UNITED STATES

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

______________

FORM 10-Q

______________

x      QUARTERLY 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