ADP 2012 Annual Report Download - page 28

Operating expenses increased $623.7 million, or 15%, in fiscal 2011 as compared to fiscal 2010 due to the increase in revenues described
above, including the increases in PEO Services, which has pass-through costs that are re-billable and which includes costs for benefits
coverage, workers’ compensation coverage and state unemployment taxes for worksite employees. These pass-through costs were $1,182.2
million in fiscal 2011, which included costs for benefits coverage of $937.8 million and costs for workers’ compensation and payment of state
unemployment taxes of $244.4 million. These pass-through costs were $988.5 million in fiscal 2010, which included costs for benefits
coverage of $811.5 million and costs for workers’ compensation and payment of state unemployment taxes of $176.9 million. The increase in
operating expenses is also due to operating expenses related to businesses acquired of $230.6 million, and higher expenses in Employer
Services of $47.4 million related to increased service costs for investment in client-facing associates. Additionally, operating expenses
increased due to the settlement of a PEO Services state unemployment matter that reduced operating expenses $9.2 million in fiscal 2010.
Lastly, operating expenses increased $5.6 million due to changes in foreign currency exchange rates.
Systems development and programming costs increased $63.3 million, or 12%, in fiscal 2011 as compared to fiscal 2010, due to expenses of
acquired businesses of $42.2 million and higher development expenses.
Selling, general and administrative expenses increased $195.9 million, or 9%, in fiscal 2011 as compared to fiscal 2010. The increase in
expenses was due to higher selling expenses of $75.6 million resulting from increases in headcount over prior year levels coupled with an
increase in selling, general and administrative expenses of acquired businesses of $96.1 million, an increase in stock-based compensation
expense of $5.9 million, and an increase in technology related security expenses of $8.1 million. Additionally, selling, general and
administrative expenses increased $5.6 million due to changes in foreign currency rates.
Other Income, net
Other income, net, increased $15.4 million in fiscal 2011 as compared to fiscal 2010. This increase was mainly due to an increase in realized
gains on available-for-sale securities of $23.0 million, and a decrease in realized losses on available-for-sale securities of $9.8 million, which
together increased other income, net, $32.8 million. Such amounts were offset in fiscal 2011 by an $11.7 million impairment loss on assets held
for sale and a $10.0 million decrease in interest income on corporate funds resulting from flat average interest rates at 2.6%, as compared to the
prior year, coupled with declining average daily corporate funds, which decreased from $3.8 billion in fiscal 2010 to $3.5 billion in fiscal 2011.
Earnings from Continuing Operations before Income Taxes
Earnings from continuing operations before income taxes increased $69.5 million, or 4%, from $1,863.2 million in fiscal 2010 to $1,932.7
million in fiscal 2011 due to the increase in revenues partially offset by the increase in expenses discussed above. Overall margin decreased
approximately 130 basis points in fiscal 2011 with approximately 90 basis points of the margin decline attributable to acquisitions.
26
Years ended June 30, 2011 2010
$ Change
(Dollars in millions)
Interest income on corporate funds
$
(88.8
)
$
(98.8
)
$
(10.0
)
Realized gains on available-for-sale securities
(38.0
)
(15.0
)
23.0
Realized losses on available-for-sale securities
3.6
13.4
9.8
Realized gains on investment in Reserve Fund
(0.9
)
(15.2
)
(14.3
)
Impairment losses on available-for-sale securities -
14.4
14.4
Impairment losses on assets held for sale
11.7
-
(11.7
)
Net loss (gain) on sales of buildings
(1.8
)
2.3
4.1
Other, net
(2.4
)
(2.3
)
0.1
Other income, net $
(116.6
)
$
(101.2
)
$
15.4