ADP 2013 Annual Report Download - page 19

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Our results during fiscal 2013 continue to reflect the strength of our underlying business model, including the diversity of our client
base and products, against the uneven global economic recovery. Our focus on product innovation and improvements in salesforce productivity
led to growth in new business bookings. We are pleased with the performance of our business segments, which have continued to drive good
revenue growth and strong pretax margin expansion. We continue to benefit from solid revenue retention across our business segments and we
remain pleased with the strength of our pays per control metric, which represents the number of employees on our clients' payrolls as measured
on a same-store-sales basis utilizing a representative subset of payrolls ranging from small to large businesses that are reflective of a broad range
of U.S. geographic regions. Despite the negative impact to our margins from strategic acquisitions completed in fiscal 2012 , we remain pleased
with their positive contribution to our revenue growth. We continue to be impacted by the decline in high-margin client interest revenues as a
result of lower interest rates, partially offset by an increase in our average client funds balance. Though we believe that the impact to fiscal 2013
client funds revenue will be the bottom in terms of the year-over-year decline, we expect the lower interest rate environment to continue to
impact us negatively during the year ending June 30, 2014 (“fiscal 2014 ”).
Consolidated revenues in fiscal 2013 increased 7% , to $11,310.1 million , as compared to fiscal 2012 . Earnings from continuing
operations before income taxes decreased 1% , to $2,084.3 million , as compared to fiscal 2012 and net earnings from continuing operations
decreased 1% , to $1,364.1 million , as compared to fiscal 2012 . Our diluted earnings per share from continuing operations was flat in fiscal
2013 as compared to $2.80 per share in fiscal 2012 on fewer shares outstanding.
Our fiscal 2013 results include a $ 42.7 million non tax-deductible goodwill impairment charge related to our ADP AdvancedMD
business. Our fiscal 2012 results include a gain on the sale of assets of $66.0 million , or $41.2 million after tax, related to rights and obligations
to resell a third-party expense management platform. Excluding these items from both years, our adjusted earnings from continuing operations
before income taxes increase d 4% , to $2,127.0 million , as compared to $2,041.9 million for fiscal 2012 , and adjusted net earnings from
continuing operations increase d 5% , to $1,406.8 million , compared to $1,338.5 million for fiscal 2012
. Our adjusted diluted earnings per share
from continuing operations increase d 6% , to $2.89 for fiscal 2013 from $2.72 , as adjusted, for fiscal 2012 , on increased adjusted net earnings
from continuing operations and fewer shares outstanding.
Our business segment results were solid with Employer Services' revenues increasing 7% to $7,914.0 million and earnings from
continuing operations before income taxes increasing 9% to $2,134.2 million , PEO Services' revenues increasing 11% to $1,973.2 million and
earnings from continuing operations before income taxes increasing 17% to $199.2 million , and Dealer Services' revenues increasing 9% to
$1,813.7 million and earnings from continuing operations before income taxes increasing 21% to $335.7 million in fiscal 2013 . Employer
Services' and PEO Services' new business bookings, which represent annualized recurring revenues anticipated from sales orders to new and
existing clients, grew 11% worldwide, to over $1.35 billion in fiscal 2013 . Dealer Services' new business bookings showed strength as we
continued to experience the effects of a stronger automotive industry and increased penetration of applications within our base. Our key business
metrics continue to reflect the core strength of our business model, with our Employer Services' worldwide client revenue retention rate
increasing to a record 91.3% and our pays per control metric increasing 2.8% for the twelve months ended June 30, 2013 .
Interest on funds held for clients decreased approximately 15% , or $72.4 million , to $420.9 million from $493.3 million in fiscal
2012 . The decrease in the consolidated interest on funds held for clients resulted from the decrease in the average interest rate earned to 2.2% in
fiscal 2013 , as compared to 2.8% in fiscal 2012 , partially offset by growth in average client funds balance of 7% resulting from the continued
strength and growth of our Employer Services segment.
We invest our funds held for clients in accordance with ADP's prudent and conservative investment guidelines, where the safety of
principal, liquidity, and diversification are the foremost objectives of our investment strategy. The portfolio is predominantly invested in
AAA/AA rated fixed-
income securities. Our client funds investment strategy is structured to allow us to average our way through an interest rate
cycle by laddering the maturities of our investments out to five years (in the case of the extended portfolio) and out to ten years (in the case of
the long portfolio). This investment strategy is supported by our short-term financing arrangements necessary to satisfy short-term funding
requirements relating to client funds obligations.
Our financial condition and balance sheet remain solid at June 30, 2013 , with cash and cash equivalents and marketable securities of
$2,041.1 million . The cash and marketable securities balance included $0.7 million of cash and $245.2 million of long-term marketable
securities pledged as collateral to the outstanding reverse repurchase obligations as of June 30,
17
• grow our integrated suite of cloud-
•
invest to grow and scale our HR Business Process Outsourcing solutions by leveraging our platforms and processes;
•
leverage our global presence to offer clients HCM, benefits, and payroll solutions where they do business; and
•
grow and deepen our solutions offering to ensure our key adjacencies are market leaders.