Paychex 2012 Annual Report Download - page 36

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Results of Operations
Summary of Results of Operations for the Fiscal Years Ended May 31:
In millions, except per share amounts 2012 Change 2011 Change 2010
Revenue:
Payroll service revenue ................ $1,510.0 5% $1,438.8 2% $1,404.9
Human Resource Services revenue ....... 676.2 13% 597.4 10% 540.9
Total service revenue .................. 2,186.2 7% 2,036.2 5% 1,945.8
Interest on funds held for clients ......... 43.6 (9%) 48.1 (13%) 55.0
Total revenue ....................... 2,229.8 7% 2,084.3 4% 2,000.8
Combined operating and SG&A expenses .... 1,375.9 6% 1,297.9 2% 1,276.0
Operating income ...................... 853.9 9% 786.4 8% 724.8
Investment income, net .................. 6.4 9% 5.8 29% 4.5
Income before income taxes ............. 860.3 9% 792.2 9% 729.3
Income taxes ........................... 312.3 13% 276.9 10% 252.3
Effective income tax rate ............... 36.3% 35.0% 34.6%
Net income ............................ $ 548.0 6% $ 515.3 8% $ 477.0
Diluted earnings per share .............. $ 1.51 6% $ 1.42 8% $ 1.32
We invest in highly liquid, investment-grade fixed income securities and do not utilize derivative
instruments to manage interest rate risk. As of May 31, 2012, we had no exposure to high-risk or illiquid
investments and had insignificant exposure to European investments. Details regarding our combined funds held
for clients and corporate investment portfolios are as follows:
Year ended May 31,
$ in millions 2012 2011 2010
Average investment balances:
Funds held for clients .................................. $3,584.3 $3,350.3 $3,167.9
Corporate investments .................................. 685.9 662.4 653.8
Total ............................................... $4,270.2 $4,012.7 $3,821.7
Average interest rates earned (exclusive of net realized gains):
Funds held for clients .................................. 1.2% 1.4% 1.6%
Corporate investments .................................. 0.9% 0.9% 0.8%
Combined funds held for clients and corporate investments .... 1.1% 1.3% 1.5%
Total net realized gains ................................... $ 1.0 $ 1.3 $ 3.2
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