Paychex 2011 Annual Report Download - page 34

Download and view the complete annual report

Please find page 34 of the 2011 Paychex annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 92

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92

$ in millions
As of May 31, 2011 2010 2009
Net unrealized gains on available-for-sale securities
(1)
......... $ 59.3 $ 66.6 $ 66.7
Federal Funds rate
(2)
.................................. 0.25% 0.25% 0.25%
Three-year “AAA” municipal securities yield ................ 0.80% 0.99% 1.35%
Total fair value of available-for-sale securities ............... $2,737.2 $2,151.8 $1,780.9
Weighted-average duration of available-for-sale securities in
years
(3)
.......................................... 2.4 2.5 2.5
Weighted-average yield-to-maturity of available-for-sale
securities
(3)
....................................... 2.6% 2.9% 3.3%
(1) The net unrealized gain of our investment portfolios was approximately $57.5 million as of July 11, 2011.
(2) The Federal Funds rate was a range of zero to 0.25% as of May 31, 2011, May 31, 2010, and May 31, 2009.
(3) These items exclude the impact of VRDNs held as of May 31, 2011 and May 31, 2010, as they are tied to short-
term interest rates. We did not hold any VRDNs as of May 31, 2009.
Payroll service revenue: Payroll service revenue increased 2% to $1.4 billion for fiscal 2011, compared to a
5% decline for fiscal 2010. Fiscal 2011 revenue benefited from an increase in checks per client and revenue per
check. Checks per client increased 2.1% for fiscal 2011 compared to fiscal 2010. Revenue per check was positively
impacted by lower discounting within our overall client base and price increases. Our client base, excluding the
impact of SurePayroll, declined 0.9% during fiscal 2011. This was largely attributable to the adverse impact on the
sales of new units from lack of growth in new business starts. Client retention improved for fiscal 2011, with client
losses that were 9% lower than for fiscal 2010, largely a result of fewer clients going out of business or having no
employees. In addition, fiscal 2011 new sales units and client losses related to local and regional competitors
improved compared to the prior year.
The decrease in payroll service revenue for fiscal 2010 was as a result of the cumulative adverse effects of
weak economic conditions on our client base and check volume. Our client base decreased 3.2% during fiscal 2010
and checks per client decreased 2.6% for fiscal 2010 compared to fiscal 2009.
Human Resource Services revenue: Human Resource Services revenue increased 10% for fiscal 2011 and
3% for fiscal 2010 to $597.4 million and $540.9 million, respectively. Human Resource Services revenue growth for
both fiscal 2011 and fiscal 2010 was impacted by the revenue earned from Stromberg time and attendance
operations (“Stromberg”), an immaterial component of Paychex, prior to its sale in October 2009. In addition,
retirement services revenue growth for fiscal 2010 was impacted by billings in fiscal 2009 related to restatements of
clients’ retirement plans required by statute, which are not expected to recur for approximately six years. This
favorably impacted retirement services revenue growth for fiscal 2009 by $12.4 million and did not recur in fiscal
2010. Excluding the impact of Stromberg in both fiscal 2011 and fiscal 2010, and the impact of retirement plan
restatement billings for fiscal 2010, Human Resource Services revenue growth would have been as follows:
% Change 2011 2010
Human Resource Services revenue, as reported .............................. 10% 3%
Human Resource Services revenue excluding Stromberg revenue and retirement plan
restatement billings ................................................. 12% 8%
18