10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

______________

FORM 10-Q

______________

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended December 31, 2005

[ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From to

Commission File Number 1-5397

AUTOMATIC DATA PROCESSING, INC.

(Exact name of registrant as specified in its charter)

Delaware	22-1467904
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)
One ADP Boulevard, Roseland, New Jersey	07068
(Address of principal executive offices)	(Zip Code)
Registrant’s telephone number, including area code: (973) 974-5000

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x Accelerated filer o Non-accelerated filer o

The number of shares outstanding of the registrant’s common stock as of January 27, 2006 was 579,565,044.

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

Automatic Data Processing, Inc. and Subsidiaries

Consolidated Statements of Earnings

(In millions, except per share amounts)

(Unaudited)

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2005 (B)			2004			2005 (B)			2004
REVENUES:
Revenues, other than interest on funds held for Employer Services’ clients and PEO revenues	$	1,870.8		$	1,745.4		$	3,632.6		$	3,368.6
Interest on funds held for Employer Services’ clients		118.9			91.1			227.3			175.8
PEO revenues (A)		163.5			133.4			319.3			258.9
TOTAL REVENUES		2,153.2			1,969.9			4,179.2			3,803.3
EXPENSES:
Operating expenses		992.2			895.2			1,947.7			1,743.8
Selling, general and administrative expenses		489.0			463.4			971.1			906.6
Systems development and programming costs		163.7			149.6			323.1			297.9
Depreciation and amortization		79.4			75.5			156.5			149.4
Other income, net		(9.5	)		(11.4	)		(12.8	)		(23.9	)
TOTAL EXPENSES		1,714.8			1,572.3			3,385.6			3,073.8
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		438.4			397.6			793.6			729.5
Provision for income taxes		165.3			147.5			299.2			270.6
NET EARNINGS FROM CONTINUING OPERATIONS	$	273.1		$	250.1		$	494.4		$	458.9
Loss from discontinued operations, net of benefit from income taxes of $7.3 and $0 for the three months ended December 31, 2005 and 2004, respectively, and $8.1 and $0.3 for the six months ended December 31, 2005 and 2004, respectively		13.4			—			14.7			0.6
NET EARNINGS	$	259.7		$	250.1		$	479.7		$	458.3
Basic Earnings Per Share from Continuing Operations	$	0.47		$	0.43		$	0.86		$	0.79
Basic Earnings Per Share from Discontinued Operations		(0.02	)		—			(0.03	)		—
BASIC EARNINGS PER SHARE	$	0.45		$	0.43		$	0.83		$	0.79
Diluted Earnings Per Share from Continuing Operations	$	0.47		$	0.42		$	0.85		$	0.78
Diluted Earnings Per Share from Discontinued Operations		(0.02	)		—			(0.02	)		—
DILUTED EARNINGS PER SHARE	$	0.45		$	0.42		$	0.83		$	0.78
Basic weighted average shares outstanding		576.2			583.2			576.8			583.4
Diluted weighted average shares outstanding		582.3			591.1			582.0			590.5

Dividends per common share $ 0.1850 $ 0.1550 $ 0.3400 $ 0.2950

(A) Professional Employer Organization (“PEO”) revenues are net of direct pass-through costs of $1,719.2 and $1,352.0 for the three months ended December 31, 2005 and 2004, respectively, and $3,209.9 and $2,501.5 for the six months ended December 31, 2005 and 2004, respectively.

(B) As a result of the adoption of SFAS No. 123R, “Share-Based Payment,” effective July 1, 2005, incremental stock-based compensation expense of $8.0 and $16.6 is included in operating expenses, $20.9 and $43.5 is included in selling, general and administrative expenses, and $8.6 and $18.0 is included in systems development and programming costs, respectively, as well as a related tax benefit of $10.2 and $21.3, which reduced net earnings from continuing operations for the three and six months ended December 31, 2005, respectively. See Note 6 to the consolidated financial statements for additional information.

See notes to the consolidated financial statements.

Automatic Data Processing, Inc. and Subsidiaries

Consolidated Balance Sheets

(In millions, except per share amounts)

(Unaudited)

	December 31,			June 30,
Assets	2005			2005
Current assets:
Cash and cash equivalents	$	1,062.2		$	975.0
Short-term marketable securities (includes $26.3 and $204.7 of segregated securities deposited with clearing organizations or segregated for regulatory purposes at December 31, 2005 and June 30, 2005, respectively)		508.9			695.8
Accounts receivable, net		1,220.8			1,190.7
Securities clearing receivables		1,049.8			965.2
Other current assets		573.6			594.9
Assets of discontinued operations		15.9			32.9
Total current assets		4,431.2			4,454.5
Long-term marketable securities		326.4			447.9
Long-term receivables, net		186.8			186.9
Property, plant and equipment, net		761.9			671.4
Other assets		829.5			813.9
Goodwill		2,559.8			2,408.5
Intangible assets, net		822.9			734.8
Total assets before funds held for clients		9,918.5			9,717.9
Funds held for clients		19,724.7			17,897.5
Total assets	$	29,643.2		$	27,615.4
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	183.0		$	219.9
Accrued expenses and other current liabilities		1,553.2			1,613.5
Securities clearing payables		851.7			745.2
Income taxes payable		198.4			215.4
Liabilities of discontinued operations		10.2			6.7
Total current liabilities		2,796.5			2,800.7
Long-term debt		74.4			75.8
Other liabilities		382.5			342.7
Deferred income taxes		197.2			290.5
Deferred revenues		476.1			462.7
Total liabilities before client funds obligations		3,926.7			3,972.4
Client funds obligations		19,860.6			17,859.2
Total liabilities		23,787.3			21,831.6
Stockholders’ equity:
Preferred stock, $1.00 par value:
Authorized 0.3 shares; issued, none		—
Common stock, $0.10 par value:
Authorized 1,000.0 shares; issued 638.7 shares		63.9			63.9
Capital in excess of par value		95.2			—
Deferred compensation		(18.8	)		(13.3	)
Retained earnings		8,249.3			7,966.0
Treasury stock - at cost: 61.7 and 58.5 shares, respectively		(2,421.8	)		(2,246.8	)

Accumulated other comprehensive (loss) income		(111.9	)		14.0
Total stockholders’ equity		5,855.9			5,783.8
Total liabilities and stockholders’ equity	$	29,643.2		$	27,615.4

See notes to the consolidated financial statements.

Automatic Data Processing, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In millions)

(Unaudited)

	Six Months Ended
	December 31,
	2005			2004
Cash Flows from Operating Activities:
Net earnings	$	479.7		$	458.3
Adjustments to reconcile net earnings to cash flows provided by operating activities:
Depreciation and amortization		157.4			150.6
Deferred income taxes		3.6			26.7
Stock-based compensation expense		88.3			7.3
Amortization of premiums and discounts on available-for-sale securities		44.3			65.1
Impairment of assets of discontinued operations business		19.0			—
Other		48.9			34.4
Net change in assets and liabilities of discontinued operations		1.6			(2.8	)
Changes in operating assets and liabilities, net of effects from acquisitions and divestitures of businesses:
Decrease (increase) in securities deposited with clearing organizations or segregated in compliance with federal regulations		178.4			(1.6	)
Increase in receivables and other assets		(17.5	)		(53.7	)
Decrease in accounts payable, accrued expenses and other liabilities		(125.3	)		(3.9	)
Increase in securities clearing receivables		(84.6	)		(16.0	)
Increase (decrease) in securities clearing payables		106.4			(1.8	)
Net cash flows provided by operating activities		900.2			662.6
Cash Flows from Investing Activities:
Purchases of marketable securities		(2,931.6	)		(3,564.8	)
Proceeds from the sales and maturities of marketable securities		2,584.4			3,576.3
Net (purchases of) proceeds from client funds securities		(1,595.3	)		(5,436.7	)
Change in client funds obligations		2,001.4			5,870.0
Capital expenditures		(155.7	)		(86.0	)
Additions to intangibles		(57.7	)		(39.3	)
Acquisitions of businesses, net of cash acquired		(288.2	)		(325.7	)
Proceeds from the sale of businesses		—			17.2
Other		5.6			4.5
Net cash flows (used in) provided by investing activities		(437.1	)		15.5
Cash Flows from Financing Activities:
Payments of debt		(0.4	)		(0.8	)
Proceeds from issuance of notes		0.3			0.2
Net proceeds from reverse repurchase agreements		—			48.7
Repurchases of common stock		(341.0	)		(270.0	)
Proceeds from stock purchase plan and exercises of stock options		153.5			96.8
Dividends paid		(181.1	)		(164.1	)
Net cash flows used in financing activities		(368.7	)		(289.2	)
Effect of exchange rate changes on cash and cash equivalents		(7.2	)		29.3
Net change in cash and cash equivalents		87.2			418.2
Cash and cash equivalents, beginning of period		975.0			712.4
Cash and cash equivalents, end of period	$	1,062.2		$	1,130.6

See notes to the consolidated financial statements.

Automatic Data Processing, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

(Tabular dollars in millions, except per share amounts)

(Unaudited)

Note 1. Basis of Presentation.

The accompanying unaudited consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods. Adjustments are of a normal recurring nature. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes of Automatic Data Processing, Inc. and Subsidiaries (“ADP” or the “Company”) as of and for the year ended June 30, 2005. The results of operations for the three and six months ended December 31, 2005 may not be indicative of the results to be expected for the fiscal year ending June 30, 2006.

Note 2. New Accounting Pronouncement

As further discussed in Note 6, the Company adopted SFAS No. 123R, "Share-Based Payment" ("SFAS No. 123R") effective July 1, 2005 using the modified prospective method. The adoption of this standard requires the measurement of stock-based compensation expense based on the fair value of the award on the date of grant. Prior to July 1, 2005, the Company followed Accounting Principles Board Opinion 25, "Accounting for Stock Issued to Employees" ("APB No. 25"), and related interpretations. Under APB No. 25, no stock-based compensation expense was recognized related to the Company’s stock options and employee stock purchase plan, as all options granted under the stock option plans had an exercise price equal to the market value of the underlying common stock on the date of grant and, with respect to the employee stock purchase plan, the discount did not exceed fifteen percent.

Note 3. Acquisitions

The Company acquired three businesses during the six months ended December 31, 2005 for approximately $287.5 million, net of cash acquired. These acquisitions resulted in approximately $181.3 million of goodwill. Intangible assets acquired, which total approximately $113.7 million, consisted primarily of software, and customer contracts and lists that are being amortized over a weighted average life of 9 years. The Company also made $0.7 million of contingent payments relating to previously consummated acquisitions. These acquisitions were not material, either individually or in the aggregate, to the Company’s operations, financial position or cash flows.

Note 4. Discontinued Operations

During the three months ended December 31, 2005, the Company finalized a plan to dispose of its Brokerage Services’ financial print business. In connection with the plan to dispose of the financial print business, the Company recorded an impairment charge of $19.0 million in order to reflect the assets of this business at fair value as of December 31, 2005 in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This impairment charge is included in the net loss from discontinued operations. On January 20, 2006, the Company sold its Brokerage Services’ financial print business. The Company has classified the results of operations of this business as discontinued operations as of December 31, 2005. During the six months ended December 31, 2005 and 2004, there were no significant investing or financing cash flow activities of the discontinued operations.

Operating results of the discontinued operations were as follows:

	Three Months Ended					Six Months Ended
	December 31,					December 31,
	2005			2004		2005			2004
Revenues	$	22.2		$	23.7	$	42.4		$	45.0
Loss before benefit from income taxes		(20.7	)		—		(22.8	)		(0.9	)
Benefit from income taxes		(7.3	)		—		(8.1	)		(0.3	)
Net loss from discontinued operations	$	(13.4	)	$	—	$	(14.7	)	$	(0.6	)

The following are the major classes of assets and liabilities related to the discontinued operations as of December 31, 2005 and June 30, 2005.

	December 31,		June 30,
	2005		2005
Assets:
Cash	$	0.6	$	0.5
Accounts receivable, net		14.8		16.6
Property, plant and equipment, net		—		13.3
Other assets		0.5		2.5
Total	$	15.9	$	32.9
Liabilities:
Accounts payable	$	4.7	$	4.2
Accrued expenses		5.5		2.5
Total	$	10.2	$	6.7

Note 5. Earnings Per Share (“EPS”)

	For the three months ended December 31,
	2005					2004
	Net Earnings from Continuing Operations		Weighted Average Shares	EPS from Continuing Operations		Net Earnings from Continuing Operations		Weighted Average Shares	EPS from Continuing Operations
Basic	$	273.1	576.2	$	0.47	$	250.1	583.2	$	0.43
Effect of zero coupon subordinated notes		0.3	1.2				0.3	1.2
Effect of stock options		—	4.9				—	6.7
Diluted	$	273.4	582.3	$	0.47	$	250.4	591.1	$	0.42
		For the six months ended December 31,
		2005					2004
		Net Earnings from Continuing Operations	Weighted Average Shares		EPS from Continuing Operations		Net Earnings from Continuing Operations	Weighted Average Shares		EPS from Continuing Operations
Basic	$	494.4	576.8	$	0.86	$	458.9	583.4	$	0.79
Effect of zero coupon subordinated notes		0.6	1.2				0.5	1.2
Effect of stock options		—	4.0				—	5.9
Diluted	$	495.0	582.0	$	0.85	$	459.4	590.5	$	0.78

Options to purchase 29.2 million and 26.6 million shares of common stock for the three months ended December 31, 2005 and 2004, respectively, and 34.5 million and 34.9 million shares of common stock for the six months ended December 31, 2005 and 2004, respectively, were excluded from the calculation of diluted earnings per share, as the effect would have been anti-dilutive for each respective period.

Note 6. Fair Value Accounting for Stock-Based Compensation

As previously noted, effective July 1, 2005, the Company adopted SFAS No. 123R utilizing the modified prospective method. SFAS No. 123R requires the measurement of stock-based compensation expense based on the fair value of the award on the date of grant. Under the modified prospective method, the provisions of SFAS No. 123R apply to all awards granted or modified after the date of adoption. In addition, the unrecognized expense of awards not yet vested at the date of adoption, determined under the original provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"), will be recognized in net earnings in the periods after the date of adoption. Stock-based compensation primarily consists of the following:

• Stock Options. Stock options are granted to employees at exercise prices equal to the fair market value of the Company’s common stock at the dates of grant. Stock options are issued under a grade vesting schedule and, generally vest ratably over five years and have a term of 10 years. Compensation expense for stock options is recognized over the requisite service period for each separately vesting portion of the stock option award. In fiscal 2005, the Company reduced the amount of stock options issued by approximately one-third.

• Employee Stock Purchase Plan. Prior to November 2005, the Company offered an employee stock purchase plan that allowed eligible employees to purchase shares of common stock at 85% of the lower of market value as of the date the purchase price for an offering was determined or as of the end of such offering under the stock purchase plan. In November 2005, the Company revised the employee stock purchase plan offering beginning on January 1, 2006, whereby eligible employees can purchase shares of common stock at 85% of the market value at the date the purchase price for the offering is determined. Compensation expense for the employee stock purchase plan is recognized over the vesting period of 24 months on a straight-line basis.

• Restricted Stock. The Company has a restricted stock program under which shares of common stock have been sold at par value to certain key employees. These shares are restricted as to transfer and in certain circumstances must be resold to the Company at the original purchase price. The Company records stock compensation expense relating to the issuance of restricted stock over the period during which the transfer restrictions exist, which is up to six years from the date of grant. The value of the Company’s restricted stock, based on market prices, is recognized as compensation expense over the restriction period on a straight-line basis.

The Company currently utilizes treasury stock to satisfy stock option exercises, issuances under its employee stock purchase plan and restricted stock awards. Stock-based compensation expense of $42.5 million and $3.9 million was recognized in earnings from continuing operations for the three months ended December 31, 2005 and 2004, respectively, as well as related tax benefits of $12.1 million and $1.5 million, respectively. Stock-based compensation expense of $87.6 million and $7.3 million was recognized in earnings from continuing operations for the six months ended December 31, 2005 and 2004, respectively, as well as related tax benefits of $25.0 million and $2.8 million, respectively:

	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2005		2004		2005		2004
Operating expenses	$	8.0	$	—	$	16.6	$	—
Selling, general and administrative expenses		25.9		3.9		53.0		7.3
System development and programming costs		8.6		—		18.0		—
Total pre-tax stock-based compensation expense included in continuing operations	$	42.5	$	3.9	$	87.6	$	7.3
Total pre-tax stock-based compensation expense included in discontinued operations		0.3		—		0.7		—
Total pre-tax stock-based compensation expense	$	42.8	$	3.9	$	88.3	$	7.3

The total pre-tax stock-based compensation expense includes expenses related to restricted stock awards of $5.0 million and $3.9 million within selling, general and administrative expenses for the three months ended December 31, 2005 and 2004, respectively, and $9.5 million and $7.3 million within selling, general and administrative expenses for the six months ended December 31, 2005 and 2004, respectively. As of December 31, 2005, the total remaining unrecognized compensation cost related to non-vested stock options, the employee stock purchase plan and restricted stock awards amounted to $148.9 million, $15.1 million and $21.7 million respectively, which will be amortized over the weighted-average remaining requisite service period of 1.2 years, 0.3 years and 1.1 years, respectively.

A summary of changes in the stock option plans for the six months ended December 31, 2005 is as follows:

	Number of Options (in thousands)		Weighted Average Price (in dollars)		Weighted Average Remaining Life (in years)	Aggregate Intrinsic Value (in millions)
Options outstanding at July 1, 2005	70,395		$	42
Options granted	2,422		$	43
Options exercised	(3,731	)	$	30
Options canceled	(2,211	)	$	46
Options outstanding at December 31, 2005	66,875		$	43	6.3	$	259.0

Approximately 38.7 million options are exercisable at December 31, 2005 with a weighted average exercise price of $43. The total intrinsic value of options exercised during the six months ended December 31, 2005 was $58.3 million. At December 31, 2005, the Company has 18.0 million shares available for future stock option grants.

Subsequent to December 31, 2005, the Company issued 2.7 million shares in connection with the employee stock purchase plan offering that vested on December 31, 2005. The Company expects to issue approximately 2.7 million shares for the employee stock purchase plan offering that vests on December 31, 2006. The Company issued 335 thousand shares of restricted stock during the six months ended December 31, 2005.

The following table illustrates the effect on net earnings from continuing operations and earnings per share from continuing operations if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation for periods prior to adoption of SFAS No. 123R.

	Three Months Ended			Six Months Ended
	December 31,			December 31,
	2004			2004
Net earnings from continuing operations, as reported	$	250.1		$	458.9
Add: Stock-based employee compensation expense included in reported net earnings from continuing operations, net of related tax effects		2.4			4.5
Deduct: Total stock-based employee compensation expense determined using the fair value-based method for all awards, net of related tax effects		(35.7	)		(73.2	)
Pro forma net earnings from continuing operations	$	216.8		$	390.2
Earnings per share from continuing operations:
Basic – as reported	$	0.43		$	0.79
Basic – pro forma	$	0.37		$	0.67
Diluted – as reported	$	0.42		$	0.78
Diluted – pro forma	$	0.36		$	0.66

The fair value of each stock option issued prior to January 1, 2005 was estimated on the date of grant using a Black-Scholes option-pricing model. For stock options issued on or after January 1, 2005, the fair value of each stock option was estimated on the date of grant using a binomial option-pricing model. The binomial model considers a range of assumptions related to volatility, risk-free interest rate and employee exercise behavior. Expected volatilities utilized in the binomial model are based on a

combination of implied market volatilities, historical volatility of the Company’s stock price and other factors. Similarly, the dividend yield is based on historical experience and expected future changes. The risk-free rate is derived from the U.S. Treasury yield curve in effect at the time of grant. The binomial model also incorporates exercise and forfeiture assumptions based on an analysis of historical data. The expected life of the stock option grants is derived from the output of the binomial model and represents the period of time that options granted are expected to be outstanding.

The fair values of options granted during the six months ended December 31, 2005 were estimated at the date of grant with the following assumptions:

Risk-free interest rate		4.03	%
Dividend yield		1.44	%
Weighted average volatility factor		24.68	%
Weighted average expected life (in years)		5.50
Weighted average fair value (in dollars)	$	10.37

Note 7. Other Income, net

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2005			2004			2005			2004
Interest income on corporate funds	$	(38.3	)	$	(26.1	)	$	(73.1	)	$	(51.9	)
Interest expense		25.7			10.8			44.4			18.9
Realized gains on available- for-sale securities		(0.1	)		(6.1	)		(0.6	)		(8.7	)
Realized losses on available- for-sale securities		3.2			10.0			16.5			17.8
Other income, net	$	(9.5	)	$	(11.4	)	$	(12.8	)	$	(23.9	)

Proceeds from sales and maturities of marketable securities were $903.6 million and $1,664.0 million for the three months ended December 31, 2005 and 2004, respectively, and $2,584.4 million and $3,576.3 million for the six months ended December 31, 2005 and 2004, respectively.

Note 8. Comprehensive Income

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2005			2004			2005			2004
Net earnings	$	259.7		$	250.1		$	479.7		$	458.3
Other comprehensive (loss) income:
Foreign currency translation adjustments		(32.8	)		109.4			(16.4	)		129.5
Unrealized net (loss) gain on available-for-sale securities, net of tax		(36.2	)		(37.1	)		(109.5	)		1.2
Comprehensive income	$	190.7		$	322.4		$	353.8		$	589.0

Note 9. Interim Financial Data by Segment

Employer Services, Brokerage Services, Dealer Services, and Securities Clearing and Outsourcing Services are the Company's reportable segments. The primary components of “Other” are Claims Services, miscellaneous processing services, and corporate allocations and expenses, including stock-based compensation expense related to the Company’s adoption of SFAS No. 123R effective July 1, 2005.

The Company evaluates the performance of its reportable segments based on operating results before interest on corporate funds, foreign currency gains and losses, stock-based compensation expenses and income taxes. Certain revenues and expenses are charged to the reportable segments at a standard rate for management reasons. Other costs are recorded based on management responsibility. The prior year’s reportable segment revenues and earnings from continuing operations before income taxes have been adjusted to reflect updated fiscal 2006 budgeted foreign exchange rates.

Reconciling items include foreign exchange differences between the actual foreign exchange rates and fiscal 2006 budgeted foreign exchange rates, and the adjustment for the difference between actual interest income earned on invested funds held for clients and interest credited to Employer Services at a standard rate of 4.5%. Both of these adjustments are eliminated in consolidation and as such represent reconciling items to revenues and earnings from continuing operations before income taxes. The reportable segment results also include an internal cost of capital charge related to the funding of acquisitions and other investments. This charge is eliminated in consolidation and as such represents a reconciling item to earnings from continuing operations before income taxes.

Segment Results:

	Revenues
	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2005			2004			2005			2004
Employer Services	$	1,372.5		$	1,250.3		$	2,671.9		$	2,440.7
Brokerage Services		366.3			338.8			720.9			651.8
Dealer Services		270.0			245.8			523.8			486.1
Securities Clearing and Outsourcing Services		19.8			15.4			37.5			15.4
Other		138.0			136.5			253.7			261.5
Reconciling items:
Foreign exchange		2.9			12.1			7.7			6.7
Client fund interest		(16.3	)		(29.0	)		(36.3	)		(58.9	)
Total	$	2,153.2		$	1,969.9		$	4,179.2		$	3,803.3
	Earnings From Continuing Operations Before Income Taxes
	Three Months Ended December 31,							Six Months Ended December 31,
		2005			2004			2005			2004
Employer Services	$	309.5		$	284.9		$	581.0		$	505.2
Brokerage Services		53.5			50.6			106.9			91.9
Dealer Services		40.2			38.5			81.3			74.7
Securities Clearing and Outsourcing Services		(7.6	)		(5.2	)		(19.4	)		(5.2	)
Other		19.5			17.9			2.5			49.3
Reconciling items:
Foreign exchange		1.8			2.0			2.8			0.4
Client fund interest		(16.3	)		(29.0	)		(36.3	)		(58.9	)
Cost of capital charge		37.8			37.9			74.8			72.1
Total	$	438.4		$	397.6		$	793.6		$	729.5

Note 10. Corporate Investments and Funds Held for Clients

Corporate investments and funds held for clients at December 31, 2005 and June 30, 2005 are as

follows:

	December 31, 2005
			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
Type of issue:
Money market securities and other cash equivalents	$	8,393.4		—		—		$	8,393.4
Trading securities:
U.S. Treasury and direct obligations of U.S. government agencies		26.3		—		—			26.3
Available-for-sale securities:
U.S. Treasury and direct obligations of U.S. government agencies		6,730.0		14.5		(97.0	)		6,647.5
Asset backed securities		1,880.2		3.1		(22.3	)		1,861.0
Corporate bonds		2,909.4		1.3		(39.1	)		2,871.6
Canadian government obligations and Canadian government agency obligations		874.3		9.0		(4.3	)		879.0
Other debt securities		951.2		2.4		(10.2	)		943.4
Total available-for-sale securities		13,345.1		30.3		(172.9	)		13,202.5
Total corporate investments and funds held for clients	$	21,764.8	$	30.3	$	(172.9	)	$	21,622.2
		June 30, 2005
				Gross		Gross
		Amortized		Unrealized		Unrealized
		Cost		Gains		Losses			Fair Value
Type of issue:
Money market securities and other cash equivalents	$	6,810.0		—		—		$	6,810.0
Trading securities:
U.S. Treasury and direct obligations of U.S. government agencies		204.7		—		—			204.7
Available-for-sale securities:
U.S. Treasury and direct obligations of U.S. government agencies		6,573.3		48.2		(30.3	)		6,591.2
Asset backed securities		1,815.2		8.6		(11.3	)		1,812.5
Corporate bonds		2,684.8		8.7		(15.3	)		2,678.2
Canadian government obligations and Canadian government agency obligations		894.3		20.5		(0.3	)		914.5
Other debt securities		999.5		8.5		(3.8	)		1,004.2
Other equity securities		1.5		—		(0.6	)		0.9
Total available-for-sale securities		12,968.6		94.5		(61.6	)		13,001.5
Total corporate investments and funds held for clients	$	19,983.3	$	94.5	$	(61.6	)	$	20,016.2

Classification of investments on the Consolidated Balance Sheets is as follows:

December 31,	June 30,
2005	2005

Corporate investments:
Cash and cash equivalents	$	1,062.2	$	975.0
Short-term marketable securities		508.9		695.8
Long-term marketable securities		326.4		447.9
Total corporate investments		1,897.5		2,118.7
Funds held for clients		19,724.7		17,897.5
Total corporate investments and funds held for clients	$	21,622.2	$	20,016.2

The Company’s trading securities include $26.3 million and $27.9 million at December 31, 2005 and June 30, 2005, respectively, that have been pledged as collateral to exchanges and clearinghouses. These investments cannot be pledged or sold by the exchanges or clearinghouses. Additionally, $176.8 million of trading securities at June 30, 2005 were segregated for the exclusive benefit of our Securities Clearing and Outsourcing Services’ customers to meet regulatory requirements.

The Company believes that the available-for-sale securities that have fair values that are below cost are not other-than-temporarily impaired since it is probable that principal and interest will be collected in accordance with the applicable contractual terms and the Company has the ability and intent to hold the available-for-sale securities until maturity.

At December 31, 2005, approximately 95% of the available-for-sale securities held an AAA or AA rating, as rated by Moody’s, Standard & Poor’s and, for Canadian securities, Dominion Bond Rating Service.

Expected maturities of available-for-sale securities at December 31, 2005 are as follows:

Due in one year or less	$	2,697.9
Due after one year to two years		2,744.3
Due after two years to three years		2,412.4
Due after three years to four years		2,446.5
Due after four years to ten years		2,901.4
Total available-for-sale securities	$	13,202.5

Note 11. Securities Clearing and Outsourcing Services

Securities clearing receivables and payables consist of the following:

	December 31,		June 30,
	2005		2005
Receivables:
Clearing customers	$	580.6	$	473.3
Securities borrowed		102.8		122.3
Broker-dealers and other		112.2		148.1
Clearing organizations		30.4		87.0
Securities failed to deliver		223.8		134.5
Total	$	1,049.8	$	965.2

Payables:
Clearing customers	$	459.1	$	454.2
Securities loaned		73.1		117.3
Broker-dealers and other		113.7		114.5
Securities failed to receive		205.8		59.2
Total	$	851.7	$	745.2

As of December 31, 2005, the Company had received collateral in connection with securities borrowed, customer margin loans and broker-dealer accounts, with a market value of approximately $1,769.5 million, which it can sell, repledge or use in securities clearance activities. Of this amount, approximately $419.3 million had been pledged as of December 31, 2005 in connection with securities loaned, deposits with clearing organizations and securities clearance activities.

The Securities Clearing and Outsourcing Services segment is comprised of one subsidiary, which is subject to the Uniform Net Capital Rule of the Securities and Exchange Commission. At December 31, 2005, the net capital of such subsidiary was $212.7 million, exceeding the net capital requirements by $197.2 million. This subsidiary has secured unlimited Securities Investor Protection Corporation (“SIPC”) insurance coverage for its customers. Under the terms of the unlimited excess SIPC insurance coverage, this subsidiary is required to maintain net capital of $200.0 million.

Note 12. Goodwill and Intangible Assets, net

Changes in goodwill for the six months ended December 31, 2005 are as follows:

	Employer Services			Brokerage Services			Dealer Services			Securities Clearing and Outsourcing Services			Other			Total
Balance as of June 30, 2005	$	1,334.0		$	368.8		$	354.6		$	129.1		$	222.0		$	2,408.5
Additions/Adjustments		—			(0.7	)		179.7			(3.3	)		(2.2	)		173.5
Cumulative translation adjustments		(13.1	)		(0.8	)		(1.1	)		—			(7.2	)		(22.2	)
Balance as of December 31, 2005	$	1,320.9		$	367.3		$	533.2		$	125.8		$	212.6		$	2,559.8

Components of intangible assets, net are as follows:

		December 31,2005			June 30,2005
Intangible assets:
Software and software licenses	$	927.9		$	818.3
Customer contracts and lists		726.8			690.2
Other intangibles		348.8			332.2
		2,003.5			1,840.7
Less: Accumulated amortization		(1,180.6	)		(1,105.9	)
Intangible assets, net	$	822.9		$	734.8

Other intangibles consist primarily of purchased rights, covenants, patents and trademarks (acquired directly or through acquisitions). All of the intangible assets have finite lives and, as such, are subject to amortization. The weighted average remaining useful life of the intangible assets is 9 years (5 years for software and software licenses, 11 years for customer contracts and lists, and 9 years for other intangibles). Amortization of intangibles totaled $37.0 million and $37.3 million for the three months ended December 31, 2005 and 2004, respectively, and totaled $72.8 million and $73.1 million for the six months ended December 31, 2005 and 2004, respectively. Estimated amortization expense of the Company’s existing intangible assets for the remaining six months of fiscal 2006 and the succeeding five fiscal years are as follows:

	Amount
2006	$	93.4
2007	$	151.4
2008	$	123.3
2009	$	78.1
2010	$	68.3
2011	$	50.9

Note 13. Short-term Financing

In June 2005, the Company entered into a $1.25 billion, 364-day credit agreement and a $1.5 billion, five-year credit agreement with a group of lenders. The five-year facility contains an accordion feature under which the aggregate commitment can be increased by $500.0 million to $2.0 billion, subject to the availability of additional commitments. These facilities replaced the Company’s prior $2.25 billion, 364-day facility, which terminated on June 29, 2005. The $1.25 billion and $1.5 billion agreements mature in June 2006 and June 2010, respectively. The Company also has a $2.25 billion credit facility that matures in June 2009. The interest rate applicable to the borrowings is tied to LIBOR or prime rate depending on the notification provided by the Company to the syndicated financial institutions prior to borrowing. The Company is also required to pay facility fees on the credit agreements. The primary uses of the credit facilities are to provide liquidity to the commercial paper program and to provide funding for general corporate purposes, if necessary. The Company had no borrowings through December 31, 2005 under the credit agreements.

The Company maintains a U.S. short-term commercial paper program providing for the issuance of up to $5.0 billion in aggregate maturity value of commercial paper at the Company’s discretion. The Company’s commercial paper program is rated A-1+ by Standard and Poor’s and Prime 1 by Moody’s. These ratings denote the highest quality commercial paper securities. Maturities of commercial paper can range from overnight to up to 270 days. At December 31, 2005 and 2004, there was no commercial paper outstanding. For the three months ended December 31, 2005 and 2004, the Company had average borrowings of $2.1 billion and $1.5 billion, respectively, at a weighted average interest rate of 4.0% and 2.0%, respectively. For the six months ended December 31, 2005 and 2004, the Company had average borrowings of $1.9 billion and $1.4 billion, respectively, at a weighted average interest rate of 3.8% and 1.7%, respectively. The weighted average maturity of the Company’s commercial paper during the three and six months ended December 31, 2005 and 2004 was less than two days for both periods.

The Company’s U.S. and Canadian short-term funding requirements related to client funds obligations are sometimes obtained on a secured basis through the use of repurchase agreements, which are collateralized principally by government and government agency securities. These agreements generally have terms ranging from overnight to up to five business days. At December 31, 2005 and 2004, there were no outstanding obligations under repurchase agreements. For the three months ended December 31, 2005 and 2004, the Company had average outstanding balances under repurchase agreements of $165.3 million and $401.4 million, respectively, at a weighted average interest rate of 3.3% and 1.8%, respectively. For the six months ended December 31, 2005 and 2004, the Company had average outstanding balances under repurchase agreements of $216.0 million and $395.7 million, respectively, at a weighted average interest rate of 3.2% and 1.6%, respectively.

During the three months ended December 31, 2005, the Company borrowed $200.1 million from a financial institution on a short-term basis in connection with one of its acquisitions. The Company repaid the short-term borrowing in full as of December 29, 2005.

Note 14. Foreign Currency Risk Management Programs

Derivative financial instruments are measured at fair value and are recognized as assets or liabilities on the consolidated balance sheet with changes in the fair value of the derivatives recognized in either net earnings from continuing operations or accumulated other comprehensive (loss) income, depending on the timing and designated purpose of the derivative, in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”), SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities” and SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” As of December 31, 2005, the Company had entered into a foreign exchange forward contract to hedge against foreign exchange fluctuations on a Canadian dollar-denominated short-term intercompany loan. This forward contract does not qualify for foreign currency fair value hedge accounting treatment in accordance with SFAS No. 133 and, therefore, is recorded at fair value with any gains or losses recognized in current period earnings. The fair value of the forward contract reflects the present value of the contract at December 31, 2005 and is included within other current assets on the Consolidated Balance Sheet at December 31, 2005. The Company recorded foreign exchange net gains of $1.7 million for the three and six months ended December 31, 2005, which offset the foreign exchange net losses of $1.7 million recorded on the re-measurement of the Company’s Canadian dollar-denominated short-term intercompany loan as of December 31, 2005. The cash flows from the Company's derivative contract are reflected as operating activities in the Consolidated Statements of Cash Flows. The Company does not hold any derivative instruments for trading purposes.

Note 15. Pension Plans

The components of net pension expense were as follows:

	Three months ended						Six months ended
	December 31,						December 31,
	2005			2004			2005			2004
Service cost– benefits earned during the period	$	7.9		$	7.5		$	15.9		$	14.8
Interest cost on projected benefits		9.9			9.5			19.8			18.9
Expected return on plan assets		(14.0	)		(13.1	)		(28.0	)		(26.1	)
Net amortization and deferral		4.8			2.8			9.6			5.6
Net pension expense	$	8.6		$	6.7		$	17.3		$	13.2

The minimum required contribution to the Company’s pension plans is approximately $3.8 million in fiscal 2006. For the six months ended December 31, 2005, the Company made $1.7 million in contributions to the pension plans, and the Company expects to contribute approximately $2.0 million during the second half of fiscal 2006.

Note 16. Commitments and Contingencies

The Company is subject to various claims and litigation in the normal course of business. The Company does not believe that the resolution of these matters will have a material impact on the consolidated financial statements.

 It is not the Company’s business practice to enter into off-balance sheet arrangements. However, the Company is exposed to market risk from changes in foreign currency exchange rates that could impact its financial position, results of operations and cash flows. The Company manages its exposure to these market risks through its regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. The Company uses derivative financial instruments as risk management tools and not for trading purposes. In the normal course of business, the Company also enters into contracts in which it makes representations and warranties that relate to the performance of the Company’s products and services. In addition, the securities transactions of the Securities Clearing and Outsourcing Services segment involve collateral arrangements required by various regulatory and internal guidelines, which are monitored daily. The Company does not expect any material losses related to such representations and warranties or collateral arrangements.

The Company is a member of numerous exchanges and clearinghouses. Under the membership agreements, members are generally required to guarantee the performance of other members. Additionally, if a member becomes unable to satisfy its obligations to the clearinghouse, other members would be required to meet these shortfalls. To mitigate these performance risks, the exchanges and clearinghouses often require members to post collateral. The Company's maximum potential liability under these arrangements cannot be quantified. However, the Company believes that it is unlikely that the Company will be required to make payments under these arrangements. Accordingly, no contingent liability is recorded in the consolidated financial statements for these arrangements.

Note 17. Income Taxes

On October 22, 2004, the American Jobs Creation Act (the “AJCA”) was signed into law. The AJCA includes a deduction of 85% of certain foreign earnings that are repatriated, as defined in the AJCA. The Company may elect to apply this provision to qualifying earnings repatriations in fiscal 2006. The Company is continuing to evaluate the effects of the repatriation provision. The range of possible amounts that the Company could repatriate under this provision is between zero and $500 million. The related potential range of income tax is between zero and $35 million.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

(Tabular dollars are presented in millions, except per share amounts)

CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. We continually evaluate the accounting policies and estimates used to prepare the consolidated financial statements. The estimates are based on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position are discussed in our Annual Report to Stockholders for the fiscal year ended June 30, 2005, in the Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

RESULTS OF OPERATIONS

Analysis of Consolidated Operations

	Three Months Ended December 31,
	2005 – As Reported			2004 – As Reported			2004 – As Adjusted			2005 vs. 2004 - As Reported Change		2005 vs. 2004 - As Adjusted Change
Total revenues	$	2,153.2		$	1,969.9		$	1,969.9		9	%	9	%
Operating expenses		992.2			895.2			905.2
Selling, general and administrative expenses		489.0			463.4			488.6
Systems development and programming costs		163.7			149.6			160.5
Depreciation and amortization		79.4			75.5			75.5
Other income, net		(9.5	)		(11.4	)		(11.4	)
Total expenses	$	1,714.8		$	1,572.3		$	1,618.4		9	%	6	%
Earnings from continuing operations before income taxes	$	438.4		$	397.6		$	351.5		10	%	25	%
Margin		20	%		20	%		18	%
Provision for income taxes	$	165.3		$	147.5		$	134.7		12	%	23	%
Effective tax rate		37.7	%		37.1	%		38.3	%
Net earnings from continuing operations	$	273.1		$	250.1		$	216.8		9	%	26	%
Diluted earnings per share from continuing operations	$	0.47		$	0.42		$	0.36		12	%	31	%

	Six Months Ended December 31,
	2005 – As Reported			2004 – As Reported			2004 – As Adjusted			2005 vs. 2004 - As Reported Change		2005 vs. 2004 - As Adjusted Change
Total revenues	$	4,179.2		$	3,803.3		$	3,803.3		10	%	10	%
Operating expenses		1,947.7			1,743.8			1,764.9
Selling, general and administrative expenses		971.1			906.6			957.3
Systems development and programming costs		323.1			297.9			321.4
Depreciation and amortization		156.5			149.4			149.4
Other income, net		(12.8	)		(23.9	)		(23.9	)
Total expenses	$	3,385.6		$	3,073.8		$	3,169.1		10	%	7	%
Earnings from continuing operations before income taxes	$	793.6		$	729.5		$	634.2		9	%	25	%
Margin		19	%		19	%		17	%
Provision for income taxes	$	299.2		$	270.6		$	244.0		11	%	23	%

Effective tax rate		37.7	%		37.1	%		38.5	%
Net earnings from continuing operations	$	494.4		$	458.9		$	390.2		8	%	27	%
Diluted earnings per share from continuing operations	$	0.85		$	0.78		$	0.66		9	%	29	%

Comparisons between the results of operations for the three and six months ended December 31, 2005 and 2004 are affected by the impact of our adoption, using the modified prospective method, of SFAS No. 123R, "Share-Based Payment" ("SFAS No. 123R"), effective July 1, 2005. The adoption of this standard requires the recognition of stock-based compensation expense in the consolidated financial statements. Prior to July 1, 2005, we followed Accounting Principles Board Opinion 25, "Accounting for Stock Issued to Employees" ("APB No. 25"), and related interpretations. Under APB No. 25, no stock-based compensation expense was recognized related to our stock options and employee stock purchase plan, as all options granted under the stock option plans had an exercise price equal to the market value of the underlying common stock on the date of grant and, with respect to the employee stock purchase plan, the discount did not exceed fifteen percent. The following table summarizes the stock-based compensation expense related to our stock option plan, the employee stock purchase plan and restricted stock program, which has been recorded in earnings from continuing operations in each respective period:

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2005			2004			2005			2004
Operating expenses	$	8.0		$	—		$	16.6		$	—
Selling, general and administrative expenses		25.9			3.9			53.0			7.3
Systems development and programming costs		8.6			—			18.0			—
Total stock-based compensation expenses reported in net earnings from continuing operations	$	42.5		$	3.9		$	87.6		$	7.3
Income tax benefit on stock-based compensation expense reported in net earnings from continuing operations	$	(12.1	)	$	(1.5	)	$	(25.0	)	$	(2.8	)

In order to provide a comparable basis between the results of operations for the three and six months ended December 31, 2005 and 2004, we have provided pro forma information for the three and six months ended December 31, 2004 as if stock-based compensation expense related to our stock options and employee stock purchase plan had been expensed. These adjusted amounts, which are based on the pro forma amounts disclosed in Note 6 to the consolidated financial statements included with this Quarterly Report on Form 10-Q, are reflected under the heading “2004 – As Adjusted”. The “2004 – As Adjusted” results of operations for the three and six months ended December 31, 2004 includes the following pro forma stock-based compensation expense related to our stock options and employee stock purchase plan, which were not expensed in our reported fiscal 2004 results of operations:

	Three Months Ended			Six Months Ended
	December 31, 2004			December 31, 2004
Operating expenses	$	10.0		$	21.1
Selling, general and administrative expenses		25.2			50.7
Systems development and programming costs		10.9			23.5
Total pro forma stock-based compensation expenses	$	46.1		$	95.3
Pro forma income tax benefit on stock-based compensation expenses	$	(12.8	)	$	(26.6	)

The adoption of SFAS No. 123R impacted the comparability of our results of operations for the three and six months ended December 31, 2005 and 2004.  We believe the inclusion of the “2004 – As Adjusted” amounts provides a useful additional perspective to compare the results of operations for the three and six months ended December 31, 2005 and 2004 as a result of our adoption of SFAS No. 123R. We use both generally accepted accounting principles (GAAP) and non-GAAP measures to manage and evaluate the Company’s performance and consider it appropriate to disclose these non-GAAP measures to assist investors with analyzing business performance and trends. However, these measures should not be considered in isolation or as a substitute for the results of operations and diluted earnings per share prepared in accordance with GAAP.

Total Revenues

Our consolidated revenues for the three months ended December 31, 2005 grew 9% to $2,153.2 million primarily due to increases in Employer Services of 10%, or $122.2 million, to $1,372.5 million, Brokerage Services of 8%, or $27.5 million, to $366.3 million, Dealer Services of 10%, or $24.2 million, to $270.0 million as well as $19.8 million from the Securities Clearing and Outsourcing Services segment. Our consolidated revenues, excluding the impact of acquisitions and divestitures, grew 8% in the three months ended December 31, 2005 as compared to the prior year. Revenue growth was reduced by $10.2 million, or 0.5%, due to fluctuations in foreign currency exchange rates.

Our consolidated revenues for the three months ended December 31, 2005 include interest on funds held for Employer Services’ clients of $118.9 million as compared to $91.1 million in the prior year. The increase in the consolidated interest earned on funds held for Employer Services’ clients resulted from the increase of 13% in our average client funds balances to $12.0 billion, as well as the increase in the interest rates during the quarter. We credit Employer Services with interest revenues at a standard rate of 4.5%; therefore Employer Services’ results are not influenced by changes in interest rates. The difference between the 4.5% standard rate allocation in Employer Services and the actual interest earned is a reconciling item that reduces revenue by $16.3 million and $29.0 million in the three months ended December 31, 2005 and 2004, respectively, to eliminate this allocation in consolidation.

Our consolidated revenues for the six months ended December 31, 2005 grew 10% to $4,179.2 million primarily due to increases in Employer Services of 9%, or $231.2 million, to $2,671.9 million, Brokerage Services of 11%, or $69.1 million, to $720.9 million, Dealer Services of 8%, or $37.7 million, to $523.8 million as well as $37.5 million from the Securities Clearing and Outsourcing Services segment. Our consolidated revenues, excluding the impact of acquisitions and divestitures, grew 9% in the six months ended December 31, 2005 as compared to the prior year.

Our consolidated revenues for the six months ended December 31, 2005 include interest on funds held for Employer Services’ clients of $227.3 million as compared to $175.8 million in the prior year. The increase in the consolidated interest earned on funds held for Employer Services’ clients resulted from

the increase of 12% in our average client funds balances to $11.7 billion, as well as the increase in the interest rates during the six months ended December 31, 2005. We credit Employer Services with interest revenues at a standard rate of 4.5%; therefore Employer Services’ results are not influenced by changes in interest rates. The difference between the 4.5% standard rate allocation in Employer Services and the actual interest earned is a reconciling item that reduces revenue by $36.3 million and $58.9 million in the six months ended December 31, 2005 and 2004, respectively, to eliminate this allocation in consolidation.

Total Expenses, As Reported

Our consolidated expenses for the three months ended December 31, 2005 increased by $142.5 million, to $1,714.8 million, from $1,572.3 million, as reported, for the three months ended December 31, 2004. Our consolidated expenses for the six months ended December 31, 2005 increased by $311.8 million, to $3,385.6 million, from $3,073.8 million, as reported, for the six months ended December 31, 2004. The increase in our consolidated expenses is primarily due to the inclusion of stock-based compensation expenses in our results of operations as of July 1, 2005 associated with the adoption of SFAS No. 123R, as discussed above, as well as the increase in our revenues. Total stock-based compensation expense included in continuing operations increased $38.6 million, to $42.5 million for the three months ended December 31, 2005, from $3.9 million, as reported, for the three months ended December 31, 2004 and increased $80.3 million, to $87.6 million for the six months ended December 31, 2005, from $7.3 million, as reported, for the six months ended December 31, 2004 due to the recording of expenses within our results of operations for our stock option program and employee stock purchase plan. The increases in consolidated expenses for the three months ended December 31, 2005 were offset, in part, by a decrease of $10.4 million, or 0.6%, due to fluctuations in foreign currency exchange rates. Operating expenses increased by $97.0 million, or 11%, for the three months ended December 31, 2005 and by $203.9 million, or 12%, for the six months ended December 31, 2005 primarily due to the increase in revenues, including the increases in the Professional Employer Organization (“PEO”) business and investor communications activity, which both have pass-through costs. The pass-through costs for these two services were $235.4 million and $201.5 million for the three months ended December 31, 2005 and 2004, respectively, and $460.2 million and $388.1 million for the six months ended December 31, 2005 and 2004, respectively. Selling, general and administrative expenses increased by $25.6 million, to $489.0 million, and by $64.5 million, to $971.1 million, for the three and six months ended December 31, 2005, respectively, primarily attributable to the expensing of stock-based compensation of $25.9 million and $53.0 million for the three and six months ended December 31, 2005, respectively, and higher compensation costs associated with increased headcount. Systems development and programming costs increased by $14.1 million, to $163.7 million, and by $25.2 million, to $323.1 million, for the three and six months ended December 31, 2005, respectively, primarily due to the expensing of stock-based compensation of $8.6 million and $18.0 million for the three and six months ended December 31, 2005, respectively. In addition, other income, net, decreased $1.9 million for the three months ended December 31, 2005 primarily due to the increase in interest expense on our short-term borrowing programs as a result of higher interest rates. Other income, net, decreased $11.1 million for the six months ended December 31, 2005 primarily due to the increase in net realized losses on our available-for-sale securities which totaled $15.9 million, as compared to $9.1 million for the six months ended December 31, 2004, as well as the increase in interest expense as a result of higher interest rates.

Total Expenses, As Adjusted

Our consolidated expenses for the three months ended December 31, 2005 increased by $96.4 million, to $1,714.8 million, from $1,618.4 million, as adjusted, for the three months ended December 31, 2004. Our consolidated expenses for the six months ended December 31, 2005 increased by $216.5 million, to $3,385.6 million, from $3,169.1 million, as adjusted, for the six months ended December 31, 2004. Consolidated expenses for the three months ended December 31, 2005 decreased by $10.4 million, or

 0.6%, due to fluctuations in foreign currency exchange rates. Operating expenses increased by $87.0 million, or 10%, and by $182.8 million, or 10%, for the three and six months ended December 31, 2005, respectively, primarily due to the increase in revenues, including the increases in the PEO business and investor communications activity, which both have pass-through costs. The pass-through costs for these two services were $235.4 million and $201.5 million for the three months ended December 31, 2005 and 2004, respectively, and $460.2 million and $388.1 million for the six months ended December 31, 2005 and 2004, respectively. Selling, general and administrative expenses increased by $0.4 million, to $489.0 million, and by $13.8 million, to $971.1 million, for the three and six months ended December 31, 2005, respectively, primarily due to higher compensation costs associated with increased headcount offset, in part, by lower stock-based compensation expense. Total stock-based compensation expense included in continuing operations decreased $7.5 million, to $42.5 million for the three months ended December 31, 2005, from $50.0 million, as adjusted, for the three months ended December 31, 2004. Total stock-based compensation expense included in continuing operations decreased $15.0 million, to $87.6 million for the six months ended December 31, 2005, from $102.6 million, as adjusted, for the six months ended December 31, 2004. These decreases were primarily driven by the reduction in the number of stock options granted to associates, which began in fiscal 2005. In addition, other income, net, decreased $1.9 million for the three months ended December 31, 2005 primarily due to the increase in interest expense on our short-term borrowing programs as a result of higher interest rates. Other income, net, decreased $11.1 million for the six months ended December 31, 2005 primarily due to the increase in net realized losses on our available-for-sale securities which totaled $15.9 million, as compared to $9.1 million for the six months ended December 31, 2004, as well as the increase in interest expense as a result of higher interest rates.

Earnings From Continuing Operations Before Income Taxes, As Reported

Earnings from continuing operations before income taxes increased by $40.8 million, or 10%, from $397.6 million, as reported, for the three months ended December 31, 2004 to $438.4 million for the three months ended December 31, 2005 and increased by $64.1 million, or 9%, from $729.5 million, as reported, for the six months ended December 31, 2004 to $793.6 million for the six months ended December 31, 2005 due to the increase in revenues and expenses discussed above. Overall margin remained flat at 20% for the three months ended December 31, 2005 and 19% for the six months ended December 31, 2005 primarily due to the leveraging of our increasing revenues, which has resulted in improved margins for our services offset, in part, by the recording of stock-based compensation expense associated with our stock options and employee stock purchase plan for the three and six months ended December 31, 2005.

Earnings From Continuing Operations Before Income Taxes, As Adjusted

Earnings from continuing operations before income taxes increased by $86.9 million, or 25%, from $351.5 million, as adjusted, for the three months ended December 31, 2004 to $438.4 million for the three months ended December 31, 2005 and increased by $159.4 million, or 25%, from $634.2 million, as adjusted, for the six months ended December 31, 2004 to $793.6 million for the six months ended December 31, 2005 due to the increase in revenues and expenses discussed above. Overall margin improved from 18% to 20% for the three months ended December 31, 2005 as compared to the three months ended December 31, 2004, as adjusted, and from 17% to 19% for the six months ended December 31, 2005 as compared to the six months ended December 31, 2004, as adjusted, primarily due to the leveraging of our increasing revenues, which has resulted in improved margins for our services, as well as the decrease in total stock-based compensation expense primarily due to the reduction in the number of stock options granted to associates.

Provision for Income Taxes, As Reported

Our effective tax rate for both the three and six months ended December 31, 2005 was 37.7% as compared to 37.1%, as reported, for the comparable periods in the prior year. The increase in the effective tax rate is primarily attributable to the expensing of stock-based compensation, as certain components of our stock-based compensation programs are non-deductible, resulting in a higher effective tax rate. This increase was partially offset by a favorable mix in income among tax jurisdictions.

Provision for Income Taxes, As Adjusted

Our effective tax rate was 37.7% as compared to 38.3%, as adjusted, for the three months ended December 31, 2005 and 2004, respectively, and 37.7% as compared to 38.5%, as adjusted, for the six months ended December 31, 2005 and 2004, respectively. Certain components of our stock-based compensation programs are non-deductible, which results in a higher effective tax rate. For the three and six months ended December 31, 2005, our non-deductible stock-based compensation expense decreased and our overall earnings from continuing operations before income taxes increased, both of which contributed to a lower effective tax rate for the three and six months ended December 31, 2005 as compared to the three and six months ended December 31, 2004, as adjusted. In addition, the decrease in the effective tax rate was partially due to a favorable mix in income among tax jurisdictions.

Net Earnings From Continuing Operations and Earnings Per Share From Continuing Operations, As Reported

Net earnings from continuing operations increased 9%, to $273.1 million, for the three months ended December 31, 2005, from $250.1 million, as reported, for the three months ended December 31, 2004 and the related diluted earnings per share from continuing operations increased 12%, to $0.47, for the three months ended December 31, 2005. Net earnings from continuing operations increased 8%, to $494.4 million, for the six months ended December 31, 2005, from $458.9 million, as reported, for the six months ended December 31, 2004 and the related diluted earnings per share from continuing operations increased 9%, to $0.85, for the six months ended December 31, 2005. The increase in net earnings from continuing operations for the three and six months ended December 31, 2005 reflects the increase in earnings from continuing operations before income taxes as a result of increased revenues being offset by expenses, including the additional expense associated with stock-based compensation, and a higher effective tax rate as described above. The increase in diluted earnings per share from continuing operations for the three and six months ended December 31, 2005 reflects the increase in net earnings from continuing operations and the impact of fewer shares outstanding due to the repurchase of 2.3 million shares and 7.3 million shares during the three and six months ended December 31, 2005, respectively, and the repurchase of 14.1 million shares in fiscal 2005.

Net Earnings From Continuing Operations and Earnings Per Share From Continuing Operations, As Adjusted

Net earnings from continuing operations increased 26%, to $273.1 million, for the three months ended December 31, 2005, from $216.8 million, as adjusted, for the three months ended December 31, 2004. Diluted earnings per share from continuing operations increased 31%, to $0.47, for the three months ended December 31, 2005, from $0.36, as adjusted, for the three months ended December 31, 2004. Net earnings from continuing operations increased 27%, to $494.4 million, for the six months ended December 31, 2005, from $390.2 million, as adjusted, for the six months ended December 31, 2004. Diluted earnings per share from continuing operations increased 29%, to $0.85, for the six months ended December 31, 2005, from $0.66, as adjusted, for the six months ended December 31, 2004. The increase in net earnings from continuing operations for the three and six months ended December 31, 2005 reflects the increase in earnings from continuing operations before income taxes as a result of our higher revenues, improved margin and lower effective tax rate as described above. The increase in diluted earnings per share from continuing operations for the three and six months ended December 31, 2005 reflects the increase in net earnings from continuing operations and the impact of fewer shares outstanding due to the repurchase of 2.3 million shares and 7.3 million shares during the three and six months ended December 31, 2005, respectively, and the repurchase of 14.1 million shares in fiscal 2005.

Analysis of Reportable Segments

Analysis of Reportable Segments
Revenues
	Three Months Ended								Six Months Ended
	December 31,								December 31,
	2005			2004			Change		2005			2004			Change
Employer Services	$	1,372.5		$	1,250.3		10	%	$	2,671.9		$	2,440.7		9	%
Brokerage Services		366.3			338.8		8	%		720.9			651.8		11	%
Dealer Services		270.0			245.8		10	%		523.8			486.1		8	%
Securities Clearing and Outsourcing Services		19.8			15.4		29	%		37.5			15.4		100	+%
Other		138.0			136.5		1	%		253.7			261.5		-3	%
Reconciling items:
Foreign exchange		2.9			12.1					7.7			6.7
Client fund interest		(16.3	)		(29.0	)				(36.3	)		(58.9	)
Total revenues	$	2,153.2		$	1,969.9		9	%	$	4,179.2		$	3,803.3		10	%
Earnings From Continuing Operations Before Income Taxes
		Three Months Ended								Six Months Ended
		December 31,								December 31,
		2005			2004		Change			2005			2004		Change
Employer Services	$	309.5		$	284.9		9	%	$	581.0		$	505.2		15	%
Brokerage Services		53.5			50.6		6	%		106.9			91.9		16	%
Dealer Services		40.2			38.5		4	%		81.3			74.7		9	%
Securities Clearing and Outsourcing Services		(7.6	)		(5.2	)	-46	%		(19.4	)		(5.2	)	-100	+%
Other		19.5			17.9		9	%		2.5			49.3		-95	%
Reconciling items:
Foreign exchange		1.8			2.0					2.8			0.4
Client fund interest		(16.3	)		(29.0	)				(36.3	)		(58.9	)
Cost of capital charge		37.8			37.9					74.8			72.1
Total earnings from continuing operations before income taxes	$	438.4		$	397.6		10	%	$	793.6		$	729.5		9	%

Employer Services

Revenues

Employer Services' revenues increased 10% and 9% for the three and six months ended December 31, 2005, respectively, primarily due to new business started in the period, an increase in the number of employees on our clients’ payrolls, strong client retention, price increases and an increase in client funds balances. Internal revenue growth, which represents revenue growth excluding the impact of acquisitions and divestitures, was approximately 10% for both the three and six months ended December 31, 2005. New business sales, which represent the annualized recurring revenues anticipated from sales orders to new and existing clients, grew 9% in the United States for both the three and six months ended December 31, 2005 and 8% and 7% worldwide for the three and six months ended December 31, 2005, respectively, due to the increased growth in the salesforce and productivity. The number of employees on our clients’ payrolls, & #147;pays per control,” increased 2.2% for both the three months and six months ended December 31, 2005 in the United States. This employment metric represents over 125 thousand payrolls across a broad range of U.S. geographies ranging from small to very large businesses. Our client retention in the United States declined by 0.3 percentage points for the three months ended December 31, 2005, but remained at record high levels for the six months ended December 31, 2005.

Interest income was credited to Employer Services at a standard rate of 4.5% so the results of the business were not influenced by changes in interest rates. Interest income increased by $15.1 million and $28.9 million, which accounted for approximately 1% growth in Employer Services’ revenues for the three and six months ended December 31, 2005, respectively, due to the increase in the average client funds balances as a result of increased Employer Services’ new business and growth in our existing client base as compared to the prior year. The average client funds balances were $12.0 billion as compared to $10.7 billion for the three months ended December 31, 2005 and 2004, respectively, and $11.7 billion as compared to $10.4 billion for the six months ended December 31, 2005 and 2004, respectively, representing an increase of 13% and 12% for the three and six months ended December 31, 2005, respectively.

Revenues from our "beyond payroll" products continued to grow at a faster rate than the traditional payroll and payroll tax revenues. Our PEO revenues grew 23%, to $163.5 million and $319.3 million, for both the three and six months ended December 31, 2005, respectively, primarily due to 19% growth in the number of PEO worksite employees as of December 31, 2005 and additional pass-through benefits. In addition, "beyond payroll" revenues grew due to a 21% and 20% increase for the three and six months ended December 31, 2005, respectively, in revenues from our Time and Labor Management Services, as a result of increases in the number of clients utilizing this service.

Earnings From Continuing Operations Before Income Taxes

Earnings from continuing operations before income taxes increased 9%, from $284.9 million to $309.5 million, for the three months ended December 31, 2005 and 15%, from $505.2 million to $581.0 million, for the six months ended December 31, 2005 primarily due to the increase in revenues. Earnings from continuing operations before income taxes for the three months ended December 31, 2005  increased comparably to revenues due to the improvement in margins of our products from the leveraging of our expenses, offset by the additional personnel expenses resulting from the increase in salesforce and implementation personnel during the current quarter. In addition, expenses for the quarter have increased due to certain start-up expenses relating to GlobalView (SM), our HR outsourcing offering for multi-national organizations based on SAP's industry-leading HR business solutions. Earnings from continuing operations before income taxes for the six months ended December 31, 2005 did not increase comparably with revenues primarily due to the leveraging of our expense structure with the increased revenues. Our operating expenses increased comparably with our revenue growth for the three and six months ended December 31, 2005 due to increases in our PEO business, which includes pass-through costs associated with the services. Our PEO revenues and pass-through operating expenses related to benefits and workers’ compensation costs both grew 23%, to $163.5 million and $117.4 million, respectively, for the three months ended December 31, 2005 and both grew 23%, to $319.3 million and $229.5 million, respectively, for the six months ended December 31, 2005.

Brokerage Services

Revenues

Brokerage Services' revenues increased 8% and 11% for the three and six months ended December 31, 2005, respectively, due to the increase in certain investor communication activities, offset by decreases in back-office services revenues for both periods. Revenues from investor communication activities consist of revenues from our beneficial proxy and interim communications and beyond beneficial products. Revenues from beneficial proxy and interim communications grew 12%, to $104.5 million, for the three months ended December 31, 2005 and 14%, to $210.8 million, for the six months ended December 31, 2005 primarily due to increased mutual fund meetings and other required mutual fund communications. Revenues beyond our beneficial products grew 14%, to $148.8 million, for the three months ended December 31, 2005 and 19%, to $288.2 million, for the six months ended December 31, 2005 primarily from sales and internal revenue growth withi n our transaction reporting, electronic solutions and print on demand products. Stock record growth, which is a measure of how many stockholders own a security compared to the prior year and a key factor in the number of pieces delivered, decreased 3% and was flat for the three and six months ended December 31, 2005, respectively. Our number of pieces delivered increased 6% for the three months ended December 31, 2005, from 197 million to 209 million, and 11% for the six months ended December 31, 2005, from 372 million to 411 million, driven by higher volumes from mutual fund meetings and other required mutual fund communications. Our back-office revenues decreased 6%, to $84.0 million, and 3%, to $168.1 million, for the three and six months ended December 31, 2005, respectively. Back-office average trades per day increased 4%, from 1.55 million to 1.61 million, for the three months ended December 31, 2005 and 7%, from 1.46 million to 1.56 million, for the six months ended December 31, 2005 primarily due to growth in our existing client base. This increase was offset by a decrease in the average revenue per trade of 6% for both the three and six months ended December 31, 2005, respectively, and a decrease in non-trade revenues.

Earnings From Continuing Operations Before Income Taxes

Earnings from continuing operations before income taxes increased $2.9 million or 6%, to $53.5 million, and $15.0 million or 16%, to $106.9 million, for the three and six months ended December 31, 2005, respectively, primarily due to the increased revenues in our investor communication activities. Earnings from continuing operations before income taxes for the three months ended December 31, 2005 did not increase comparably with the increase in revenues primarily due to the mix of revenues. Revenues of our investor communications activities, whose products have lower margins, have increased and revenues of our back-office services, whose products have higher margins, have decreased. Earnings from continuing operations before income taxes for the six months ended December 31, 2005 increased at a higher rate than the growth in revenues due to the leveraging of our expense structure to improve our margins associated with our investor communications activities. Additionally, earnings from continuing operations before income taxes for the six months was favorably impacted by the improvement in the margin of our back-office services products due to the continued efforts to align our operating expenses to back-office revenues. The increase in earnings from continuing operations before income taxes for the six months ended December 31, 2005 was partially offset by the increase in the pass-through postage costs associated with certain investor communications activities.

Dealer Services

Revenues

Dealer Services' revenues increased 10% and 8% for the three and six months ended December 31, 2005, respectively, as compared with the prior year. Internal revenue growth was approximately 4% for both the three and six months ended December 31, 2005, respectively. Revenues increased for our dealer business systems in North America by $9.6 million, to $209.8 million, for the three months and $20.9 million, to $420.7 million, for the six months primarily due to growth in our key products for both periods. The growth in our key products was primarily driven by the increased users for Application Service Provider (“ASP”) managed services, increased Credit Check and CVR transaction volume, new network installations and increased market penetration of our Customer Relationship Management (“CRM”) product. Our revenues for the three months ended December 31, 2005 were also impacted by the acquisition of Kerridge Comp uter Company Ltd (“Kerridge”) in December 2005. Kerridge is a leading dealer management systems provider to auto dealers in the United Kingdom and this acquisition contributed approximately 6% and 3% to our revenue growth for the three and six months ended December 31, 2005, respectively.

Earnings From Continuing Operations Before Income Taxes

Earnings from continuing operations before income taxes increased $1.7 million, to $40.2 million, and $6.6 million, to $81.3 million, for the three and six months ended December 31, 2005, respectively, primarily due to the increases in revenues of our dealer business systems and contributions from recent acquisitions. These increases for both periods were partially offset by additional sales expenses relating to headcount additions to generate the current revenue growth. Our earnings from continuing operations before income taxes for the three and six months ended December 31, 2005 was also partially offset by the additional expenses associated with the acquisition of Kerridge.

Securities Clearing and Outsourcing Services

Revenues

Revenues for Securities Clearing and Outsourcing Services were $19.8 million and $37.5 million for the three and six months ended December 31, 2005, respectively, as compared with $15.4 million during the period from its acquisition date of November 1, 2004 through December 31, 2004. Average margin balances for the three and six months ended December 31, 2005 were $636 million and $616 million, respectively, as compared with $1.0 billion during the period from its acquisition date of November 1, 2004 through December 31, 2004. Average number of trades cleared per day for the three and six months ended December 31, 2005 was 19 thousand and 18 thousand, respectively, as compared with 25 thousand during the period from its acquisition date of November 1, 2004 through December 31, 2004.

Loss From Continuing Operations Before Income Taxes

Loss from continuing operations before income taxes was $7.6 million and $19.4 million for the three and six months ended December 31, 2005, respectively, as compared with $5.2 million during the period from its acquisition date of November 1, 2004 through December 31, 2004. Loss from continuing operations before income taxes was primarily due to the current alignment of the cost structure associated with the revenues of the segment as well as the integration costs incurred since the acquisition of the business on November 1, 2004.

Other

The primary components of "Other" are Claims Services, miscellaneous processing services, and corporate allocations and expenses, including stock-based compensation expense related to the Company’s adoption of SFAS No. 123R, effective July 1, 2005.

Reconciling Items

The prior year’s reportable segment revenues and earnings from continuing operations before income taxes have been adjusted to reflect updated fiscal 2006 budgeted foreign exchange rates. Reconciling items include foreign exchange differences between the actual foreign exchange rates and fiscal 2006 budgeted foreign exchange rates, and the adjustment for the difference between actual interest income earned on invested funds held for Employer Services’ clients and interest credited to Employer Services at a standard rate of 4.5%. Both of these adjustments are eliminated in consolidation and as such represent reconciling items to revenues and earnings from continuing operations before income taxes.  The reportable segment results also include an internal cost of capital charge related to the funding of acquisitions and other investments. This charge is eliminated in consolidation and as such represents a reconciling i tem to earnings from continuing operations before income taxes.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Our financial condition and balance sheet remain strong. At December 31, 2005, cash and marketable securities were $1,897.5 million. Stockholders’ equity was $5,855.9 million and the ratio of long-term debt-to-equity was 1.3% at December 31, 2005. At December 31, 2005, working capital was $1,634.7 million as compared to $1,653.8 million at June 30, 2005.

Our principal sources of liquidity are derived from cash generated through operations and our cash and marketable securities on hand. We also have the ability to generate cash through our financing arrangements under our U.S. short-term commercial paper program and our U.S. and Canadian short-term repurchase agreements. In addition, we have three unsecured revolving credit agreements that allow us to borrow up to $5.0 billion in the aggregate. When utilized, our short-term commercial paper program and repurchase agreements are the primary instruments used to meet short-term funding requirements related to client funds obligations. Our revolving credit agreements are in place to provide additional liquidity, if needed. We have never had borrowings under the current or previous revolving credit agreements. The Company believes that the internally generated cash flows and financing arrangements are adequate to support business operations and capital expenditures.

On November 1, 2004, we acquired the U.S. Clearing and BrokerDealer Services divisions of Bank of America and formed the Securities Clearing and Outsourcing Services segment to report the results of the acquired business. The Securities Clearing and Outsourcing Services segment provides third-party clearing operations in the regulated broker-dealer industry. The cash flows from operations from this business differ from that of our other businesses because the broker-dealer third-party clearing activities utilize payables to finance their business activities and the regulations associated with the broker-dealer industry require cash or securities to be segregated for the exclusive benefit of customers in certain circumstances based on regulatory calculations driven by customers’ cash and securities balances. As a result, management analyzes cash flows provided from operating activities of the Securities Clearing and Outsourcing Services segment separately from all other businesses. Management’s view of the net cash flows provided by operating activities is as follows:

	Six Months Ended
	December 31,
	2005		2004
Net cash flows provided by operating activities for all businesses, excluding the Securities Clearing and Outsourcing Services segment	$	719.8	$	665.5
Net cash flows provided by operating activities for the Securities Clearing and Outsourcing Services segment		180.4		(2.9	)
Net cash flows provided by operating activities, as reported	$	900.2	$	662.6

Net cash flows provided by operating activities for all businesses, excluding the Securities Clearing and Outsourcing Services segment, were $719.8 million for the six months ended December 31, 2005 as compared to $665.5 million for the comparable period in the prior fiscal year. This increase was primarily due to the increase in net earnings for all businesses, excluding the Securities Clearing and Outsourcing Services segment, offset, in part, by a decrease in accounts payable and accrued expenses primarily due to the timing of income tax payments made during the six months ended December 31, 2005 as compared to the six months ended December 31, 2004.

Net cash flows provided by operating activities for the Securities Clearing and Outsourcing Services segment were $180.4 million for the six months ended December 31, 2005. The net cash flows provided by operating activities primarily resulted from a decrease of $178.4 million in securities deposited with clearing organizations or segregated for the exclusive benefit of our Securities Clearing and Outsourcing Services’ customers to meet regulatory requirements and an increase in Securities Clearing payables related to higher securities failed to receive. This fluctuation was offset in part by an increase in securities clearing receivables from clearing customers.

Cash flows used in investing activities for the six months ended December 31, 2005 totaled $437.1 million compared to cash flows provided by investing activities of $15.5 million for the comparable period in the prior year. The fluctuation between periods was primarily due to the timing of purchases of and proceeds from marketable securities and the change in client funds obligations.

Cash flows used in financing activities for the six months ended December 31, 2005 totaled $368.7 million compared to $289.2 million for the six months ended December 31, 2004. The increase in cash used in financing activities was primarily due to repurchases of common stock and the increase in dividends paid resulting from the increase in the amount of dividends per common share for the six months ended December 31, 2005 as compared to the comparable period in the prior year, offset by the increase in proceeds received from the stock purchase plan and exercises of stock options. We purchased 7.3 million shares of our common stock at an average price per share of $43.96 during the six months ended December 31, 2005. As of December 31, 2005, we had remaining Board of Directors’ authorization to purchase up to 56.3 million additional shares.

In June 2005, the Company entered into a $1.25 billion, 364-day credit agreement and a $1.5 billion, five-year credit agreement with a group of lenders. The five-year facility contains an accordion feature under which the aggregate commitment can be increased by $500.0 million to $2.0 billion, subject to the availability of additional commitments. These facilities replaced the Company’s prior $2.25 billion, 364-day facility, which terminated on June 29, 2005. The $1.25 billion and $1.5 billion agreements mature in June 2006 and June 2010, respectively. The Company also has a $2.25 billion credit facility that matures in June 2009. The interest rate applicable to the borrowings is tied to LIBOR or prime rate depending on the notification provided by the Company to the syndicated financial institutions prior to borrowing. The Company is also required to pay facility fees on the credit agreements. The primary uses of the credit facilities are to provide liquidity to the commercial paper program and to provide funding for general corporate purposes, if necessary. The Company had no borrowings through December 31, 2005 under the credit agreements.

The Company maintains a U.S. short-term commercial paper program providing for the issuance of up to $5.0 billion in aggregate maturity value of commercial paper at the Company’s discretion. The Company’s commercial paper program is rated A-1+ by Standard and Poor’s and Prime 1 by Moody’s. These ratings denote the highest quality commercial paper securities. Maturities of commercial paper can range from overnight to up to 270 days. At December 31, 2005 and 2004, there was no commercial paper outstanding. For the three months ended December 31, 2005 and 2004, the Company had average borrowings of $2.1 billion and $1.5 billion, respectively, at a weighted average interest rate of 4.0% and 2.0%, respectively. For the six months ended December 31, 2005 and 2004, the Company had average borrowings of $1.9 billion and $1.4 billion, respectively, at a weighted average interest rate of 3.8% and 1.7%, respectively. The weighted average maturity of the Company’s commercial paper during the three and six months ended December 31, 2005 and 2004 was less than two days for both periods.

The Company’s U.S. and Canadian short-term funding requirements related to client funds obligations are sometimes obtained on a secured basis through the use of repurchase agreements, which are collateralized principally by government and government agency securities. These agreements generally have terms ranging from overnight to up to five business days. At December 31, 2005 and 2004, there were no outstanding obligations under repurchase agreements. For the three months ended December 31, 2005 and 2004, the Company had average outstanding balances under repurchase agreements of $165.3 million and $401.4 million, respectively, at a weighted average interest rate of 3.3% and 1.8%, respectively. For the six months ended December 31, 2005 and 2004, the Company had average outstanding balances under repurchase agreements of $216.0 million and $395.7 million, respectively, at a weighted average interest rate of 3.2% and 1.6%, respectively.

During the three months ended December 31, 2005, the Company borrowed $200.1 million from a financial institution on a short-term basis in connection with Dealer Services’ acquisition of Kerridge. The Company repaid the short-term borrowing in full as of December 29, 2005.

For the six months ended December 31, 2005, capital expenditures were $158.9 million. Capital expenditures for fiscal 2006 are expected to be approximately $300 million, compared to $202.8 million in fiscal 2005. The increase in expected capital expenditures is due primarily to data center and other facility improvements.

It is not our business practice to enter into off-balance sheet arrangements. However, the Company is exposed to market risk from changes in foreign currency exchange rates that could impact its financial position, results of operations and cash flows. The Company manages its exposure to these market risks through its regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. The Company uses derivative financial instruments as risk management tools and not for trading purposes. In the normal course of business, we also enter into contracts in which we make representations and warranties that relate to the performance of our products and services. In addition, the securities transactions of the Securities Clearing and Outsourcing Services segment involve collateral arrangements required by various regulatory and internal guidelines, which are monitored daily. We do not expect any material losses related to such representations and warranties or collateral arrangements.

We are a member of numerous exchanges and clearinghouses. Under the membership agreements, members are generally required to guarantee the performance of other members. Additionally, if a member becomes unable to satisfy its obligations to the clearinghouse, other members would be required to meet these shortfalls. To mitigate these performance risks, the exchanges and clearinghouses often require members to post collateral. Our maximum potential liability under these arrangements cannot be quantified. However, we believe that it is unlikely that the Company will be required to make payments under these arrangements. Accordingly, no contingent liability is recorded in the consolidated financial statements for these arrangements.

Quantitative and Qualitative Disclosures about Market Risk

During the six months ended December 31, 2005, approximately 20% of our overall investment portfolio was invested in cash and cash equivalents, and therefore was impacted almost immediately by changes in short-term interest rates. The other 80% of our investment portfolio was invested in fixed-income securities, with varying maturities of less than ten years, which were also subject to interest rate risk including reinvestment risk. We have historically had the ability and intent to hold these investments until maturity. Details regarding our overall investment portfolio are as follows:

	Three Months Ended December 31,				Six Months Ended December 31,
	2005		2004		2005		2004
Average investment balances at cost:
Corporate investments	$	4,188.3	$	3,707.6	$	4,110.0	$	3,759.5
Funds held for clients		12,026.0		10,667.7		11,723.1		10,447.4
Total	$	16,214.3	$	14,375.3	$	15,833.1	$	14,206.9

Average interest rates earned exclusive of realized gains/(losses) on:
Corporate investments			3.7	%		2.8	%		3.6	%		2.7	%
Funds held for clients			3.9	%		3.4	%		3.9	%		3.3	%
Total			3.9	%		3.2	%		3.8	%		3.2	%
Realized gains on available-for-sale securities		$	0.1		$	6.1		$	0.6		$	8.7
Realized losses on available- for-sale securities			(3.2	)		(10.0	)		(16.5	)		(17.8	)
Net realized losses on available-for-sale securities		$	(3.1	)	$	(3.9	)	$	(15.9	)	$	(9.1	)
	December 31,					June 30,
			2005			2005
Net unrealized pre-tax (losses) gains on available-for-sale securities		$	(142.6	)	$	32.9
Total available-for-sale securities		$	13,202.5		$	13,001.5

The return on our portfolio is impacted by interest rate changes. Factors that influence the earnings impact of the interest rate changes include, among others, the amount of invested funds and the overall portfolio mix between short-term and long-term investments. This mix varies during the fiscal year and is impacted by daily interest rate changes. A hypothetical change in both the short-term interest rates (e.g., overnight interest rates or Fed Funds rates) and intermediate-term interest rates of 25 basis points applied to the estimated fiscal 2006 average investment balances and any related borrowings would result in less than a $10 million impact to earnings before income taxes over a twelve-month period. A hypothetical change in only short-term interest rates of 25 basis points applied to the estimated fiscal 2006 average short-term investment balances and any related short-term borrowing would result in approximately a $2 million impact to earnings before income taxes over a twelve-month period.

The Company is exposed to credit risk in connection with our available-for-sale securities through the possible inability of the borrowers to meet the terms of the bonds. The Company limits credit risk by investing primarily in AAA and AA rated securities, as rated by Moody’s, Standard & Poor’s, and for Canadian securities, Dominion Bond Rating Service. At December 31, 2005, approximately 95% of our available-for-sale securities held an AAA or AA rating. In addition, we also limit amounts that can be invested in any single issuer.

In the normal course of business, the securities activities of the Securities Clearing and Outsourcing Services segment involve execution, settlement and financing of various securities transactions for a nationwide client base. With these activities, we may be exposed to risk in the event customers, other broker-dealers, banks, clearing organizations or depositories are unable to fulfill contractual obligations.

For securities activities of the Securities Clearing and Outsourcing Services segment in which we extend credit to customers and broker-dealers, we seek to control the risk associated with these activities by requiring customers and broker-dealers to maintain margin collateral in compliance with various regulatory and internal guidelines. We monitor margin levels and, pursuant to such guidelines, request the deposit of additional collateral or the reduction of securities positions, when necessary. In addition, broker-dealers may be required to maintain deposits relating to any security clearance activities we perform on their behalf.

We record customers’ security clearing transactions on a settlement date basis, which is generally three business days after trade date. The Company is therefore exposed to off-balance sheet risk of loss on unsettled transactions in the event customers and other counterparties are unable to fulfill contractual obligations.

Income Taxes

On October 22, 2004, the American Jobs Creation Act (the “AJCA”) was signed into law. The AJCA includes a deduction of 85% of certain foreign earnings that are repatriated, as defined in the AJCA. We may elect to apply this provision to qualifying earnings repatriations in fiscal 2006. We are continuing to evaluate the effects of the repatriation provision. The range of possible amounts that the Company could repatriate under this provision is between zero and $500 million. The related potential range of income tax is between zero and $35 million.

FORWARD-LOOKING INFORMATION

This report and other written or oral statements made from time to time by ADP may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature and which may be identified by the use of words like “expects,” “assumes,” “projects,” “anticipates,” “estimates,” “we believe,” “could be” and other words of similar meaning, are forward-looking statements. These statements are based on management’s expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed. Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements include: ADP’s success in obtaining, retaining and selling additional services to clients; the pricing of products and services; changes in laws regulating payroll taxes, professional employer organizations, employee benefits and registered clearing agencies and broker-dealers; overall market and economic conditions, including interest rate and foreign currency trends; competitive conditions; stock market activity; auto sales and related industry changes; employment and wage levels; changes in technology; availability of skilled technical associates and the impact of new acquisitions and divestitures. ADP disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information called for by this item is provided under the caption “Quantitative and Qualitative Disclosures about Market Risk” under Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 4. Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures as of December 31, 2005 were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission's rules and forms.

There were no changes in the Company's internal control over financial reporting that occurred during the three and six months ended December 31, 2005 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

Except as noted below, all other items are either inapplicable or would result in negative responses and, therefore, have been omitted.

Item 1. Legal Proceedings.

The Registrant and its indirect wholly-owned subsidiaries Dealer Solutions, L.L.C. and Dealer Solutions Holdings, Inc. ("DSI") are named as defendants in a lawsuit filed on March 4, 1999 in the 133rd Judicial District Court of Harris County, Texas by Universal Computer Systems, Inc., Universal Computer Consulting, Ltd., Universal Computer Services, Inc., and Dealer Computer Services, Inc. (collectively, "UCS"), which lawsuit has since been tried before an arbitration panel in June 2003. This lawsuit alleges trade secret violations by DSI in the creation by DSI of the CARMan automobile dealership software product and misappropriation of those trade secrets by the Registrant through its acquisition of DSI. UCS sought injunctive relief and damages of $56 million. On November 11, 2003, the arbitration panel appointed by the District Court entered an award in favor of DSI and its co-defendants (“the Award”). The Award denied all relief to UCS. The Award has been affirmed and adopted by the District Court as a final judgment of the Court. On November 28, 2005, the Court of Appeals for the First District of Texas affirmed the judgment of the District Court in all respects and, on December 15, 2005, that same court denied UCS’s Motion for Rehearing of its affirmance. On January 27, 2006, UCS filed a Petition for Review, asking the Texas Supreme Court to accept an appeal and reverse the judgment. The Registrant believes it has valid defenses with respect to the above matter and should prevail.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

	(a)			(b)		(c)	(d)
	Total Number of Shares			Average Price Paid per		Total Number of Shares Purchased As Part of the Publicly Announced Common Stock	Maximum Number of Shares that may yet be Purchased under the Common Stock Repurchase
Period	Purchased			Share (3)		Repurchase Plan (1)	Plan (1)
October 1, 2005 to October 31, 2005	751,259			$	43.89	750,000	7,829,400
November 1, 2005 to November 30, 2005	613,149			$	46.72	612,700	57,216,700
December 1, 2005 to December 31, 2005	949,900			$	46.65	949,900	56,266,800
Total	2,314,308	(2	)			2,312,600

(1) In March 2001, the Registrant received the Board of Directors’ approval to repurchase up to 50 million shares of the Registrant’s common stock. In November 2002, the Registrant received the Board of Directors’ approval to repurchase an additional 35 million shares of the Registrant’s common stock. In November 2005, the Registrant received the Board of Directors’ approval to repurchase an additional 50 million shares of the Registrant’s common stock. There is no expiration date for the common stock repurchase plan.

(2) During fiscal 2006, pursuant to the terms of the Registrant’s restricted stock program, the Registrant (i) made repurchases of 449 shares during November 2005 at the then market value of the shares in connection with the exercise by employees of their option under such program to satisfy certain tax withholding requirements through the delivery of shares to the Registrant instead of cash and (ii) made purchases of 1,259 shares during October 2005 at a price of $.10 per share under the terms of such program to repurchase stock granted to employees who have left the Registrant.

(3) The average price per share does not include the repurchases described in clause (ii) of the preceding footnote.

Item 4. Submission of Matters to a Vote of Security Holders.

The Company's Annual Meeting of the Stockholders was held on November 8, 2005. There were present at the meeting, either in person or by proxy, holders of 488,528,207 shares of common stock. The following nominees were elected to the Company's Board of Directors to hold office for the ensuing year. The votes cast for each nominee were as follows:

Nominee For Withheld

Gregory D. Brenneman	481,601,231	6,926,976
Leslie A. Brun	472,789,934	15,738,273
Gary C. Butler	472,474,799	16,053,408
Leon G. Cooperman	475,011,577	13,516,630
R. Glenn Hubbard	481,497,538	7,030,669
John P. Jones	481,653,119	6,875,088
Ann Dibble Jordan	474,994,572	13,533,635
Harvey M. Krueger	459,751,971	28,776,236
Frederic V. Malek	471,948,617	16,579,590
Henry Taub	472,336,028	16,192,179
Arthur F. Weinbach	474,973,702	13,554,505

The results of the voting to ratify the appointment of Deloitte & Touche LLP to

serve as the Company's independent registered public accounting firm for the fiscal

year that began on July 1, 2005 were as follows:

For	Against	Abstained
482,299,352	2,800,382	3,428,473

Item 6. Exhibits.

Exhibit Number	Exhibit
10.11	Amended and Restated Employees’ Savings-Stock Option Plan (France)
10.13	Amended and Restated Employees’ Savings-Stock Purchase Plan
31.1	Certification by Arthur F. Weinbach pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
31.2	Certification by Karen E. Dykstra pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
32.1	Certification by Arthur F. Weinbach pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification by Karen E. Dykstra pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	AUTOMATIC DATA PROCESSING, INC. (Registrant)
Date: February 6, 2006	/s/ Karen E. Dykstra Karen E. Dykstra
	Chief Financial Officer (Title)

EX-10.11

AUTOMATIC DATA PROCESSING, INC.

AMENDED AND RESTATED EMPLOYEES' SAVING - STOCK OPTION PLAN

The following is an amendment and restatement, effective as of November 8, 2005, of the terms and restrictions of the Employees’ Savings-Stock Option Plan (the “Plan”), originally adopted by the Board of Directors of Automatic Data Processing, Inc. (the “Company”) on January 29, 1996, for the employees of the Company and its subsidiaries based in France.

A. The Plan shall be implemented by a series of consecutive offerings of 48 months’ duration (each, an “Offering”). The terms and restrictions specific for each Offering will be adopted by the Administrative Committee of the Plan (the “Administrative Committee”) appointed by the Board of Directors of the Company.

B. The Administrative Committee shall supervise and administer the Plan and shall have full power to adopt, amend and rescind any rules deemed desirable and appropriate for the administration of the Plan and not inconsistent with the Plan, to construe and interpret the Plan, and to make all other determinations necessary or advisable for the administration of the Plan. The determinations of the Administrative Committee shall be final, binding, and conclusive.

C. Either the Board or the Administrative Committee may amend the Plan, provided, however, that the Administrative Committee may amend the Plan only to the extent required to comply with applicable law. The Plan shall continue until terminated by the Board.

D. The terms and restrictions for each Offering shall include the following provisions:

1.            Offering N° __ is granted for a period commencing January 1, 20__ and ending December 31, 20__ (the "Stock Option Period") to all employees of the Company's French subsidiaries having concluded an indefinite-term employment contract as of _________, 20__. No employee shall be granted an option under Offering N° __ if such employee, immediately after the option is granted, owns stock in the Company possessing 5% or more of the total combined voting power or value of all classes of stock of the Company. Persons eligible to participate in Offering N° __ pursuant to this Section 1 are hereinafter called "Eligible Employees".

2.             The maximum number of shares of Common Stock of the Company (the “Shares”) that may be issued and sold to all employees of the Company and its subsidiaries in France and outside of France under the Plan and comparable plans is ____ Shares. For each Eligible Employee, the maximum number of stock options he or she may elect to receive is limited to the nearest whole number of stock options determined by dividing (a) an amount equal to 10% of his or her gross annual base salary in effect on ________, 20__ (bonuses and benefits in kind excluded), by (b) the price per Share provided in Section 3 below, up to a maximum of ____ stock options.

3.             The price at which the Eligible Employees may exercise their options to acquire Shares has been irrevocably fixed prior to Offering N° __ and for the entire duration of Offering N° __ at U.S. $____ per Share, corresponding to Euro ____ per Share (the “Purchase Price”), using an exchange rate of Euro _____ for U.S. $1.00 (the “Reference Rate”).

4.             Shares that the Eligible Employees may decide to acquire by exercising their options will be paid by monthly deductions from their salaries over a 48 calendar-month period commencing January 1, 20__ and ending December 31, 20__. Such deductions will correspond to Euro_____ per option and will bear an interest rate based on the interest rate environment within France. The funds collected from the Eligible Employees will be managed by a financial institution.

5.             The Eligible Employees shall be entitled to exercise their stock options by written notice of exercise delivered in January20__ to the ADP French subsidiary which employs them.

6.             The Eligible Employees who have elected to benefit from stock options may withdraw from Offering N° __ and cancel their election with respect to any or all of such stock options by written notice of cancellation delivered to the ADP French subsidiary which employs them, at any time during the Stock Option Period. If an Eligible Employee cancels his election as to a portion of the stock options, he shall continue to make the required installment payments with respect to the remainder of the stock options that he has not cancelled.

An Eligible Employee's rights with respect to the stock options which he has cancelled shall be to receive in cash, within 15 business days following the end of the calendar month during which he has delivered the notice of cancellation, the amount credited to his account with respect to such stock options, which amount will include any interest to which he may be entitled.

In the event that the Purchase Price is higher than the average of the high and low sales prices of a share of Common Stock of the Company on the New York Stock Exchange on December 31, 20__, all Eligible Employees will be deemed to have withdrawn from Offering N° __and each Eligible Employee will be entitled to receive, within 15 business days following the end of the calendar month during which he has been deemed to have withdrawn from Offering N° __, a refund of funds collected from such Eligible Employee in respect of Offering N° __, plus any interest credited to the Eligible Employee's account in respect of such funds.

7.            In order to minimize the exchange risks pertaining to the respective fluctuation of the Euro and the U.S. dollar during the 48 calendar-month period referred to in Section 4 above, the following method will be applied if the Eligible Employees exercise their options to acquire Shares:

-if at the expiration of the 48 calendar-month period, i.e. on December 31, 20__, the exchange rate between the Euro and the U.S. $ is the same as the Reference Rate, there will be no adjustment;

-if on the same date, the Euro is higher, the Eligible Employees will be reimbursed for the difference between the Reference Rate and the rate in effect on December 31, 20__;

-if on the same date, the Euro is lower, the Eligible Employees will have the option to either:

* make an additional payment covering the difference between the rate in effect on December 31, 20__ and the Reference Rate in order to exercise all their stock options; or

* exercise their stock options for a lower number of Shares, corresponding to the U.S. dollar equivalent of the Euro amounts credited to their accounts.

8.            In the event of a stock dividend or a subdivision or combination of the shares of capital stock of the Company, the maximum number of Shares which may thereafter be issued and sold under Offering N° __ will be proportionately increased or decreased, the terms relating to the price at which options to acquire Shares may be exercised will be appropriately adjusted, and such other action will be taken as in the opinion of the Administrative Committee is appropriate under the circumstances. In case of reclassification or other change in the shares of capital stock of the Company, the Administrative Committee will make appropriate adjustments.

In the event that the Company is merged into another corporation, the Board of Directors of the surviving or acquiring corporation may, but shall not be required to, make such modification as is permissible and appropriate.

9.            No option granted under Offering N° __ shall be transferable by an Eligible Employee, and an Eligible Employee's rights under Offering N° __ shall be exercisable, during his lifetime, only by him.

10.          If, prior to January 1, 20__, an Eligible Employee having elected to receive stock options, resigns, is dismissed, or if he transfers to a company other than the Company or a subsidiary thereof, his rights under Offering N° __ shall thereupon be deemed to be cancelled. In such case, the Eligible Employee shall be entitled to receive in cash, within 15 business days following the end of the calendar month during which his rights under Offering N° __ shall be deemed to be cancelled pursuant to this Section 10, the amount credited to his account, which amount shall include any interest to which he may be entitled.

If, prior to January 1, 20__, an Eligible Employee having elected to receive stock options dies, the right to purchase all Shares that the Eligible Employee had elected to purchase under Offering N° 38, will be granted to the estate of the deceased Eligible Employee. The estate will have six months from the date of the death of the Eligible Employee to elect to purchase all Shares that the Eligible Employee had originally elected to purchase, or such fewer number of Shares that the estate elects to purchase using the funds credited to the account of such Eligible Employee through the date of his death, in either case, using as the “reference rate” the Euro/U.S. $ exchange rate in effect on the last business day of the month in which the Eligible Employee died. In the event the estate elects to purchase Shares for which there are not adequate funds in the Eligible Employee’s account, the estate shall pay the difference, if any, between the funds credited to the account of the Eligible Employee and the amount necessary to purchase Shares at the reference rate. Any funds collected on behalf of the deceased Eligible Employee exceeding the price to be paid by the estate for the purchase of Shares will be given to the estate of the deceased Eligible Employee. In the event the estate of such Eligible Employee does not respond or elects not to purchase Shares in accordance with this Section 10, the estate will receive the amount of funds credited to the account of the deceased Eligible Employee, plus any interest credited to such account.

If an Eligible Employee is employed by a French subsidiary of the Company, or business unit or division thereof, that is sold, transferred or otherwise disposed by the Company after January 1, 20__, such Eligible Employee will be entitled to purchase Shares with the funds collected (including any interest credited thereon) through the date the sale is completed. Under such circumstances, Eligible Employees will have the right to purchase Shares at the Purchase Price, using as the “reference rate” the Euro/U.S. $ exchange rate in effect on the date the sale is completed, up to the maximum number of Shares that the Eligible Employee had elected to purchase under Offering N° __, and the balance of funds, if any, will be returned to the Eligible Employee. In the event that a sale, transfer or other disposition of a French subsidiary of the Company, or business unit or division thereof, is completed before January 1, 200_, an Eligible Employee's participation in Offering N° __ will be automatically terminated and all funds collected (including any interest credited thereon) through the date of such sale will be returned to the Eligible Employee within 15 business days following the end of the calendar month during which any such sale, transfer or other disposition was completed.

11.           An Eligible Employee having elected to receive stock options on an authorized leave of absence at any time during the period of January 1, 20__ through October 31, 20__ may continue to participate in Offering N° __ for up to 12 months. Upon return from the leave of absence, the Eligible Employee may make up any deficit in the total amount originally required to be in such Eligible Employee’s account through increased uniform payroll deductions over the remaining payroll periods or the Eligible Employee may elect to submit a certified check for the full deficit on the account. If, however, the authorized leave of absence begins on or after November 1, 20__, then the Eligible Employee may only make up any deficit in the amount required to purchase the number of Shares that the Eligible Employee elected to purchase by certified check. The Eligible Employee’s local Human Resource contact in the local Human Resource office must receive all certified checks prior to December 31, 20__.

12.           An Eligible Employee that retires prior to December 31, 20__ may elect to purchase the number of Shares purchasable under Offering N° __ with funds collected through the date of retirement.

If an Eligible Employee that retires elects to purchase Shares with funds collected through the date of retirement, on the last business day of the month in which the Eligible Employee retires, all funds collected on behalf of the Eligible Employee to purchase Shares in Offering N° __, including any interest credited to date on funds held on behalf of such Eligible Employee, will be used to purchase as many whole Shares as such amount will purchase up to the maximum number of Shares that the Eligible Employee had elected to purchase in Offering N° __, and the balance of funds, if any, will be paid in cash to such Eligible Employee.

EX-10.13

AUTOMATIC DATA PROCESSING, INC.

AMENDED AND RESTATED EMPLOYEES’

SAVINGS–STOCK PURCHASE PLAN

The following is an amendment and restatement, effective as of November 8, 2005, of the Employees’ Savings-Stock Purchase Plan of Automatic Data Processing, Inc., originally adopted on May 2, 1968 and approved by stockholders on October 31, 1968.

1.Purpose. The purpose of the Plan is to provide eligible employees of the Company, its Designated Subsidiaries and its Designated Foreign Subsidiaries with a convenient opportunity to purchase Common Stock of the Company. It is the intention of the Company to have the Plan qualify as an “Employee Stock Purchase Plan” under Section 423 of the Code. The provisions of the Plan shall, accordingly, be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code.

(a)This Plan document is an omnibus document which includes, in addition to the Plan, separate sub-plans (“Non-Statutory Plans”) that permit offerings of grants to employees of certain Designated Foreign Subsidiaries that are not intended to satisfy the requirements of Section 423 of the Code. Offerings under the Non-Statutory Plans may be made to achieve desired tax or other objectives in particular locations outside the United States of America or to comply with local laws applicable to offerings in such foreign jurisdictions. The Plan shall be a separate and independent plan from the Non-Statutory Plans.

(b)Although the Plan is a separate and independent plan from the Non-Statutory Plans, the total number of Shares authorized to be issued under the Plan applies in the aggregate to both the Plan and the Non-Statutory Plans. Section 11 of the Plan sets forth the maximum number of Shares to be offered under the Plan (together with the Non-Statutory Plans), subject to adjustments as permitted under Section 17. The Administration Committee shall determine from time to time the method for allocating the number of such total Shares to be offered under the Plan and each Non-Statutory Plan. Such determination shall be in the Administration Committee’s discretion and shall not require stockholder approval.

(c)The Administration Committee may adopt Non-Statutory Plans applicable to particular Designated Foreign Subsidiaries or locations that are not participating in the Plan. The terms of each Non-Statutory Plan shall take precedence over other provisions in this Plan document in respect of any Designated Foreign Subsidiary participating therein, with the exception of Sections 11 and 17 with respect to the total number of Shares available to be offered under the Plan and all Non-Statutory Plans. Unless otherwise superseded by the terms of a Non-Statutory Plan, the provisions of this Plan document shall govern the operation of each Non-Statutory Plan. Except to the extent expressly set forth herein or where the context suggests otherwise, any

reference herein to “Plan” shall be construed to include a reference to the Plan and the Non-Statutory Plans.

2. Definitions.

(a)“Administration Committee” means a committee appointed by the Board. Notwithstanding the above, in the absence of a contrary designation by the Board, the Administration Committee shall be the Compensation Committee of the Board.

(b) “Board” means the Board of Directors of the Company.

(c)“Code” means the United States Internal Revenue Code of 1986, as amended.

(d)“Common Stock” means the Common Stock of the Company, $.10 par value per share.

(e)“Company” means Automatic Data Processing, Inc., a Delaware corporation.

(f)“Compensation” means the earnings received by an Employee from the Company, a Designated Subsidiary or a Designated Foreign Subsidiary as determined by the Administration Committee in a manner intended to comply with the requirements of Section 423 of the Code and the Treasury Regulations promulgated thereunder.

(g)“Continuous Status as an Employee” means the absence of any interruption or termination of service as an Employee. Continuous Status as an Employee shall not be considered interrupted in the case of: (i) sick leave, military leave, or other bona fide leave of absence which is required by law to be considered uninterrupted service or which is otherwise approved by the Administration Committee if the period of such leave does not exceed 90 days, or if longer, so long as the individual’s right to reemployment as an Employee is guaranteed either by contract or statute; or (ii) transfers between locations of the Company or between and among the Company, its Designated Subsidiaries or Designated Foreign Subsidiaries. For purposes of clarification, the disposition of a Designated Subsidiary or Designated Foreign Subsidiary shall constitute a termination of the Continuous Status as an Employee of any Employee employed by such Designated Subsidiary or Designated Foreign Subsidiary.

(h)“Contributions” means all amounts credited to the account of a Participant pursuant to the Plan.

(i)“Corporate Transaction” means a sale of all or substantially all of the Company’s assets, or a merger, consolidation or other capital reorganization of the Company with or into another corporation, or any other transaction or series of related transactions in which the Company’s stockholders immediately prior thereto own

less than 50% of the voting stock of the Company (or its successor or parent) immediately thereafter.

(j)“Designated Broker” shall mean Smith Barney, or such other institution selected by the Administration Committee.

(k)“Designated Country” means a jurisdiction or country other than the United States of America that is designated by the Board or the Administration Committee from time to time.

(l)“Designated Foreign Subsidiaries” means all Subsidiaries organized under the laws of any Designated Country; provided, however, that Subsidiaries employing as a service for clients any worksite, leased, or similar type employees under a professional employer, employee leasing or similar type of employment relationship shall not be Designated Foreign Subsidiaries.

(m)“Designated Subsidiaries” means all Subsidiaries organized under the laws of any state of the United States of America, except with respect to any of such Subsidiaries which the Board or the Administration Committee has determined is not eligible to participate in the Plan; provided, however, that Subsidiaries employing as a service for clients any worksite, leased, or similar type employers under a professional employer, employee leasing, or similar type of employment relationship shall not be Designated Subsidiaries; provided, further, however, that at any given time, a Subsidiary that is a Designated Foreign Subsidiary in a Non-Statutory Plan may not be a Designated Subsidiary in the Plan.

(n)“Employee” means any person who is an employee of the Company or one of its Designated Subsidiaries or Designated Foreign Subsidiaries for tax purposes and who is customarily employed thereby for at least ten hours per week.

(o)“Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

(p)“Fair Market Value” shall have the meaning ascribed to it in Section 7(b).

(q)“GAAP” shall mean United States generally accepted accounting principles as in effect from time to time.

(r)“New Purchase Date” shall have the meaning ascribed to it in Section 17(b).

(s)“Non-Statutory Plans” shall have the meaning ascribed to it in Section 1(a).

(t)“Offering Date” means the first day of each Offering Period, as determined in accordance with Section 4(a).

(u)“Offering Period” means the period described in Section 4(a).

(v)“Plan” means this Automatic Data Processing, Inc. Amended and Restated Employees’ Savings–Stock Purchase Plan.

(w)“Participant” means an eligible Employee who has elected to participate in the Plan in accordance with Section 5.

(x)“Purchase Date” means the last day of each Purchase Period.

(y)“Purchase Period” means the period described in Section 4(b).

(z)“Purchase Price” means with respect to a Purchase Period an amount equal to 85% of the Fair Market Value of a Share of Common Stock on the Offering Date.

(aa)“Reserves” shall have the meaning ascribed to it in Section 17(a).

(bb)“Retirement” means an Employee’s termination of employment under conditions prescribed by the Administration Committee from time to time.

(cc)“Rule 16b-3” means Rule 16b-3 adopted under Section 16 of the Exchange Act.

(dd)“Sales Benefit Earnings” means earnings of an Employee, determined in accordance with the Sales Benefit Earnings Calculation Summary, as established by the Company from time to time.

(ee)“Share” means a share of Common Stock, as adjusted in accordance with Section 17.

(ff)“Subsidiary” means a corporation which is a “subsidiary corporation” of the Company within the meaning of Section 424(f) of the Code; provided, however, that, with respect to determining Designated Foreign Subsidiaries, the term “Subsidiary” means a corporation or other entity organized or established under the laws of any country other than the United States of America, of which not less than 50% of the voting control is held, directly or indirectly, by the Company.

3. Eligibility.

(a)Any person who is an Employee of the Company or a Designated Subsidiary as of the Offering Date of a given Offering Period, or such later date established by the Administration Committee in respect of a given Offering Period,

shall be eligible to participate in such Offering Period, subject to the requirements of Section 5(a) and the limitations imposed by Section 423(b) of the Code; provided, however, that any Employee working in a country in which participation by such Employee in the Plan is prohibited by law, or where an alternative employee stock purchase plan of the Company, or a similar plan, is offered, is not eligible to participate in the Plan. Any person who is an Employee of a Designated Foreign Subsidiary as of the Offering Date of a given Offering Period, or such later date established by the Administration Committee in respect of a given Offering Period, shall be eligible to participate in such Offering Period under the Non-Statutory Plan in which such Designated Foreign Subsidiary participates, subject to the requirements of Section 5(a).

(b)Any provisions of the Plan to the contrary notwithstanding, each option to purchase Shares under the Plan shall be limited as necessary to prevent any Employee from (i) immediately after the grant, owning capital stock of the Company and holding outstanding options to purchase capital stock of the Company possessing, in the aggregate, more than five percent of the total combined voting power or value of all classes of stock of the Company or of any Subsidiary, including for this purpose any stock attributed to such Employee pursuant to Section 424(d) of the Code, or (ii) acquiring rights to purchase stock under all employee stock purchase plans (as described in Section 423 of the Code or any other similar arrangements maintained by the Company or any of its Subsidiaries) of the Company and its Subsidiaries which accrue at a rate that exceeds $25,000 of the fair market value of such stock (determined at the time such option is granted in accordance with the principles set forth in Section 7(b)) for each calendar year in which such option is outstanding at any time.

4. Offering Periods and Purchase Periods.

(a)Offering Periods. The Plan shall be implemented by a series of consecutive Offering Periods of 27 months’ duration, with new Offering Periods commencing on October 1 of each year, or the first business day thereafter if October 1 is not a business day; provided, however, that the Administration Committee may determine that any Offering Period shall commence on a different date and/or be of a different duration (so long as such duration is not greater than 27 months). The Plan shall continue until terminated in accordance with Section 18 hereof.

(b)Purchase Periods. Subject to Section 17(b), each Offering Period shall include one Purchase Period of 24 months’ duration, commencing on the January 1 following the Offering Date in respect of such Offering Period and ending on December 31 of the following year; provided, however, that the Administration Committee may determine that any Purchase Period may have a different commencement date and a different duration, so long as such duration is no longer than that of the associated Offering Period.

5. Participation.

(a)An eligible Employee may become a Participant in respect of an Offering Period by electing to participate on the Company’s internet or intranet site

or calling the Company’s Associate Benefit System, in each case, as approved by the Administration Committee, or in such other manner as the Administration Committee shall approve, in each case prior to the tenth day preceding the first day of the Purchase Period related to such Offering Period, unless a different time for electing to participate is set by the Administration Committee with respect to a given Offering Period.

(b)In accordance with Section 6(a), payroll deductions in an amount necessary to purchase the number of Shares elected to be purchased by the Participant in respect of any Offering Period pursuant to Section 7 shall commence on the first full payroll following the first day of the associated Purchase Period and shall end on the last payroll paid on or prior to the Purchase Date of such Purchase Period, unless sooner terminated by the Participant as provided in Section 10.

6. Method of Payment of Contributions.

(a)Payroll deductions shall be made from a Participant’s Compensation during a Purchase Period in an amount necessary to purchase that number of Shares indicated by the Participant on his or her participation election, subject to the limitations of Section 7(a). All payroll deductions made by a Participant shall be credited to his or her account under the Plan. Except as permitted in Section 6(d), a Participant may not make a prepayment or any additional payments into such account.

(b)A Participant may discontinue his or her participation in the Plan as provided in Section 10. A Participant may elect at any time during an Offering Period to reduce (but not increase) the number of Shares he or she has elected to purchase in respect of such Offering Period in accordance with such procedures as may be established by the Administration Committee, and the Participant’s payroll deductions shall be reduced accordingly.

(c)Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3(b) herein, a Participant’s payroll deductions may be decreased by the Company during any Purchase Period to zero.

(d)Participants on an authorized leave of absence during the first 22 months of a Purchase Period may continue to participate in such Purchase Period for up to 12 months. Upon return from the leave of absence, the Participant may make up any deficit in the total amount which would have been in such Participant’s account but for such leave of absence through increased uniform payroll deductions over the remaining payroll periods in the Purchase Period, or the Participant may elect to submit a certified check for the full deficit in the account. If, however, the authorized leave of absence begins after the twenty-second month of a Purchase Period, then the Participant may only make up any deficit in the amount required to purchase the number of Shares that the Participant elected to purchase by certified check.

(e)At the time an option granted under the Plan is exercised, in whole or in part, or at the time some or all of the Common Stock issued to a Participant

under the Plan is disposed of, the Participant must make adequate provisions for any applicable federal, state or other tax withholding obligations, if any, which arise upon the Purchase Date or the disposition of the Common Stock. At any time, the Company, a Designated Subsidiary or a Designated Foreign Subsidiary may, but will not be obligated to, withhold from the Participant’s compensation the amount necessary to meet applicable withholding obligations, including any withholding required to make available to the Company any tax deductions or benefits attributable to the sale or disposition of Common Stock by the Participant earlier than as described in Section 423(a)(1) of the Code.

7. Grant of Option.

(a)At any time after the Offering Date of each Offering Period and prior to the tenth day preceding the first day of the Purchase Period related to such Offering Period (unless a different time for electing to participate is set by the dministration Committee with respect to a given Offering Period) each Participant shall be entitled to elect to receive (using the procedures set forth in Section 5) an option for a number of Shares not to exceed the amount that is equal to (i) ten percent of such Participant’s Compensation on the related Offering Date (or such other day as may be determined by the Administration Committee), divided by (ii) 85% of the Fair Market Value of a Share on the related Offering Date; provided, however, that (x) the number of Shares for which an election is made shall not exceed that number of Shares permitted under Section 3(b) and (y) such election shall be subject to the limitations set forth in Section 11, if applicable. Upon making a proper election, a Participant shall be granted an option to purchase on the Purchase Date the number of Shares so elected (subject to Sections 3(b) and 11). The option granted hereunder may be reduced pursuant to Section 6.

(b)The fair market value of the Company’s Common Stock on a given date (the “Fair Market Value”) shall be the average of the high and low sales prices of a Share on the primary exchange over which the Common Stock is traded for such date or, in the event that the Common Stock is not traded on such date, then the immediately preceding trading date.

8. Exercise of Option; Interest.

(a)Except as otherwise provided in Section 10 or Section 8(b), unless a Participant withdraws from the Plan as provided in Section 10 (or is deemed to have withdrawn under Section 8(b)), his or her option for the purchase of Shares will be exercised automatically on each Purchase Date, and the number of full Shares subject to the option will be purchased at the applicable Purchase Price with the accumulated Contributions in his or her account and the interest on such Contributions as calculated in accordance with Section 8(c). No fractional Shares shall be issued. Any amounts accumulated in a Participant’s account (including interest) that are in excess of that required to purchase the number of Shares that the Participant elected to purchase, or that are not sufficient to purchase a full Share, shall be refunded to the Participant in cash. The Shares purchased upon exercise of an option hereunder shall be deemed to be

transferred to the Participant as of the Purchase Date. During his or her lifetime, a Participant’s option to purchase Shares hereunder is exercisable only by him or her.

(b)In the event that the applicable Purchase Price on a given Purchase Date exceeds the Fair Market Value of a Share of Common Stock on such Purchase Date, all Participants will be deemed to have withdrawn from the Plan with respect to such Offering Period, in accordance with the provisions of Section 10(a).

(c)Each Participant’s account shall be credited daily with interest at an annual rate determined by the Administration Committee and such interest shall be compounded daily.

9.Delivery. As promptly as practicable after each Purchase Date, the number of Shares purchased by each Participant upon exercise of his or her option shall be deposited into an account established in the Participant’s name with the Designated Broker. The Administration Committee may determine that, for one year following each Purchase Date, no Share purchased on such Purchase Date may be transferred out of such Participant’s account with the Designated Broker other than in connection with the “disposition,” as such term is used in Section 423(a)(1) of the Code, of such Share.

10. Voluntary Withdrawal; Termination of Employment.

(a)A Participant may withdraw all but not less than all the Contributions credited to his or her account under the Plan at any time prior to each Purchase Date by giving written notice to the Company in the manner directed by the Company. All of the Participant’s Contributions, plus any interest, credited to his or her account with respect to an Offering Period will be paid to him or her promptly after receipt of his or her notice of withdrawal and his or her option for the current Offering Period will be automatically terminated, and no further Contributions for the purchase of Shares may be made by the Participant with respect to such Offering Period.

(b)Upon termination of the Participant’s Continuous Status as an Employee prior to a Purchase Date for any reason other than Retirement or death, the Contributions, plus any interest, credited to his or her account will be returned to him or her and his or her option will be automatically terminated.

(c)Upon termination of a Participant’s Continuous Status as an Employee prior to a Purchase Date due to Retirement, the Participant may elect to purchase Shares with amounts accumulated in his or her account through the date of Retirement in accordance with Section 10(d) or the Participant may elect to cease participation in the Plan in respect of the then-current Offering Period and receive a full refund of the amounts accumulated in his or her account up to the date of Retirement. Upon termination of the Participant’s Continuous Status as an Employee prior to a Purchase Date due to death, the Participant’s election to participate in the Plan shall cease on the date the Participant dies and Shares will be purchased with amounts accumulated in his or her account in accordance with Section 10(d).

(d)If a Participant who retires elects to purchase Shares with funds collected through the date of Retirement in accordance with Section 10(c), or if a Participant dies, on the last business day of the month in which the Participant retires or dies all amounts accumulated in his or her account, including any interest thereon, will be used to purchase, at a price equal to the applicable Purchase Price, as many whole Shares as such amount will purchase up to the maximum number of Shares that the Participant had elected to purchase during the Purchase Period, and the balance of funds, if any, will be paid in cash. All Shares purchased on behalf of deceased Participants will be issued, and all payments of excess funds will be made, in accordance with Section 13.

(e)A Participant’s withdrawal from the Plan during an Offering Period will not have any effect upon his or her eligibility to participate in a succeeding Offering Period or in any similar plan that may hereafter be adopted by the Company.

11. Shares.

(a)Subject to adjustment as provided in Section 17, the maximum number of Shares which shall be made available for sale under the Plan shall be 60,000,000. If the Administration Committee determines at any time that, on a given Purchase Date, the number of Shares with respect to which options are to be exercised may exceed the number of Shares that are available for sale under the Plan on such Purchase Date, the Board or the Administration Committee may in its discretion provide (x) that the Company shall make a pro rata allocation of the Shares available for purchase on such Purchase Date, in as uniform a manner as shall be practicable and as it shall determine to be equitable among all Participants exercising options to purchase Common Stock on such Purchase Date, and continue all Offering Periods then in effect, or (y) that the Company shall make a pro rata allocation of the Shares available for purchase on such Purchase Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine to be equitable among all Participants exercising options to purchase Common Stock on such Purchase Date, and terminate any or all Offering Periods then in effect pursuant to Section 18 below.

(b)The Participant shall have no interest or voting right in Shares covered by his or her option until such option has been exercised.

(c)Shares to be delivered to a Participant under the Plan will be registered in the name of the Participant.

12. Administration.

(a)Subject to the express provisions of the Plan, the Administration Committee shall supervise and administer the Plan and shall have full power to adopt, amend and rescind any rules deemed desirable and appropriate for the administration of the Plan and not inconsistent with the Plan, to construe and interpret the Plan, and to make all other determinations necessary or advisable for the administration

of the Plan. The determinations of the Administration Committee shall be final, binding, and conclusive.

(b)The Board and the Administration Committee may delegate any or all of their authority and obligations under this Plan to such committee or committees (including without limitation, a committee of the Board) or officer(s) of the Company as they may designate. Notwithstanding any such delegation of authority, the Board may itself take any action under the Plan in its discretion at any time, and any reference in this Plan document to the rights and obligations of the Administration Committee shall be construed to apply equally to the Board. Any references to the Board mean only the Board. The authority of the Administration Committee includes, without limitation, the authority to (i) establish Non-Statutory Plans and determine the terms of such Non-Statutory Plans, (ii) designate from time to time which Subsidiaries will be Designated Foreign Subsidiaries, and which Designated Foreign Subsidiaries will participate in a particular Non-Statutory Plan, (iii) determine procedures for eligible Employees to enroll in or withdraw from a Non-Statutory Plan, setting or changing payroll deduction percentages, and obtaining necessary tax withholdings, (iv) allocate the available Shares under the Plan to the Non-Statutory Plans for particular offerings, and (v) adopt amendments to the Plan or any Non-Statutory Plan in accordance with Section 18.

(c)The authority of the Administration Committee will specifically include, without limitation, the power to make any changes to the Plan with respect to the participation of Employees of any Designated Foreign Subsidiary when the Administration Committee deems such changes to be necessary or appropriate to achieve a desired tax treatment in such foreign jurisdiction or to comply with the laws applicable to such Designated Foreign Subsidiary. Such changes may include, without limitation, the exclusion of particular Designated Foreign Subsidiaries from participation in the Plan; modifications to eligibility criteria, maximum number or value of Shares that may be purchased in a given period, or other requirements set forth herein; and procedural or administrative modifications. Any modification relating to offerings to a particular Designated Foreign Subsidiary will apply only to such Designated Foreign Subsidiary, and will apply equally to all similarly situated employees of such Designated Foreign Subsidiary.

13.Delivery Following the Death of a Participant. In the event of the death of a Participant, the Company shall deliver to the executor or administrator of the estate of the Participant any Shares and/or cash due to the Participant in accordance with the Plan or, if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such Shares and/or cash to the spouse or to any one or more dependents or relatives of the Participant.

14.Transferability. Neither amounts accumulated in a Participant’s account nor any rights with regard to the exercise of an option or to receive Shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution, or as provided in Section 13) by the Participant. Any such attempt at assignment, transfer, pledge or other disposition shall be

without effect, except that the Company may treat such act as an election to withdraw funds in accordance with Section 10.

15.Use of Funds. All Contributions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such Contributions.

16.Reports. Statements of account will be made available to Participants by the Company or the Designated Broker in the form and manner designated by the Administration Committee.

17.Adjustments Upon Changes in Capitalization; Corporate Transactions.

(a)Adjustment. Subject to any required action by the stockholders of the Company, the number of Shares covered by each option under the Plan that has not yet been exercised and the number of Shares that have been authorized for issuance under the Plan but have not yet been placed under option (collectively, the “Reserves”), as well as the maximum number of Shares that may be purchased by a Participant in a Purchase Period, the number of Shares set forth in Section 11 above, and the price per Share covered by each option under the Plan that has not yet been exercised, shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, subdivision, combination or reclassification of the Common Stock (including any such change in the number of shares of Common Stock effected in connection with a change in domicile of the Company), or any other increase or decrease in the number of Shares effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Administration Committee, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issue by the Company of Shares of stock of any class, or securities convertible into Shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an option.

(b)Corporate Transactions. In the event of a dissolution or liquidation of the Company, any Purchase Period and Offering Period then in progress will terminate immediately prior to the consummation of such action, unless otherwise provided by the Board. In the event of a Corporate Transaction, each option outstanding under the Plan shall be assumed or an equivalent option shall be substituted by the successor corporation or a parent or subsidiary of such successor corporation. In the event that the successor corporation refuses to assume or substitute for outstanding options, each Purchase Period and Offering Period then in progress shall be shortened and a new Purchase Date shall be set (the “New Purchase Date”), as of which date any Purchase Period and Offering Period then in progress will terminate. The New Purchase Date shall be on or before the date of consummation of the transaction and the Board shall notify each Participant in writing, at least ten days prior to the New Purchase Date,

that the Purchase Date for his or her option has been changed to the New Purchase Date and that his or her option will be exercised automatically on the New Purchase Date, unless prior to such date he or she has withdrawn from the Offering Period as provided in Section 10. For purposes of this Section 17, an option granted under the Plan shall be deemed to be assumed, without limitation, if, at the time of issuance of the stock or other consideration upon a Corporate Transaction, each holder of an option under the Plan would be entitled to receive upon exercise of the option the same number and kind of Shares of stock or the same amount of property, cash or securities as such holder would have been entitled to receive upon the occurrence of the transaction if the holder had been, immediately prior to the transaction, the holder of the number of shares of Common Stock covered by the option at such time (after giving effect to any adjustments in the number of Shares covered by the option as provided for in this Section 17); provided, however, that if the consideration received in the transaction is not solely common stock of the successor corporation or its parent (as defined in Section 424(e) of the Code), the Board may, with the consent of the successor corporation, provide for the consideration to be received upon exercise of the option to be solely common stock of the successor corporation or its parent equal in Fair Market Value to the per Share consideration received by holders of Common Stock in the transaction.

(c)Sales of Designated Subsidiaries and Business Units. In the event the Company consummates the sale or transfer of a Designated Subsidiary, Designated Foreign Subsidiary, business unit or division to an unaffiliated person or entity during a Purchase Period, each Participant that is employed by such Designated Subsidiary, Designated Foreign Subsidiary, business unit or division, as the case may be, shall be entitled to purchase Shares with funds collected through the date of the sale of such Designated Subsidiary, Designated Foreign Subsidiary, business unit or division, as the case may be, including any interest thereon, at a price equal to the Purchase Price applicable to such Purchase Period, up to the maximum number of Shares that the Participant had elected to purchase during the applicable Purchase Period, and the balance of funds, if any, will be paid in cash; provided, however, that if the number of months elapsed as of the date of the sale or transfer of such Designated Subsidiary, Designated Foreign Subsidiary, business unit or division, as the case may be, in any Purchase Period is fewer than 12, then the Contributions, plus any interest thereon (if any), credited to the Participant’s account as of the time of such sale or transfer with respect the offering to which such Purchase Period relates, will be returned to the Participant and the Participant’s option will be automatically terminated.

The Administration Committee may, if it so determines in the exercise of its sole discretion, also make provision for adjusting the Reserves, as well as the price per Share covered by each outstanding option, in the event that the Company effects one or more reorganizations, recapitalizations, rights offerings or other increases or reductions of shares of its outstanding Common Stock, and in the event of the Company’s being consolidated with or merged into any other corporation.

18. Amendment or Termination.

(a)The Board may at any time and for any reason terminate the Plan. Except as provided in Section 17, no such termination of the Plan may affect options previously granted, provided that the Plan or an Offering Period may be terminated by the Board on a Purchase Date or by the Board’s setting a new Purchase Date with respect to an Offering Period and Purchase Period then in progress if the Board determines that termination of the Plan and/or the Offering Period is in the best interests of the Company and the stockholders or if continuation of the Plan and/or the Offering Period would cause the Company to incur adverse accounting charges as a result of a change after the effective date of the Plan in the GAAP rules applicable to the Plan. Either the Board or the Administration Committee may amend the Plan, provided, however, that the Administration Committee may amend the Plan only to the extent required to comply with applicable law. Except as provided in Section 17 and in this Section 18, no amendment to the Plan shall make any change in any option previously granted that adversely affects the rights of any Participant. In addition, to the extent necessary to comply with Rule 16b-3 or Section 423 of the Code (or any successor rule or provision or any applicable law or regulation), the Company shall obtain stockholder approval in such a manner and to such a degree as so required.

(b)Without stockholder consent and without regard to whether any Participant rights may be considered to have been adversely affected, the Board or the Administration Committee shall be entitled to change the Offering Periods and Purchase Periods, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a Participant in order to adjust for delays or mistakes in the Company’s processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond with amounts withheld from the Participant’s Compensation, and establish such other limitations or procedures as the Board or the Administration Committee determines in its sole discretion advisable that are consistent with the Plan.

19.Notices. All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.

20.Conditions Upon Issuance of Shares. Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such Shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, applicable state securities laws and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

As a condition to the exercise of an option, the Company may require the person exercising such option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law.

21.Term of Plan; Effective Date. The Plan was originally adopted by the Board on May 2, 1968, and approved by the Company’s stockholders on October 31, 1968, and has been amended and approved by stockholders from time to time since then. The Plan, as amended and restated herein, is effective as of November 8, 2005 and shall continue in force and effect until terminated under Section 18.

22.Additional Restrictions of Rule 16b-3. The terms and conditions of options granted hereunder to, and the purchase of Shares by, persons subject to Section 16 of the Exchange Act shall comply with the applicable provisions of Rule 16b-3. This Plan shall be deemed to contain, and such options shall contain, and the Shares issued upon exercise thereof shall be subject to, such additional conditions and restrictions as may be required by Rule 16b-3 to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions.

EX-31.1

EXHIBIT 31.1

Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934

I, Arthur F. Weinbach, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Automatic Data Processing, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(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

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(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: February 6, 2006

/s/ Arthur F. Weinbach

Arthur F. Weinbach

Chairman and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934

I, Karen E. Dykstra, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Automatic Data Processing, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(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

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(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: February 6, 2006

/s/ Karen E. Dykstra

Karen E. Dykstra

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Automatic Data Processing, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ending December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Arthur F. Weinbach, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Arthur F. Weinbach

Arthur F. Weinbach

Chairman and Chief Executive Officer

February 6, 2006

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Automatic Data Processing, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ending December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Karen E. Dykstra, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Karen E. Dykstra

Karen E. Dykstra

Chief Financial Officer

February 6, 2006