Large accelerated filer | ý | Accelerated filer | ¨ |
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Common Stock, $0.01 Par Value | 365,196,117 | Shares | |
CLASS | OUTSTANDING AS OF | August 31, 2013 |
For the three months ended August 31, | ||||||||
2013 | 2012 | |||||||
Revenue: | ||||||||
Service revenue | $ | 597.9 | $ | 568.1 | ||||
Interest on funds held for clients | 10.0 | 10.1 | ||||||
Total revenue | 607.9 | 578.2 | ||||||
Expenses: | ||||||||
Operating expenses | 164.7 | 163.5 | ||||||
Selling, general and administrative expenses | 188.1 | 176.7 | ||||||
Total expenses | 352.8 | 340.2 | ||||||
Operating income | 255.1 | 238.0 | ||||||
Investment income, net | 1.2 | 1.9 | ||||||
Income before income taxes | 256.3 | 239.9 | ||||||
Income taxes | 93.5 | 86.8 | ||||||
Net income | 162.8 | 153.1 | ||||||
Other comprehensive loss, net of tax: | ||||||||
Unrealized losses on securities, net of tax | (26.9 | ) | (0.4 | ) | ||||
Total other comprehensive loss, net of tax | (26.9 | ) | (0.4 | ) | ||||
Comprehensive income | $ | 135.9 | $ | 152.7 | ||||
Basic earnings per share | $ | 0.45 | $ | 0.42 | ||||
Diluted earnings per share | $ | 0.44 | $ | 0.42 | ||||
Weighted-average common shares outstanding | 365.3 | 363.0 | ||||||
Weighted-average common shares outstanding, assuming dilution | 366.7 | 363.8 | ||||||
Cash dividends per common share | $ | 0.35 | $ | 0.32 |
August 31, 2013 | May 31, 2013 | ||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 111.6 | $ | 107.3 | |||
Corporate investments | 447.6 | 398.2 | |||||
Interest receivable | 28.7 | 32.4 | |||||
Accounts receivable, net of allowance for doubtful accounts | 154.7 | 133.4 | |||||
Deferred income taxes | 2.0 | 2.3 | |||||
Prepaid income taxes | — | 49.9 | |||||
Prepaid expenses and other current assets | 42.0 | 36.6 | |||||
Current assets before funds held for clients | 786.6 | 760.1 | |||||
Funds held for clients | 3,911.7 | 4,072.5 | |||||
Total current assets | 4,698.3 | 4,832.6 | |||||
Long-term corporate investments | 365.6 | 369.1 | |||||
Property and equipment, net of accumulated depreciation | 350.5 | 346.0 | |||||
Intangible assets, net of accumulated amortization | 42.1 | 45.2 | |||||
Goodwill | 533.9 | 533.9 | |||||
Deferred income taxes | 36.3 | 34.1 | |||||
Other long-term assets | 4.5 | 2.8 | |||||
Total assets | $ | 6,031.2 | $ | 6,163.7 | |||
LIABILITIES | |||||||
Accounts payable | $ | 40.4 | $ | 42.7 | |||
Accrued compensation and related items | 129.3 | 138.2 | |||||
Deferred revenue | 4.5 | 5.2 | |||||
Accrued income taxes | 25.6 | — | |||||
Deferred income taxes | 2.3 | 8.1 | |||||
Other current liabilities | 35.1 | 34.3 | |||||
Current liabilities before client fund obligations | 237.2 | 228.5 | |||||
Client fund obligations | 3,913.2 | 4,039.7 | |||||
Total current liabilities | 4,150.4 | 4,268.2 | |||||
Accrued income taxes | 21.8 | 19.7 | |||||
Deferred income taxes | 58.3 | 53.3 | |||||
Other long-term liabilities | 52.3 | 48.8 | |||||
Total liabilities | 4,282.8 | 4,390.0 | |||||
COMMITMENTS AND CONTINGENCIES – NOTE I | |||||||
STOCKHOLDERS’ EQUITY | |||||||
Common stock, $0.01 par value; Authorized: 600.0 shares; Issued and outstanding: 365.2 shares as of August 31, 2013 and 365.4 shares as of May 31, 2013, respectively. | 3.7 | 3.7 | |||||
Additional paid-in capital | 715.4 | 659.5 | |||||
Retained earnings | 1,034.2 | 1,088.5 | |||||
Accumulated other comprehensive (loss)/income | (4.9 | ) | 22.0 | ||||
Total stockholders’ equity | 1,748.4 | 1,773.7 | |||||
Total liabilities and stockholders’ equity | $ | 6,031.2 | $ | 6,163.7 |
For the three months ended August 31, | |||||||
2013 | 2012 | ||||||
OPERATING ACTIVITIES | |||||||
Net income | $ | 162.8 | $ | 153.1 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization on property and equipment and intangible assets | 24.4 | 24.1 | |||||
Amortization of premiums and discounts on available-for-sale securities, net | 16.7 | 13.3 | |||||
Stock-based compensation costs | 7.5 | 6.4 | |||||
Provision for deferred income taxes | 10.3 | 10.2 | |||||
Provision for allowance for doubtful accounts | 0.8 | 0.2 | |||||
Net realized gains on sales of available-for-sale securities | (0.2 | ) | (0.2 | ) | |||
Changes in operating assets and liabilities: | |||||||
Interest receivable | 3.7 | 6.6 | |||||
Accounts receivable | (22.1 | ) | (10.9 | ) | |||
Prepaid expenses and other current assets | 44.5 | 4.5 | |||||
Accounts payable and other current liabilities | 15.4 | 10.3 | |||||
Net change in other assets and liabilities | 2.9 | 0.1 | |||||
Net cash provided by operating activities | 266.7 | 217.7 | |||||
INVESTING ACTIVITIES | |||||||
Purchases of available-for-sale securities | (6,372.8 | ) | (5,228.6 | ) | |||
Proceeds from sales and maturities of available-for-sale securities | 6,696.4 | 4,865.8 | |||||
Net change in funds held for clients’ money market securities and other cash equivalents | (267.0 | ) | 1,156.8 | ||||
Purchases of property and equipment | (25.1 | ) | (22.0 | ) | |||
Purchases of other assets | (0.7 | ) | (0.1 | ) | |||
Net cash provided by investing activities | 30.8 | 771.9 | |||||
FINANCING ACTIVITIES | |||||||
Net change in client fund obligations | (126.6 | ) | (847.5 | ) | |||
Dividends paid | (127.9 | ) | (116.4 | ) | |||
Repurchases of common shares | (83.9 | ) | — | ||||
Equity activity related to stock-based awards | 45.2 | 14.5 | |||||
Net cash used in financing activities | (293.2 | ) | (949.4 | ) | |||
Increase in cash and cash equivalents | 4.3 | 40.2 | |||||
Cash and cash equivalents, beginning of period | 107.3 | 108.8 | |||||
Cash and cash equivalents, end of period | $ | 111.6 | $ | 149.0 |
For the three months ended August 31, | |||||||
In millions, except per share amounts | 2013 | 2012 | |||||
Basic earnings per share: | |||||||
Net income | $ | 162.8 | $ | 153.1 | |||
Weighted-average common shares outstanding | 365.3 | 363.0 | |||||
Basic earnings per share | $ | 0.45 | $ | 0.42 | |||
Diluted earnings per share: | |||||||
Net income | $ | 162.8 | $ | 153.1 | |||
Weighted-average common shares outstanding | 365.3 | 363.0 | |||||
Dilutive effect of common share equivalents | 1.4 | 0.8 | |||||
Weighted-average common shares outstanding, assuming dilution | 366.7 | 363.8 | |||||
Diluted earnings per share | $ | 0.44 | $ | 0.42 | |||
Weighted-average anti-dilutive common share equivalents | 0.8 | 7.4 |
For the three months ended August 31, | ||||||||
In millions | 2013 | 2012 | ||||||
Interest income on corporate funds | $ | 1.6 | $ | 2.0 | ||||
Interest expense | (0.4 | ) | (0.1 | ) | ||||
Investment income, net | $ | 1.2 | $ | 1.9 |
August 31, 2013 | |||||||||||||||
In millions | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | |||||||||||
Type of issue: | |||||||||||||||
Funds held for clients money market securities and other cash equivalents | $ | 1,404.8 | $ | — | $ | — | $ | 1,404.8 | |||||||
Available-for-sale securities: | |||||||||||||||
General obligation municipal bonds | 1,603.7 | 18.8 | (22.1 | ) | 1,600.4 | ||||||||||
Pre-refunded municipal bonds(1) | 129.3 | 2.1 | — | 131.4 | |||||||||||
Revenue municipal bonds | 837.8 | 5.9 | (12.9 | ) | 830.8 | ||||||||||
Variable rate demand notes | 745.9 | — | — | 745.9 | |||||||||||
Total available-for-sale securities | 3,316.7 | 26.8 | (35.0 | ) | 3,308.5 | ||||||||||
Other | 10.5 | 1.2 | (0.1 | ) | 11.6 | ||||||||||
Total funds held for clients and corporate investments | $ | 4,732.0 | $ | 28.0 | $ | (35.1 | ) | $ | 4,724.9 | ||||||
May 31, 2013 | |||||||||||||||
In millions | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | |||||||||||
Type of issue: | |||||||||||||||
Funds held for clients money market securities and other cash equivalents | $ | 1,137.7 | $ | — | $ | — | $ | 1,137.7 | |||||||
Available-for-sale securities: | |||||||||||||||
General obligation municipal bonds | 1,432.9 | 27.4 | (3.5 | ) | 1,456.8 | ||||||||||
Pre-refunded municipal bonds(1) | 201.0 | 2.9 | — | 203.9 | |||||||||||
Revenue municipal bonds | 746.1 | 10.1 | (2.2 | ) | 754.0 | ||||||||||
Variable rate demand notes | 1,276.7 | — | — | 1,276.7 | |||||||||||
Total available-for-sale securities | 3,656.7 | 40.4 | (5.7 | ) | 3,691.4 | ||||||||||
Other | 9.5 | 1.2 | — | 10.7 | |||||||||||
Total funds held for clients and corporate investments | $ | 4,803.9 | $ | 41.6 | $ | (5.7 | ) | $ | 4,839.8 |
(1) | Pre-refunded municipal bonds are secured by an escrow fund of U.S. government obligations. |
In millions | August 31, 2013 | May 31, 2013 | |||||
Funds held for clients | $ | 3,911.7 | $ | 4,072.5 | |||
Corporate investments | 447.6 | 398.2 | |||||
Long-term corporate investments | 365.6 | 369.1 | |||||
Total funds held for clients and corporate investments | $ | 4,724.9 | $ | 4,839.8 |
August 31, 2013 | |||||||||||||||||||||||
Less than twelve months | More than twelve months | Total | |||||||||||||||||||||
In millions | Gross unrealized losses | Fair value | Gross unrealized losses | Fair Value | Gross unrealized losses | Fair Value | |||||||||||||||||
Type of issue: | |||||||||||||||||||||||
General obligation municipal bonds | $ | (22.1 | ) | $ | 775.9 | $ | — | $ | 2.0 | $ | (22.1 | ) | $ | 777.9 | |||||||||
Pre-refunded municipal bonds | — | 11.4 | — | — | — | 11.4 | |||||||||||||||||
Revenue municipal bonds | (12.9 | ) | 512.3 | — | 2.1 | (12.9 | ) | 514.4 | |||||||||||||||
Total | $ | (35.0 | ) | $ | 1,299.6 | $ | — | $ | 4.1 | $ | (35.0 | ) | $ | 1,303.7 |
May 31, 2013 | |||||||||||||||||||||||
Less than twelve months | More than twelve months | Total | |||||||||||||||||||||
In millions | Gross unrealized losses | Fair value | Gross unrealized losses | Fair Value | Gross unrealized losses | Fair Value | |||||||||||||||||
Type of issue: | |||||||||||||||||||||||
General obligation municipal bonds | $ | (3.5 | ) | $ | 349.2 | $ | — | $ | — | $ | (3.5 | ) | $ | 349.2 | |||||||||
Pre-refunded municipal bonds | — | 3.1 | — | — | — | 3.1 | |||||||||||||||||
Revenue municipal bonds | (2.2 | ) | 225.3 | — | 2.1 | (2.2 | ) | 227.4 | |||||||||||||||
Total | $ | (5.7 | ) | $ | 577.6 | $ | — | $ | 2.1 | $ | (5.7 | ) | $ | 579.7 |
August 31, 2013 | |||||||
In millions | Amortized cost | Fair value | |||||
Maturity date: | |||||||
Due in one year or less | $ | 339.6 | $ | 343.0 | |||
Due after one year through three years | 711.8 | 727.0 | |||||
Due after three years through five years | 704.1 | 705.8 | |||||
Due after five years | 1,561.2 | 1,532.7 | |||||
Total | $ | 3,316.7 | $ | 3,308.5 |
• | Level 1 valuations are based on quoted prices in active markets for identical instruments that the Company can access at the measurement date. |
• | Level 2 valuations are based on inputs other than quoted prices included in Level 1 that are observable for the instrument, either directly or indirectly, for substantially the full term of the asset or liability including the following: |
• | quoted prices for similar, but not identical, instruments in active markets; |
• | quoted prices for identical or similar instruments in markets that are not active; |
• | inputs other than quoted prices that are observable for the instrument; or |
• | inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
• | Level 3 valuations are based on information that is unobservable and significant to the overall fair value measurement. |
August 31, 2013 | |||||||||||||||
In millions | Carrying value (Fair value) | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |||||||||||
Assets: | |||||||||||||||
Cash equivalents: | |||||||||||||||
General obligation municipal bonds | $ | 6.3 | $ | — | $ | 6.3 | $ | — | |||||||
Revenue municipal bonds | 2.0 | — | 2.0 | — | |||||||||||
Commercial paper | 3.0 | — | 3.0 | — | |||||||||||
Money market securities | 0.1 | 0.1 | — | — | |||||||||||
Total cash equivalents | $ | 11.4 | $ | 0.1 | $ | 11.3 | $ | — | |||||||
Available-for-sale securities: | |||||||||||||||
General obligation municipal bonds | $ | 1,600.4 | $ | — | $ | 1,600.4 | $ | — | |||||||
Pre-refunded municipal bonds | 131.4 | — | 131.4 | — | |||||||||||
Revenue municipal bonds | 830.8 | — | 830.8 | — | |||||||||||
Variable rate demand notes | 745.9 | — | 745.9 | — | |||||||||||
Total available-for-sale securities | $ | 3,308.5 | $ | — | $ | 3,308.5 | $ | — | |||||||
Other securities | $ | 11.6 | $ | 11.6 | $ | — | $ | — | |||||||
Liabilities: | |||||||||||||||
Other long-term liabilities | $ | 11.6 | $ | 11.6 | $ | — | $ | — |
May 31, 2013 | |||||||||||||||
In millions | Carrying value (Fair value) | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |||||||||||
Assets: | |||||||||||||||
Available-for-sale securities: | |||||||||||||||
General obligation municipal bonds | $ | 1,456.8 | $ | — | $ | 1,456.8 | $ | — | |||||||
Pre-refunded municipal bonds | 203.9 | — | 203.9 | — | |||||||||||
Revenue municipal bonds | 754.0 | — | 754.0 | — | |||||||||||
Variable rate demand notes | 1,276.7 | — | 1,276.7 | — | |||||||||||
Total available-for-sale securities | $ | 3,691.4 | $ | — | $ | 3,691.4 | $ | — | |||||||
Other securities | $ | 10.7 | $ | 10.7 | $ | — | $ | — | |||||||
Liabilities: | |||||||||||||||
Other long-term liabilities | $ | 10.7 | $ | 10.7 | $ | — | $ | — |
In millions | August 31, 2013 | May 31, 2013 | |||||
Land and improvements | $ | 8.1 | $ | 8.1 | |||
Buildings and improvements | 100.3 | 99.2 | |||||
Data processing equipment | 182.4 | 175.6 | |||||
Software | 300.9 | 290.1 | |||||
Furniture, fixtures, and equipment | 144.6 | 145.2 | |||||
Leasehold improvements | 100.6 | 99.5 | |||||
Construction in progress | 35.9 | 32.8 | |||||
Total property and equipment, gross | 872.8 | 850.5 | |||||
Less: Accumulated depreciation and amortization | 522.3 | 504.5 | |||||
Property and equipment, net of accumulated depreciation | $ | 350.5 | $ | 346.0 |
In millions | August 31, 2013 | May 31, 2013 | |||||
Client lists | $ | 231.4 | $ | 231.0 | |||
Other intangible assets | 2.4 | 2.4 | |||||
Total intangible assets, gross | 233.8 | 233.4 | |||||
Less: Accumulated amortization | 191.7 | 188.2 | |||||
Intangible assets, net of accumulated amortization | $ | 42.1 | $ | 45.2 |
In millions Fiscal year ending May 31, | Estimated amortization expense | ||
2014 | $ | 14.9 | |
2015 | $ | 10.9 | |
2016 | $ | 7.8 | |
2017 | $ | 5.5 | |
2018 | $ | 3.6 |
For the three months ended August 31, | ||||||||
In millions | 2013 | 2012 | ||||||
Beginning balance | $ | 22.0 | $ | 37.7 | ||||
Other comprehensive loss: | ||||||||
Unrealized losses on available-for-sale securities, net of tax | (26.8 | ) | (0.3 | ) | ||||
Reclassification adjustment for the net gain on sale of available-for-sale securities realized in net income, net of tax | (0.1 | ) | (0.1 | ) | ||||
Total other comprehensive loss, net of tax | $ | (26.9 | ) | $ | (0.4 | ) | ||
Ending balance | $ | (4.9 | ) | $ | 37.3 |
Financial institution | Amount available | Expiration date |
JP Morgan Chase Bank, N.A. | $350 million | February 28, 2014 |
Bank of America, N.A. | $250 million | February 28, 2014 |
PNC Bank, National Association | $150 million | February 28, 2014 |
Wells Fargo Bank, National Association | $150 million | February 28, 2014 |
• | general market and economic conditions including, among others, changes in U.S. employment and wage levels, changes to new hiring trends, legislative changes to stimulate the economy, changes in short- and long-term interest rates, changes in the fair value and the credit rating of securities held by us, and accessibility of financing; |
• | changes in demand for our services and products, ability to develop and market new services and products effectively, pricing changes and the impact of competition; |
• | changes in the availability of skilled workers; |
• | changes in the laws regulating collection and payment of payroll taxes, professional employer organizations, and employee benefits, including retirement plans, workers’ compensation, health insurance (including health care reform legislation), state unemployment, and section 125 plans; |
• | changes in health insurance and workers’ compensation rates and underlying claims trends; |
• | changes in technology that adversely affect our products and services and impact our ability to provide timely enhancements to services and products; |
• | the possibility of a security breach that disrupts operations or exposes client confidential data; |
• | the possibility of failure of our operating facilities, computer systems, and communication systems during a catastrophic event; |
• | the possibility of third-party service providers failing to perform their functions; |
• | the possibility of a failure of internal controls or our inability to implement business processing improvements; |
• | the possibility that we may be subject to liability for violations of employment or discrimination laws by our clients and acts or omissions of client employees who may be deemed to be our agents, even if we do not participate in any such acts or violations; and |
• | potentially unfavorable outcomes related to pending legal matters. |
Service | Description | |
Payroll Services: | ||
Payroll processing | Includes the calculation, preparation, and delivery of employee payroll checks; production of internal accounting records and management reports; preparation of federal, state, and local payroll tax returns; and collection and remittance of clients’ payroll obligations. | |
Payroll tax administration services | Provides accurate preparation and timely filing of quarterly and year-end tax returns, as well as the electronic transfer of funds to the applicable federal, state, and local tax or regulatory agencies. | |
Employee payment services | Provides the employer the option of paying their employees by direct deposit, payroll debit card, a check drawn on a Paychex, Inc. account (Readychex®), or a check drawn on the employer’s account and electronically signed by us. | |
Regulatory compliance services | Includes new-hire reporting and garnishment processing, which allow employers to comply with legal requirements and reduce the risk of penalties. |
Human Resource Services: | ||
Paychex HR Solutions | Available through an administrative services organization (“ASO”) and a professional employer organization (“PEO”). Both options offer businesses a combined package that includes payroll, employer compliance, human resource and employee benefits administration, risk management outsourcing, and on-site availability of a professionally trained human resource representative, among other services. Our PEO differs from the ASO in that we serve as a co-employer of the clients’ employees, assume the risks and rewards of workers’ compensation insurance, and offer health care coverage to PEO client employees. Paychex HR Essentials is an ASO product that provides support to our clients over the phone or online to help manage employee-related topics. | |
Retirement services administration | Offers a variety of retirement plan options to clients, as well as recordkeeping services, which include plan implementation, ongoing compliance with government regulations, employee and employer reporting, participant and employer online access, electronic funds transfer, and other administrative services. | |
Insurance services | Our licensed insurance agency, Paychex Insurance Agency, Inc., provides insurance through a variety of carriers. Insurance offerings include property and casualty coverage, such as workers’ compensation; business-owner policies; commercial auto; and health and benefits coverage, including health, dental, vision, and life. | |
eServices | Offers online human resource administration software products for employee benefits management and administration, expense reporting, applicant tracking, and time and attendance solutions. | |
Other human resource services and products | Includes section 125 plans, state unemployment insurance services, employee handbooks, management manuals, and personnel and required regulatory forms. |
• | Payroll service revenue increased 2% to $395.2 million. |
• | HRS revenue increased 11% to $202.7 million. |
• | Interest on funds held for clients decreased 1% to $10.0 million. |
• | Total revenue increased 5% to $607.9 million. |
• | Operating income increased 7% to $255.1 million and operating income, net of certain items increased 8% to $245.1 million. Refer to the “Non-GAAP Financial Measure” section, which follows, for further information on this non-GAAP measure. |
• | Net income increased 6% to $162.8 million and diluted earnings per share increased 5% to $0.44 per share. |
Low | High | ||||
Payroll service revenue | 3 | % | — | 4 | % |
HRS revenue | 9 | % | — | 10 | % |
Total service revenue | 5 | % | — | 6 | % |
Net income | 8 | % | — | 9 | % |
For the three months ended August 31, | |||||||||||
$ in millions | 2013 | 2012 | Change | ||||||||
Revenue: | |||||||||||
Payroll service revenue | $ | 395.2 | $ | 385.9 | 2 | % | |||||
HRS revenue | 202.7 | 182.2 | 11 | % | |||||||
Total service revenue | 597.9 | 568.1 | 5 | % | |||||||
Interest on funds held for clients | 10.0 | 10.1 | (1 | )% | |||||||
Total revenue | 607.9 | 578.2 | 5 | % | |||||||
Combined operating and SG&A expenses | 352.8 | 340.2 | 4 | % | |||||||
Operating income | 255.1 | 238.0 | 7 | % | |||||||
Investment income, net | 1.2 | 1.9 | (35 | )% | |||||||
Income before income taxes | 256.3 | 239.9 | 7 | % | |||||||
Income taxes | 93.5 | 86.8 | 8 | % | |||||||
Effective income tax rate | 36.5 | % | 36.2 | % | |||||||
Net income | $ | 162.8 | $ | 153.1 | 6 | % | |||||
Diluted earnings per share | $ | 0.44 | $ | 0.42 | 5 | % |
For the three months ended August 31, | |||||||||||
$ in millions | 2013 | 2012 | Change | ||||||||
Average investment balances: | |||||||||||
Funds held for clients | $ | 3,523.2 | $ | 3,302.0 | 7 | % | |||||
Corporate investments | 864.0 | 766.3 | 13 | % | |||||||
Total | $ | 4,387.2 | $ | 4,068.3 | 8 | % | |||||
Average interest rates earned (exclusive of net realized gains): | |||||||||||
Funds held for clients | 1.1 | % | 1.2 | % | |||||||
Corporate investments | 0.7 | % | 1.0 | % | |||||||
Combined funds held for clients and corporate investments | 1.0 | % | 1.2 | % | |||||||
Total net realized gains | $ | 0.2 | $ | 0.2 |
As of: $ in millions | August 31, 2013 | May 31, 2013 | ||||||
Net unrealized (loss)/gain on available-for-sale securities (1) | $ | (8.2 | ) | $ | 34.7 | |||
Federal Funds rate (2) | 0.25 | % | 0.25 | % | ||||
Total fair value of available-for-sale securities | $ | 3,308.5 | $ | 3,691.4 | ||||
Weighted-average duration of available-for-sale securities in years (3) | 3.3 | 3.1 | ||||||
Weighted-average yield-to-maturity of available-for-sale securities (3) | 1.7 | % | 1.8 | % |
(1) | The net unrealized gain on our investment portfolio was approximately $10.1 million as of September 23, 2013. |
(2) | The Federal Funds rate was a range of 0% to 0.25% as of August 31, 2013 and May 31, 2013. |
(3) | These items exclude the impact of VRDNs as they are tied to short-term interest rates. |
For the three months ended August 31, | |||||||||||
$ in millions | 2013 | 2012 | Change | ||||||||
Compensation-related expenses | $ | 240.5 | $ | 230.9 | 4 | % | |||||
Facilities expense | 13.0 | 13.8 | (6 | )% | |||||||
Depreciation and amortization | 24.4 | 24.1 | 2 | % | |||||||
Other expenses | 74.9 | 71.4 | 5 | % | |||||||
Total operating and SG&A expenses | $ | 352.8 | $ | 340.2 | 4 | % |
For the three months ended August 31, | |||||||||||
$ in millions | 2013 | 2012 | Change | ||||||||
Operating income | $ | 255.1 | $ | 238.0 | 7 | % | |||||
Excluding: interest on funds held for clients | (10.0 | ) | (10.1 | ) | (1 | )% | |||||
Operating income, net of certain items | $ | 245.1 | $ | 227.9 | 8 | % | |||||
Operating income, net of certain items, as a percent of total service revenue | 41.0 | % | 40.1 | % |
Financial institution | Amount available | Expiration date |
JP Morgan Chase Bank, N.A. | $350 million | February 28, 2014 |
Bank of America, N.A. | $250 million | February 28, 2014 |
PNC Bank, National Association | $150 million | February 28, 2014 |
Wells Fargo Bank, National Association | $150 million | February 28, 2014 |
For the three months ended August 31, | |||||||
In millions | 2013 | 2012 | |||||
Net income | $ | 162.8 | $ | 153.1 | |||
Non-cash adjustments to net income | 59.5 | 54.0 | |||||
Cash provided by changes in operating assets and liabilities | 44.4 | 10.6 | |||||
Net cash provided by operating activities | $ | 266.7 | $ | 217.7 |
For the three months ended August 31, | |||||||
In millions | 2013 | 2012 | |||||
Net change in funds held for clients and corporate investment activities | $ | 56.6 | $ | 794.0 | |||
Purchases of property and equipment | (25.1 | ) | (22.0 | ) | |||
Purchases of other assets | (0.7 | ) | (0.1 | ) | |||
Net cash used in investing activities | $ | 30.8 | $ | 771.9 |
For the three months ended August 31, | |||||||
In millions, except per share amounts | 2013 | 2012 | |||||
Net change in client fund obligations | $ | (126.6 | ) | $ | (847.5 | ) | |
Dividends paid | (127.9 | ) | (116.4 | ) | |||
Repurchases of common stock | (83.9 | ) | — | ||||
Equity activity related to stock-based awards | 45.2 | 14.5 | |||||
Net cash provided by financing activities | $ | (293.2 | ) | $ | (949.4 | ) | |
Cash dividends per common share | $ | 0.35 | $ | 0.32 |
August 31, 2013 | |||||||
In millions | Amortized cost | Fair value | |||||
Maturity date: | |||||||
Due in one year or less | $ | 339.6 | $ | 343.0 | |||
Due after one year through three years | 711.8 | 727.0 | |||||
Due after three years through five years | 704.1 | 705.8 | |||||
Due after five years | 1,561.2 | 1,532.7 | |||||
Total | $ | 3,316.7 | $ | 3,308.5 |
• | daily interest rate changes; |
• | seasonal variations in investment balances; |
• | actual duration of short-term and available-for-sale securities; |
• | the proportion of taxable and tax-exempt investments; |
• | changes in tax-exempt municipal rates versus taxable investment rates, which are not synchronized or simultaneous; and |
• | financial market volatility and the resulting effect on benchmark and other indexing interest rates. |
• | revenue recognition; |
• | PEO workers’ compensation insurance; |
• | goodwill and other intangible assets; |
• | stock-based compensation costs; and |
• | income taxes. |
Total number of shares purchased | Average price paid per share | Approximate dollar value of shares that may yet be purchased under the program | |||||||||
July 1, 2013 - July 31, 2013 | 1,792,625 | $ | 39.27 | $ | 348,207,375 | ||||||
August 1, 2013 - August 31, 2013 | 332,653 | $ | 40.53 | $ | 266,127,343 | ||||||
Total for the period | 2,125,278 | $ | 39.46 | $ | 266,127,343 |
Exhibit number | Description | |
31.1 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS | XBRL instance document. | |
101.SCH | XBRL taxonomy extension schema document. | |
101.CAL | XBRL taxonomy extension calculation linkbase document. | |
101.LAB | XBRL taxonomy label linkbase document. | |
101.PRE | XBRL taxonomy extension presentation linkbase document. | |
101.DEF | XBRL taxonomy extension definition linkbase document. |
Date: September 30, 2013 | /s/ Martin Mucci |
Martin Mucci | |
President and Chief Executive Officer | |
(Principal Executive Officer) | |
Date: September 30, 2013 | /s/ Efrain Rivera |
Efrain Rivera | |
Senior Vice President, Chief | |
Financial Officer, and Treasurer | |
(Principal Financial Officer) |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: September 30, 2013 | /s/ Martin Mucci |
President and Chief Executive Officer |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: September 30, 2013 | /s/ Efrain Rivera |
Senior Vice President, Chief Financial Officer, and Treasurer |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Martin Mucci |
Martin Mucci |
President and Chief Executive Officer |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Efrain Rivera |
Efrain Rivera |
Senior Vice President, Chief Financial Officer, and Treasurer |
Investment Income, Net (Tables)
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3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 31, 2013
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Investment Income, Net [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Investment Income, Net [Table Text Block] | Investment income, net, consisted of the following items:
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Consolidated Balance Sheets (Parenthetical) (Unaudited) (USD $)
In Millions, except Per Share data, unless otherwise specified |
Aug. 31, 2013
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May 31, 2013
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Statement of Financial Position [Abstract] | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 600.0 | 600.0 |
Common stock, shares issued | 365.2 | 365.4 |
Common stock, shares outstanding | 365.2 | 365.4 |
Fair Value Measurements
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 31, 2013
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability (an exit price), in an orderly transaction between market participants at the measurement date. The accounting standards related to fair value measurements include a hierarchy for information and valuations used in measuring fair value that is broken down into three levels based on reliability, as follows:
The carrying values of cash and cash equivalents, accounts receivable, net of allowance for doubtful accounts, and accounts payable approximate fair value due to the short maturities of these instruments. Marketable securities included in funds held for clients and corporate investments consist primarily of securities classified as available-for-sale and are recorded at fair value on a recurring basis. The Company’s financial assets and liabilities measured at fair value on a recurring basis were as follows:
In determining the fair value of its assets and liabilities, the Company predominately uses the market approach. Money market securities, which are cash equivalents, are valued based on quoted market prices in active markets. Commercial paper is included in level 2 because it may not trade on a daily basis. Available-for-sale securities and short-term municipal bonds with a maturity of less than 90 days included in Level 2 are valued utilizing inputs obtained from an independent pricing service. To determine the fair value of the Company’s Level 2 available-for-sale investments, a variety of inputs are utilized, including benchmark yields, reported trades, non-binding broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, new issue data, and monthly payment information. The Company reviews the values generated by the independent pricing service for reasonableness by comparing the valuations received from the independent pricing service to valuations from at least one other observable source for a sample of securities. The Company has not adjusted the prices obtained from the independent pricing service. Other securities are mutual fund investments, consisting of participants’ eligible deferral contributions under the Company’s non-qualified and unfunded deferred compensation plans. The related liability is reported as other long-term liabilities. The mutual funds are valued based on quoted market prices in active markets. The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. |
Description of Business, Basis of Presentation, and Significant Accounting Policies (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Aug. 31, 2013
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Aug. 31, 2012
|
May 31, 2013
|
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Description of Business, Basis of Presentation, and Significant Accounting Policies (Textual) | |||
Disclosure on geographic areas, Description of revenue from external customers | revenue within Germany, which represented less than one percent of the Company's total revenue | revenue within Germany, which represented less than one percent of the Company's total revenue | |
Disclosure on geographic areas, Long-lived assets | Long-lived assets in Germany are insignificant in relation to total long-lived assets of the Company | Long-lived assets in Germany are insignificant in relation to total long-lived assets of the Company | |
Maximum individual workers' compensation claims liability | $ 1.0 | $ 1.0 | |
Workers' compensation insurance costs in current liabilities | 7.1 | 6.8 | |
Workers' compensation insurance costs in long-term liabilities | 14.6 | 13.7 | |
Stock-based compensation costs recognized | $ 7.5 | $ 6.4 |
Funds Held for Clients and Corporate Investments (Tables)
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 31, 2013
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Funds Held for Clients and Corporate Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Funds held for clients and corporate investments | Funds held for clients and corporate investments consisted of the following:
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Classification of investments on the Consolidated Balance Sheets | Classification of investments on the Consolidated Balance Sheets is as follows:
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Securities in an unrealized loss position | The securities in an unrealized loss position were as follows:
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Amortized cost and fair value of available-for-sale securities by contractual maturity | The amortized cost and fair value of available-for-sale securities that had stated maturities as of August 31, 2013 are shown below by contractual maturity. Expected maturities can differ from contractual maturities because borrowers may have the right to prepay obligations without prepayment penalties.
|
Commitments and Contingencies (Details Textual) (USD $)
|
3 Months Ended | |
---|---|---|
Aug. 31, 2013
|
May 31, 2013
|
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Commitments and Contingencies (Textual) | ||
Commitments to purchase capital assets | $ 7,700,000 | $ 9,900,000 |
Line of Credit [Member]
|
||
Line of Credit Facility [Line Items] | ||
Amount outstanding | 0 | |
Revolving Credit Facility [Member]
|
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Line of Credit Facility [Line Items] | ||
Maximum amount outstanding during period | 25,000,000 | |
Interest rate on amount borrowed | 3.25% | |
Maximum borrowing capacity | 500,000,000 | |
Expiration date | Jun. 21, 2018 | |
Amount outstanding | 0 | |
Standby Letters of Credit [Member]
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Line of Credit Facility [Line Items] | ||
Amount available | 35,500,000 | 36,800,000 |
Expiration date range of letters of credit | December 2013 and July 2014 | |
Irrevocable stand by letters of credit amount outstanding | $ 0 |
Investment Income, Net (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | |
---|---|---|
Aug. 31, 2013
|
Aug. 31, 2012
|
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Investment Income, Net [Abstract] | ||
Interest income on corporate funds | $ 1.6 | $ 2.0 |
Interest expense | (0.4) | (0.1) |
Investment income, net | $ 1.2 | $ 1.9 |
Basic and Diluted Earnings Per Share (Details Textual) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | |
---|---|---|
Aug. 31, 2013
|
Aug. 31, 2012
|
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Basic And Diluted Earnings Per Share (Textual) | ||
Common stock issued in connection with the exercise or vesting of stock-based awards | 1.9 | 0.8 |
Stock repurchase program, Authorized amount | $ 350 | |
Stock repurchased and retired during period, Shares | 2.1 | |
Stock repurchased and retired during period, Value | $ 83.9 |
Goodwill and Intangible Assets, Net of Accumulated Amortization (Details) (USD $)
In Millions, unless otherwise specified |
Aug. 31, 2013
|
May 31, 2013
|
---|---|---|
Components of intangible assets, at cost | ||
Client lists | $ 231.4 | $ 231.0 |
Other intangible assets | 2.4 | 2.4 |
Total intangible assets, gross | 233.8 | 233.4 |
Less: Accumulated amortization | 191.7 | 188.2 |
Intangible assets, net of accumulated amortization | 42.1 | 45.2 |
Estimated future amortization expense relating to intangible assets | ||
Fiscal year ending May 31, 2014 | 14.9 | |
Fiscal year ending May 31, 2015 | 10.9 | |
Fiscal year ending May 31, 2016 | 7.8 | |
Fiscal year ending May 31, 2017 | 5.5 | |
Fiscal year ending May 31, 2018 | $ 3.6 |
Fair Value Measurements (Details) (USD $)
In Millions, unless otherwise specified |
Aug. 31, 2013
|
May 31, 2013
|
---|---|---|
Available-for-sale securities: | ||
Available-for-sale securities | $ 3,308.5 | $ 3,691.4 |
Fair Value, Measurements, Recurring [Member]
|
||
Cash equivalents: | ||
Cash equivalents | 11.4 | |
Available-for-sale securities: | ||
Available-for-sale securities | 3,308.5 | 3,691.4 |
Other securities | 11.6 | 10.7 |
Liabilities: | ||
Other long-term liabilities | 11.6 | 10.7 |
Commercial Paper [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Cash equivalents: | ||
Cash equivalents | 3.0 | |
Money Market Funds [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Cash equivalents: | ||
Cash equivalents | 0.1 | |
General obligation municipal bonds [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Cash equivalents: | ||
Cash equivalents | 6.3 | |
Available-for-sale securities: | ||
Available-for-sale securities | 1,600.4 | 1,456.8 |
Pre-refunded municipal bonds [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Available-for-sale securities: | ||
Available-for-sale securities | 131.4 | 203.9 |
Revenue municipal bonds [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Cash equivalents: | ||
Cash equivalents | 2.0 | |
Available-for-sale securities: | ||
Available-for-sale securities | 830.8 | 754.0 |
Variable rate demand notes [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Available-for-sale securities: | ||
Available-for-sale securities | 745.9 | 1,276.7 |
Quoted prices in active markets (Level 1) [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Cash equivalents: | ||
Cash equivalents | 0.1 | |
Available-for-sale securities: | ||
Available-for-sale securities | 0 | 0 |
Other securities | 11.6 | 10.7 |
Liabilities: | ||
Other long-term liabilities | 11.6 | 10.7 |
Quoted prices in active markets (Level 1) [Member] | Commercial Paper [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Cash equivalents: | ||
Cash equivalents | 0 | |
Quoted prices in active markets (Level 1) [Member] | Money Market Funds [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Cash equivalents: | ||
Cash equivalents | 0.1 | |
Quoted prices in active markets (Level 1) [Member] | General obligation municipal bonds [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Cash equivalents: | ||
Cash equivalents | 0 | |
Available-for-sale securities: | ||
Available-for-sale securities | 0 | 0 |
Quoted prices in active markets (Level 1) [Member] | Pre-refunded municipal bonds [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Available-for-sale securities: | ||
Available-for-sale securities | 0 | 0 |
Quoted prices in active markets (Level 1) [Member] | Revenue municipal bonds [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Cash equivalents: | ||
Cash equivalents | 0 | |
Available-for-sale securities: | ||
Available-for-sale securities | 0 | 0 |
Quoted prices in active markets (Level 1) [Member] | Variable rate demand notes [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Available-for-sale securities: | ||
Available-for-sale securities | 0 | 0 |
Significant other observable Inputs (Level 2) [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Cash equivalents: | ||
Cash equivalents | 11.3 | |
Available-for-sale securities: | ||
Available-for-sale securities | 3,308.5 | 3,691.4 |
Other securities | 0 | 0 |
Liabilities: | ||
Other long-term liabilities | 0 | 0 |
Significant other observable Inputs (Level 2) [Member] | Commercial Paper [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Cash equivalents: | ||
Cash equivalents | 3.0 | |
Significant other observable Inputs (Level 2) [Member] | Money Market Funds [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Cash equivalents: | ||
Cash equivalents | 0 | |
Significant other observable Inputs (Level 2) [Member] | General obligation municipal bonds [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Cash equivalents: | ||
Cash equivalents | 6.3 | |
Available-for-sale securities: | ||
Available-for-sale securities | 1,600.4 | 1,456.8 |
Significant other observable Inputs (Level 2) [Member] | Pre-refunded municipal bonds [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Available-for-sale securities: | ||
Available-for-sale securities | 131.4 | 203.9 |
Significant other observable Inputs (Level 2) [Member] | Revenue municipal bonds [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Cash equivalents: | ||
Cash equivalents | 2.0 | |
Available-for-sale securities: | ||
Available-for-sale securities | 830.8 | 754.0 |
Significant other observable Inputs (Level 2) [Member] | Variable rate demand notes [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Available-for-sale securities: | ||
Available-for-sale securities | 745.9 | 1,276.7 |
Significant unobservable Inputs (Level 3) [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Cash equivalents: | ||
Cash equivalents | 0 | |
Available-for-sale securities: | ||
Available-for-sale securities | 0 | 0 |
Other securities | 0 | 0 |
Liabilities: | ||
Other long-term liabilities | 0 | 0 |
Significant unobservable Inputs (Level 3) [Member] | Commercial Paper [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Cash equivalents: | ||
Cash equivalents | 0 | |
Significant unobservable Inputs (Level 3) [Member] | Money Market Funds [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Cash equivalents: | ||
Cash equivalents | 0 | |
Significant unobservable Inputs (Level 3) [Member] | General obligation municipal bonds [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Cash equivalents: | ||
Cash equivalents | 0 | |
Available-for-sale securities: | ||
Available-for-sale securities | 0 | 0 |
Significant unobservable Inputs (Level 3) [Member] | Pre-refunded municipal bonds [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Available-for-sale securities: | ||
Available-for-sale securities | 0 | 0 |
Significant unobservable Inputs (Level 3) [Member] | Revenue municipal bonds [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Cash equivalents: | ||
Cash equivalents | 0 | |
Available-for-sale securities: | ||
Available-for-sale securities | 0 | 0 |
Significant unobservable Inputs (Level 3) [Member] | Variable rate demand notes [Member] | Fair Value, Measurements, Recurring [Member]
|
||
Available-for-sale securities: | ||
Available-for-sale securities | $ 0 | $ 0 |
Basic and Diluted Earnings Per Share (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified |
3 Months Ended | |
---|---|---|
Aug. 31, 2013
|
Aug. 31, 2012
|
|
Basic earnings per share: | ||
Net income | $ 162.8 | $ 153.1 |
Weighted-average common shares outstanding | 365.3 | 363.0 |
Basic earnings per share | $ 0.45 | $ 0.42 |
Diluted earnings per share: | ||
Net income | $ 162.8 | $ 153.1 |
Weighted-average common shares outstanding | 365.3 | 363.0 |
Dilutive effect of common share equivalents | 1.4 | 0.8 |
Weighted-average common shares outstanding, assuming dilution | 366.7 | 363.8 |
Diluted earnings per share | $ 0.44 | $ 0.42 |
Weighted-average anti-dilutive common share equivalents | 0.8 | 7.4 |
Description of Business, Basis of Presentation, and Significant Accounting Policies
|
3 Months Ended |
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Aug. 31, 2013
|
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Accounting Policies [Abstract] | |
Description of Business, Basis of Presentation, and Significant Accounting Policies | Description of Business, Basis of Presentation, and Significant Accounting Policies Description of business: Paychex, Inc. and its wholly owned subsidiaries (collectively, the “Company” or “Paychex”) is a leading provider of payroll, human resource, insurance, and benefits outsourcing solutions for small- to medium-sized businesses in the United States (“U.S.”). The Company also has a subsidiary in Germany. Paychex, a Delaware corporation formed in 1979, reports as one segment. Substantially all of the Company’s revenue is generated within the U.S. The Company also generates revenue within Germany, which represented less than one percent of the Company's total revenue for the three months ended August 31, 2013 and 2012. Long-lived assets in Germany are insignificant in relation to total long-lived assets of the Company as of August 31, 2013 and May 31, 2013. Basis of presentation: The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q (“Form 10-Q”) and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statement presentation. The consolidated financial statements include the consolidated accounts of the Company with all significant intercompany transactions eliminated. In the opinion of management, the information furnished herein reflects all adjustments (consisting of items of a normal recurring nature), which are necessary for a fair presentation of the results for the interim period. These financial statements should be read in conjunction with the Company’s consolidated financial statements and related Notes to Consolidated Financial Statements presented in the Company’s Annual Report on Form 10-K (“Form 10-K”) as of and for the year ended May 31, 2013 (“fiscal 2013”). Operating results and cash flows for the three months ended August 31, 2013 are not necessarily indicative of the results that may be expected for other interim periods or the full fiscal year ending May 31, 2014 (“fiscal 2014”). The Company has evaluated subsequent events for potential recognition and/or disclosure through the date of issuance of these financial statements. PEO workers’ compensation insurance: Workers’ compensation insurance for professional employer organization ("PEO") worksite employees is provided under a deductible workers’ compensation policy with a national insurance company. Reserves are established to provide for the estimated costs of paying claims underwritten by the Company. The Company’s maximum individual claims liability is $1.0 million under both its fiscal 2014 and fiscal 2013 policies. As of August 31, 2013 and May 31, 2013, the Company had recorded current liabilities of $7.1 million and $6.8 million, respectively, and long-term liabilities of $14.6 million and $13.7 million, respectively, on its Consolidated Balance Sheets for PEO workers’ compensation costs. Estimating the ultimate cost of future claims is an uncertain and complex process based upon historical loss experience and actuarial loss projections, and is subject to change due to multiple factors, including economic trends, changes in legal liability law, and damage awards, all of which could materially impact the reserves as reported in the consolidated financial statements. Accordingly, final claim settlements may vary from the present estimates, particularly when those payments may not occur until well into the future. The Company regularly reviews the adequacy of its estimated workers' compensation insurance reserves. Adjustments to previously established reserves are reflected in the results of operations for the period in which the adjustment is identified. Such adjustments could be significant, reflecting any combination of new and adverse or favorable trends. Stock-based compensation costs: The Company has issued stock-based awards to employees and directors consisting of stock options, restricted stock awards, restricted stock units, performance shares, and performance stock options. The Company accounts for all stock-based awards to employees and directors as compensation costs in the consolidated financial statements based on the fair value measured as of the date of grant. These costs are recognized over the requisite service period. Stock-based compensation costs recognized were $7.5 million and $6.4 million for the three months ended August 31, 2013 and 2012, respectively. The methods and assumptions used in the determination of the fair value of stock-based awards are consistent with those described in the Company’s fiscal 2013 Form 10-K. Reclassifications: Certain prior period amounts have been reclassified to conform to the current period presentation and had no effect on reported consolidated earnings. Recently adopted accounting pronouncements: Effective June 1, 2013, the Company adopted authoritative guidance issued by the Financial Accounting Standards Board (“FASB”) on the reporting and disclosures surrounding comprehensive income. This guidance requires the reporting of the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income. There are no changes to the components that are recognized in net income or other comprehensive income. Adoption of this guidance did not have a material effect on the Company's consolidated financial statements. Effective June 1, 2013, the Company adopted authoritative guidance on the periodic testing of indefinite-lived intangible assets, other than goodwill, for impairment. This updated guidance allows companies the option to first assess qualitative factors to determine if it is more-likely-than-not that an indefinite-lived intangible asset might be impaired and whether it is necessary to perform the quantitative impairment test. The Company currently does not have any indefinite-lived intangible assets other than goodwill, so adoption of this guidance did not have a material effect on its consolidated financial statements. Recently issued accounting pronouncements: In July 2013, the FASB issued guidance on the presentation of unrecognized tax benefits when net operating losses or tax credit carryforwards exist. It is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, with early adoption permitted, and is applicable to the Company's fiscal year beginning June 1, 2014. The Company is currently evaluating this guidance, but does not anticipate its adoption will have a material effect on its consolidated financial statements. Other recent authoritative guidance issued by the FASB (including technical corrections to the Accounting Standards Codification), the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not, or are not expected to have a material effect on the Company’s consolidated financial statements. |
Investment Income, Net (Notes)
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3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 31, 2013
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Investment Income, Net [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Income, Net [Text Block] | Investment Income, Net Investment income, net, consisted of the following items:
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Property and Equipment, Net of Accumulated Depreciation
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 31, 2013
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment, Net of Accumulated Depreciation | Property and Equipment, Net of Accumulated Depreciation The components of property and equipment, at cost, consisted of the following:
Depreciation expense was $20.7 million and $19.4 million for the three months ended August 31, 2013 and 2012, respectively. |
Funds Held for Clients and Corporate Investments
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 31, 2013
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Funds Held for Clients and Corporate Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Funds held for clients and corporate investments | Funds Held for Clients and Corporate Investments Funds held for clients and corporate investments consisted of the following:
Included in money market securities and other cash equivalents as of August 31, 2013 were short-term municipal bonds with a maturity of less than 90 days, commercial paper, money market funds, and bank demand deposit accounts. Included in money market securities and other cash equivalents as of May 31, 2013 were money market funds and bank demand deposit accounts. Within bank demand deposit accounts for funds held for clients, the Company maintained $22.2 million as of August 31, 2013 and $23.4 million as of May 31, 2013 in a separately designated account for tax obligations of a partner's clients. Classification of investments on the Consolidated Balance Sheets is as follows:
The Company’s available-for-sale securities reflected a net unrealized loss of $8.2 million as of August 31, 2013 compared with a net unrealized gain of $34.7 million as of May 31, 2013. The change to an unrealized loss position was driven by recent increases in market rates of interest. Included in the net unrealized loss as of August 31, 2013 and the net unrealized gain as of May 31, 2013, there were 335 and 147 available-for-sale securities in an unrealized loss position, respectively. The securities in an unrealized loss position were as follows:
The Company regularly reviews its investment portfolios to determine if any investment is other-than-temporarily impaired due to changes in credit risk or other potential valuation concerns. The Company believes that the investments it held as of August 31, 2013, that had unrealized losses totaling $35.0 million, were not other-than-temporarily impaired. The Company believes that it is probable that the principal and interest will be collected in accordance with the contractual terms, and that the unrealized losses on these securities were due to changes in interest rates, and were not due to increased credit risk or other valuation concerns. A substantial portion of the securities in an unrealized loss position as of August 31, 2013 and May 31, 2013 held an AA rating or better. The Company does not intend to sell these investments until the recovery of their amortized cost basis or maturity, and further believes that it is not more-likely-than-not that it will be required to sell these investments prior to that time. The Company’s assessment that an investment is not other-than-temporarily impaired could change in the future due to new developments or changes in the Company’s strategies or assumptions related to any particular investment. Realized gains and losses on the sales of securities are determined by specific identification of the amortized cost basis of each security. On the Consolidated Statements of Income and Comprehensive Income, realized gains and losses from funds held for clients are included in interest on funds held for clients and realized gains and losses from corporate investments are included in investment income, net. For both the three months ended August 31, 2013 and 2012, realized gains were $0.2 million. There were no realized losses recognized in any of the respective periods. The amortized cost and fair value of available-for-sale securities that had stated maturities as of August 31, 2013 are shown below by contractual maturity. Expected maturities can differ from contractual maturities because borrowers may have the right to prepay obligations without prepayment penalties.
Variable rate demand notes are primarily categorized as due after five years in the table above as the contractual maturities on these securities are typically 20 to 30 years. Although these securities are issued as long-term securities, they are priced and traded as short-term instruments because of the liquidity provided through the tender feature. |
Fair Value Measurements Fair Value Measurements (Details Textual)
|
3 Months Ended |
---|---|
Aug. 31, 2013
|
|
Fair Value Disclosures (Textuals) [Abstract] | |
Maximum maturity on short-term investments classified as cash equivalents | 90 days |
Commitments and Contingencies (Details) (Line of Credit [Member], USD $)
In Millions, unless otherwise specified |
3 Months Ended |
---|---|
Aug. 31, 2013
|
|
JP Morgan Chase Bank, N.A. [Member]
|
|
Lines of credit | |
Amount available | $ 350 |
Expiration date | Feb. 28, 2014 |
Bank of America, N.A. [Member]
|
|
Lines of credit | |
Amount available | 250 |
Expiration date | Feb. 28, 2014 |
PNC Bank, National Association [Member]
|
|
Lines of credit | |
Amount available | 150 |
Expiration date | Feb. 28, 2014 |
Wells Fargo Bank, National Association [Member]
|
|
Lines of credit | |
Amount available | $ 150 |
Expiration date | Feb. 28, 2014 |