Paychex 2011 Annual Report Download - page 35

Download and view the complete annual report

Please find page 35 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

This growth was generated from the following:
$ in billions
As of May 31, 2011 Change 2010 Change 2009
Paychex HR Solutions client employees
(1)
. . 567,000 13% 502,000 11% 453,000
Paychex HR Solutions clients
(1)
......... 21,000 9% 19,000 8% 18,000
Insurance services clients
(2)
............ 100,000 8% 92,000 7% 86,000
Health and benefits services applicants .... 99,000 23% 80,000 38% 58,000
Retirement services clients
(3)
........... 57,000 12% 51,000 3% 50,000
Asset value of retirement services client
employees’ funds
(3)
................ $ 15.3 35% $ 11.3 33% $ 8.5
(1) Includes Paychex HR Essentials as of May 31, 2011.
(2) Includes workers’ compensation insurance services clients and health and benefits services clients.
(3) Includes ePlan as of May 31, 2011. Excluding ePlan clients, retirement services clients would have increased
5% for fiscal 2011.
Human Resource Services revenue growth for fiscal 2011 reflects modest improvements in economic
conditions, the client growth noted above, and price increases. Paychex HR Solutions revenue for fiscal 2011
was positively impacted by increases in both clients and client employees. Contributing to this growth in clients and
client employees is our new product offering, Paychex HR Essentials. Growth in certain products that are primarily
beneficial to our MMS clients contributed positively to Human Resource Services revenue growth for both fiscal
2011 and fiscal 2010. Also, insurance services revenue continued to grow as a result of increases in both health and
benefits services and workers’ compensation insurance services revenue. Health and benefits services revenue
continued its accelerated growth since inception, increasing 29% for fiscal 2011 and 49% for fiscal 2010, driven
primarily by the number of applicants.
Somewhat offsetting these positive factors, fluctuations in our PEO revenue had an adverse impact on Human
Resource Services revenue growth for fiscal 2011. PEO net service revenue is more variable quarter to quarter than
our other revenue streams due to fluctuations in adding and retaining client employees as healthcare rates change.
For fiscal 2010, client growth as noted above positively impacted Human Resource Services Revenue;
however, the rates of growth were adversely affected by the cumulative impact of weak economic conditions on our
client base. This particularly affected retirement services, although client growth for retirement services rebounded
somewhat late in fiscal 2010 as client losses improved compared to the prior year.
In fiscal 2011 and fiscal 2010, the 35% and 33% increases in the asset value of retirement services client
employees’ funds were driven by recovery in the financial markets and increased levels of larger plans converting to
Paychex. For both fiscal 2011 and fiscal 2010, retirement services revenue growth was adversely impacted by a shift
in the mix of assets in the retirement services client employees’ funds to investments earning lower fees from
external fund managers.
Total service revenue: Total service revenue increased 5% for fiscal 2011 and declined 3% for fiscal 2010,
attributable to the factors previously discussed.
Interest on funds held for clients: The decrease of 13% in interest on funds held for clients for fiscal 2011
compared to fiscal 2010 was the result of lower average interest rates earned, offset somewhat by an increase in
average investment balances. The decrease of 27% in interest on funds held for clients for fiscal 2010 compared to
fiscal 2009 was the result of lower average interest rates earned and lower average investment balances, offset
somewhat by higher net realized gains on sales of available-for-sale securities.
Average investment balances for funds held for clients increased 6% for fiscal 2011 and decreased 5% for
fiscal 2010. The increase in average investment balances for fiscal 2011 was the result of increases in state
unemployment insurance rates for the 2011 calendar year and the increase in checks per client, offset somewhat by
the lingering effects of the difficult economic conditions on our client base. The decline in average investment
balances for fiscal 2010 was the result of the cumulative adverse effect of weak economic conditions on our client
19