Paychex 2010 Annual Report Download - page 23

clients begin using our services in the beginning of a calendar year. In addition, calendar year-end transaction
processing and client funds activity are traditionally higher during the third fiscal quarter due to clients paying year-
end bonuses and requesting additional year-end services. Historically, as a result of these factors, our total revenue
has been slightly higher in the third fiscal quarter, with greater sales commission expenses also reported in this
quarter.
Other
Information about our services and products, stockholder information, press releases, and filings with the SEC
can be found on our website at www.paychex.com. Our Form 10-Ks, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, and other SEC filings, and any amendments to such reports and filings, are made available,
free of charge, on the Investor Relations section of our website as soon as reasonably practical after such material is
filed with, or furnished to, the SEC. Also, copies of our Annual Report to Stockholders and Proxy Statement, to be
issued in connection with our 2010 Annual Meeting of Stockholders, will be made available, free of charge, upon
written request submitted to Paychex, Inc., c/o Corporate Secretary, 911 Panorama Trail South, Rochester,
New York 14625-2396.
Item 1A. Risk Factors
Our future results of operations are subject to a number of risks and uncertainties. These risks and uncertainties
could cause actual results to differ materially from historical and current results and from our projections. Important
factors known to us that could cause such differences include, but are not limited to, those discussed below and those
contained in the “Safe Harbor” statement at the beginning of Part I of this Form 10-K.
We may be adversely impacted by volatility in the financial and economic environment: During periods of
weakening economic conditions, employment levels may decrease and interest rates may become more volatile.
These conditions may impact our business due to lower transaction volumes or an increase in the number of clients
going out of business. Current or potential clients may decide to reduce their spending on payroll and other
outsourcing services. In addition, new business starts may be affected by an inability to obtain credit. The interest
we earn on funds held for clients may decrease as a result of a decline in funds available to invest and lower interest
rates. In addition, during periods of volatility in the credit markets, certain types of investments may not be available
to us or may become too risky for us to invest in, further reducing the interest we may earn on client funds.
Constriction in the credit markets may impact the availability of financing, even to borrowers with the highest credit
ratings. We historically have not borrowed against available credit arrangements to meet liquidity needs. However,
should we require additional short-term liquidity during days of large outflows of client funds, a credit constriction
may limit our ability to access those funds or the flexibility to obtain them at interest rates that would be acceptable
to us. If all of these financial and economic circumstances were to remain in effect for an extended period of time,
there could be a material adverse effect on our results of operations.
Our interest earned on funds held for clients may be impacted by changes in government regulations
mandating the amount of tax withheld or timing of remittance: We receive interest income from investing client
funds collected but not yet remitted to applicable tax or regulatory agencies or to client employees. A change in
regulations either decreasing the amount of taxes to be withheld or allowing less time to remit taxes to applicable tax
or regulatory agencies would adversely impact this interest income.
Our services may be adversely impacted by changes in government regulations and policies: Many of our
services, particularly payroll tax administration services and employee benefit plan administration services, are
designed according to government regulations that continually change. Changes in regulations could affect the
extent and type of benefits employers are required, or may choose, to provide employees or the amount and type of
taxes employers and employees are required to pay. Such changes could reduce or eliminate the need for some of
our services and substantially decrease our revenue. Added requirements could also increase our cost of doing
business. The recently enacted Hiring Incentives to Restore Employment (“HIRE”) Act provides temporary tax
breaks to companies that hire the unemployed and will impact our payroll tax administration service clients. The
recently enacted health care reform legislation will have a direct impact on insurance services clients. Failure to
educate and assist our client regarding these legislations could have an adverse impact on our reputation. Failure by
7