ADP 2013 Annual Report Download - page 25

the average interest rate earned to 2.8% during fiscal 2012 , as compared to 3.2% for fiscal 2011 , partially offset by an increase in our average
client funds balance of 6%, to $17.9 billion in fiscal 2012 .
Total Expenses
Our total expenses increased $647.3 million , or 8% , to $8,678.9 million in fiscal 2012 , as compared to fiscal 2011 . The increase in
our total expenses was due to an increase in operating expenses of $476.6 million , an increase in selling, general and administrative expenses of
$142.3 million , and an increase in systems development and programming costs of $22.7 million . Total expenses would have increased
approximately 6% without the impact of recently completed acquisitions.
Our total costs of revenues increased 9% , to $6,214.3 million in fiscal 2012 , as compared to fiscal 2011
due to an increase in operating
expenses of $476.6 million and an increase in systems development and programming costs of $22.7 million .
Operating expenses increased $476.6 million , or 10% , in fiscal 2012 , as compared to fiscal 2011 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 $1,363.6
million in fiscal 2012, which included costs for benefits coverage of $1,060.3 million and costs for workers' compensation and payment of state
unemployment taxes of $303.3 million. 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. The increase in
operating expenses is also due to operating expenses related to businesses acquired of $132.1 million, and higher labor-related expenses in
Employer Services of $38.5 million. Additionally, operating expenses decreased $5.4 million due to changes in foreign currency exchange rates.
Systems development and programming costs increased $22.7 million , or 4% , in fiscal 2012, as compared to fiscal 2011, due to
businesses acquired of $16.1 million, partially offset by a higher proportion of capitalizable efforts directed at feature and functionality product
enhancements in the period. Additionally, systems, development, and programming costs decreased $1.3 million due to changes in foreign
currency exchange rates.
Selling, general and administrative expenses increased $142.3 million , or 6% , in fiscal 2012, as compared to fiscal 2011. The increase
in expenses was related to severance expenses of $51.2 million resulting from cost reduction initiatives focused on the realization of synergies in
certain international businesses as we adjust our cost structure in light of the softer European economic environment, an increase in selling
expenses of $55.5 million resulting from increases in salesforce headcount coupled with an increase in expenses of businesses acquired of $36.7
million. Additionally, selling, general, and administrative expenses decreased $9.0 million due to changes in foreign currency exchange rates.
Other Income, net
Other income, net, increased $54.2 million in fiscal 2012, as compared to fiscal 2011. This increase was due to a gain of $66.0 million
pertaining to the sale of assets related to rights and obligations to resell a third-party expense management platform during fiscal 2012. This
increase was partially offset by the net activity related to our available-for-sale securities, including realized gains, realized losses and
impairment losses, which together resulted in a decrease in other income, net of
22
Years ended June 30,
(Dollars in millions)
2012 2011 $ Change
Interest income on corporate funds
$
(85.2
)
$
(88.8
)
$
(3.6
)
Realized gains on available-for-sale securities
(32.1
)
(38.0
)
(5.9
)
Realized losses on available-for-sale securities
7.7
3.6
(4.1
)
Impairment losses on available-for-sale securities
5.8
— (
5.8
)
Impairment losses on assets held for sale
2.2
11.7
9.5
Gains on sales of buildings
—
(
1.8
)
(1.8
)
Gain on sale of assets
(66.0
)
—
66.0
Other, net
(3.2
)
(3.3
)
(0.1
)
Other income, net
$
(170.8
)
$
(116.6
)
$
54.2