Paychex 2014 Annual Report Download - page 38

any non-GAAP measure may produce results that vary from the GAAP measure and may not be comparable to a
similarly defined non-GAAP measure used by other companies.
Had the direct costs of certain benefit plans been reported as a reduction in service revenue, the following
would have been reflected for fiscal 2014:
For the twelve months ended May 31, 2014 % Change
In millions
As
reported
PEO direct
cost
adjustment
HRS net
revenue
As
reported
HRS
net
revenue
Revenue:
HRS revenue ...................... $ 878.9 $46.8 $ 832.1 18% 12%
Total service revenue ................ $2,478.2 $46.8 $2,431.4 8% 6%
Total revenue ...................... $2,518.9 $46.8 $2,472.1 8% 6%
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, 2014, 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 2014 2013 2012
Average investment balances:
Funds held for clients .................................. $3,877.0 $3,715.6 $3,584.3
Corporate investments .................................. 888.2 756.9 685.9
Total ............................................... $4,765.2 $4,472.5 $4,270.2
Average interest rates earned (exclusive of net realized gains):
Funds held for clients .................................. 1.0% 1.1% 1.2%
Corporate investments .................................. 0.7% 0.8% 0.9%
Combined funds held for clients and corporate investments .... 1.0% 1.0% 1.1%
Total net realized gains ................................... $ 0.6 $ 0.9 $ 1.0
$ in millions
As of May 31, 2014 2013 2012
Net unrealized gains on available-for-sale securities(1) ........... $ 34.5 $ 34.7 $ 59.5
Federal Funds rate(2) ..................................... 0.25% 0.25% 0.25%
Total fair value of available-for-sale securities ................. $3,391.4 $3,691.4 $3,059.0
Weighted-average duration of available-for-sale securities in
years(3) .............................................. 3.0 3.1 3.0
Weighted-average yield-to-maturity of available-for-sale
securities(3) ........................................... 1.6% 1.8% 2.2%
(1) The net unrealized gain on our investment portfolios was approximately $26.9 million as of July 16, 2014.
(2) The Federal Funds rate was a range of zero to 0.25% as of May 31, 2014, 2013, and 2012.
(3) These items exclude the impact of VRDNs, as they are tied to short-term interest rates.
Payroll service revenue: Payroll service revenue was $1.6 billion for fiscal 2014 and $1.5 billion for fiscal
2013, reflecting growth of 4% and 2%, respectively, compared to the prior fiscal year periods. Both fiscal 2014
and fiscal 2013 revenue benefited from increases in revenue per check, client base, and checks per payroll.
Revenue per check was positively impacted by price increases, partially offset by discounting, together with
increased product penetration. For fiscal 2014, our total payroll client base growth was approximately 2%,
compared to 1% for both fiscal 2013 and fiscal 2012. Checks per payroll have increased for seventeen
consecutive quarters. Payroll service revenue for fiscal 2013 was modestly affected by the impact of Hurricane
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