8
%
8
%
Dealer Services
234.4
201.5
215.2
32.9
(13.7
)
16
%
(6
)%
Other
(191.1
)
(173.1
)
(233.2
)
(18.0
)
60.1
Reconciling items:
Foreign exchange
20.2
17.8
6.5
Client funds interest
(212.9
)
(136.7
)
(66.3
)
Cost of capital charge
113.2
105.8
104.9
Total earnings from continuing
operations before income taxes
$
1,932.7
$
1,863.2
$
1,900.1
$
69.5
$
(36.9
)
4
%
(2
)%