Paychex, Inc. Reports Record First Quarter Results
Business Wire - September 16, 1999 09:48
ROCHESTER, N.Y.--(BUSINESS WIRE)--Sept. 16, 1999--Paychex, Inc. (NASDAQ: PAYX) today announced record net income of $43.0 million or $.17 diluted earnings per share for the quarter ended August 31, 1999, a 37% increase over net income of $31.4 million or $.13 diluted earnings per share for the same period last year. Total service revenues were $166.4 million, an increase of 19% over $139.3 million for the first quarter last year.
PAYROLL SEGMENT
For the quarter ended August 31, 1999, operating income for the Payroll segment increased 33% to $71.8 million from $53.9 million for the first quarter last year. Payroll service revenue was $150.9 million, an increase of 18% over $128.0 million for the first quarter last year.
The increases in service revenue and operating income were primarily the result of a 10% year-over-year increase in the Payroll client base and continued growth of the Taxpay(R) and Direct Deposit ancillary services. Paychex currently services 331,200 Payroll clients, with 262,100 utilizing Taxpay, the Company's tax filing and payment feature, and 141,000 taking advantage of the Company's Direct Deposit product.
HRS-PEO SEGMENT
For the quarter ended August 31, 1999, operating income for the HRS-PEO segment increased 88% from $2.6 million to $4.9 million. HRS-PEO service revenue was $15.5 million, an increase of 37% over $11.3 million for the first quarter last year.
The increases in service revenue and operating income are primarily related to increasing 401(k) recordkeeping and section 125 clients. The increase in 401(k) clients reflects the expansion of the sales force during the first half of fiscal 1999. As of August 31, 1999, the segment serviced 11,000 401(k) recordkeeping clients and 21,400 section 125 administration plans, representing 64% and 24% year-over-year increases in these client bases, respectively.
CORPORATE EXPENSES
Corporate expenses are primarily related to the Information Technology, Organizational Development, Finance, Marketing and Senior Management functions of the Company. For the quarter ended August 31, 1999, Corporate expenses increased 21% from $14.9 million to $18.0 million. The increase is primarily due to additional employees and other expenditures to support the continued growth of the Company. Full-year fiscal 2000's expenses are expected to increase at a rate slightly lower than 1999's growth rate of 16%.
B. Thomas Golisano, Chairman, President, and Chief Executive Officer of Paychex said, "Fiscal 2000 is off to a good start and is in line with our growth formula, which has generated consistent financial results for many years. We continue to see numerous opportunities to increase client utilization of ancillary services including our new Flexible Pay Package, which provides a cost-effective bundle of payment options such as Direct Deposit, Check Signing and Readychex(SM). The potential for our 401(k) recordkeeping and workers' compensation services continues to be outstanding. All Paychex internal, mission-critical systems are year 2000 compliant. We look forward to the new millennium and expect to continue our record of increasing client utilization and leveraging our infrastructure."
PAYCHEX, INC.
-------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(In thousands, except per share amounts)
For the three months ended
--------------------------
August 31, August 31,
1999 1998
----------------------------------------------------------------------
Service revenues:
Payroll $150,919 $127,982
HRS-PEO
(Net of PEO direct
costs billed and
incurred of $160,987
and $142,498,
respectively (A)) 15,473 11,307
----------------------------------------------------------------------
Total service revenues 166,392 139,289
Operating costs 39,366 35,885
Selling, general and
administrative
expenses 68,342 61,761
----------------------------------------------------------------------
Operating income 58,684 41,643
Investment income 3,688 2,961
----------------------------------------------------------------------
Income before income
taxes 62,372 44,604
Income taxes 19,335 13,203
----------------------------------------------------------------------
Net income $ 43,037 $ 31,401
======================================================================
Basic earnings per
share (B) $ .17 $ .13
----------------------------------------------------------------------
Diluted earnings per
share (B) $ .17 $ .13
----------------------------------------------------------------------
Weighted-average common
shares outstanding (B) 246,418 244,916
----------------------------------------------------------------------
Weighted-average shares
assuming dilution (B) 248,996 248,288
----------------------------------------------------------------------
Cash dividends per
common share (B) $ .06 $ .04
----------------------------------------------------------------------
(A) PEO direct costs billed to clients are equal to PEO direct costs
incurred for the wages and payroll taxes of worksite employees
and their related benefit premiums and claims.
(B) Financial information for the period ended August 31, 1998, has
been adjusted for a three-for-two stock split distributed in May
1999.
PAYCHEX, INC.
-------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(In thousands)
----------------------------------------------------------------------
August 31, May 31,
1999 1999
----------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 69,238 $ 52,692
Investments 309,834 290,555
Interest receivable 14,014 18,045
Accounts receivable 74,720 62,941
Deferred income taxes 2,105 1,364
Prepaid expenses and other
current assets 5,505 6,000
----------------------------------------------------------------------
Current assets before
ENS investments 475,416 431,597
ENS investments 1,413,979 1,361,523
----------------------------------------------------------------------
Total current assets 1,889,395 1,793,120
----------------------------------------------------------------------
Property and equipment - net 65,500 65,931
Deferred income taxes 2,255 1,417
Other assets 10,794 12,633
----------------------------------------------------------------------
Total assets $ 1,967,944 $ 1,873,101
======================================================================
LIABILITIES
Accounts payable $ 11,756 $ 10,328
Accrued compensation and
related items 32,566 36,574
Deferred revenue 3,286 4,643
Accrued income taxes 17,425 4,281
Other current liabilities 18,945 17,905
----------------------------------------------------------------------
Current liabilities before
ENS client deposits 83,978 73,731
ENS client deposits 1,416,452 1,358,605
----------------------------------------------------------------------
Total current liabilities 1,500,430 1,432,336
Long-term liabilities 5,057 4,965
----------------------------------------------------------------------
Total liabilities 1,505,487 1,437,301
----------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value,
300,000 authorized shares
Issued: 246,591/August 31, 1999
and 246,326/May 31, 1999 2,466 2,463
Additional paid-in capital 71,876 68,238
Retained earnings 390,522 362,269
Accumulated other comprehensive
income/(loss) (2,407) 2,830
----------------------------------------------------------------------
Total stockholders' equity 462,457 435,800
----------------------------------------------------------------------
Total liabilities and
stockholders' equity $ 1,967,944 $ 1,873,101
======================================================================
PAYCHEX, INC.
-------------
BUSINESS SEGMENT INFORMATION
----------------------------
(In thousands)
The Company has two business segments: Payroll and Human Resource
Services-Professional Employer Organization (HRS-PEO). The Payroll
segment is engaged in the preparation of payroll checks, internal
accounting records, federal, state and local payroll tax returns, and
collection and remittance of payroll obligations for small- to
medium-sized businesses. The HRS-PEO segment specializes in providing
small- to medium-sized businesses with cost-effective outsourcing
solutions for their employee benefits. HRS-PEO products include 401(k)
plan recordkeeping services, section 125 plan administration,
Professional Employer Organization (PEO) services, workers'
compensation, group benefits, and state unemployment insurance
services, employee handbooks and management services. Corporate
expenses are primarily related to the Information Technology,
Organizational Development, Finance, Marketing and Senior Management
functions of the Company.
For the three months ended
--------------------------
August 31, August 31,
1999 1998
----------------------------------------------------------------------
Service revenues:
Payroll $150,919 $127,982
HRS-PEO (A) 15,473 11,307
----------------------------------------------------------------------
Total service revenues $166,392 $139,289
======================================================================
Investment revenue included
in Payroll revenue $ 12,207 $ 11,776
======================================================================
Operating income:
Payroll $ 71,772 $ 53,888
HRS-PEO 4,916 2,611
----------------------------------------------------------------------
Segment operating income 76,688 56,499
Corporate expenses 18,004 14,856
----------------------------------------------------------------------
Total operating income 58,684 41,643
Investment income 3,688 2,961
----------------------------------------------------------------------
Income before income taxes $ 62,372 $ 44,604
======================================================================
(A) Net of PEO directs costs billed and incurred of $160,987 and
$142,498 for the three months ended August 31, 1999 and 1998,
respectively. PEO direct costs billed to clients are equal to PEO
direct costs incurred for the wages and payroll taxes of worksite
employees and their related benefit premiums and claims.
|
