SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: March 19, 2001
(Date of earliest event reported)
PAYCHEX, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-11330 16-1124166
(State of incorporation) (Commission (IRS Employer
File Number) Identification Number)
911 PANORAMA TRAIL SOUTH, ROCHESTER, NEW YORK 14625-0397
(Address of principal executive offices) (Zip Code)
(716)385-6666
(Registrant's telephone number, including area code)
ITEM 9. REGULATION FD DISCLOSURE
The registrant's press release dated March 19, 2001 is attached. This release
announces the Company's results of operations for the third quarter and
nine months ended February 28, 2001.
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.
PAYCHEX, INC.
Date: March 19, 2001 /s/ B. Thomas Golisano
-----------------------
B. Thomas Golisano
Chairman, President and
Chief Executive Officer
Date: March 19, 2001 /s/ John M. Morphy
-----------------------
John M. Morphy
Vice President, Chief
Financial Officer and
Secretary
FOR IMMEDIATE RELEASE
John M. Morphy, Chief Financial Officer or Jan Shuler 716-383-3406
Access the Webcast of the Paychex, Inc. Third Quarter Earnings Release
Conference Call scheduled for March 19, 2001 at 10:30 a.m. Eastern
Standard Time at http://www.paychex.com/paychex/finance/finance.html.
Paychex, Inc. news releases, current financial information, related SEC
filings and Investor Relations presentation are accessible at the same
Web site.
PAYCHEX, INC. REPORTS RECORD THIRD QUARTER RESULTS
ROCHESTER, NY, March 19, 2001 -- Paychex, Inc. (NASDAQ: PAYX) today announced
record net income of $66.4 million, or $.18 diluted earnings per share, for the
quarter ended February 28, 2001, a 34% increase over net income of $49.6
million, or $.13 diluted earnings per share, for the same period last year.
Total service revenues were $229.3 million, an increase of 19% over $192.2
million for the third quarter last year.
For the nine months ended February 28, 2001, net income increased 35% to $187.1
million, or $.50 diluted earnings per share, as compared to $138.4 million, or
$.37 diluted earnings per share, for the same period last year. Total service
revenues were $641.2 million, an increase of 21% over $530.9 million for the
same period last year.
PAYROLL SEGMENT
For the third quarter ended February 28, 2001, operating income for the Payroll
segment increased 21% to $94.3 million from $77.7 million for the third quarter
last year. Total payroll service revenues were $203.7 million, an increase of
19% over $171.8 million for the prior year period.
For the nine months ended February 28, 2001, operating income for the Payroll
segment increased 22% to $272.1 million from $222.4 million for the same period
last year. Total payroll service revenues were $570.2 million, an increase of
19% over $477.6 million for the same period last year.
The increases in total payroll service revenues and operating income were
primarily the result of continued growth in the Payroll client base, increased
utilization of ancillary services, higher rates of return and net realized
gains on ENS investments (funds held for clients).
As of February 28, 2001, 83% of Paychex clients utilized Taxpay (Registerd
Trademark), the Company's tax filing and payment feature. The Company's
Employee Pay Services, which includes Direct Deposit, Readychex and Access Card
products, was utilized by 52% of its clients. Major Market Services revenue
increased 65% and 59% for the third quarter and nine-month periods to $13.7
million and $34.0 million, respectively.
HRS-PEO SEGMENT
For the third quarter ended February 28, 2001, operating income for the HRS-PEO
segment increased 37% from $6.8 million to $9.3 million. HRS-PEO service
revenue was $25.5 million, an increase of 25% over $20.4 million for the third
quarter last year. For the nine months ended February 28, 2001, operating
income for the HRS-PEO segment increased 58% from $17.1 million to $26.9
million. HRS-PEO service revenue was $71.1 million, an increase of 33% over
$53.3 million for the same period last year.
The increases in service revenue and operating income are primarily related to
increases in 401(k) recordkeeping, workers' compensation insurance and section
125 clients. 401(k) recordkeeping revenue increased 34% and 41% in the third
quarter and nine-month periods to $11.4 million and $31.5 million,
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 third quarter ended February 28, 2001, corporate
expenses increased .7% to $16.7 million from $16.6 million. For the nine
months ended February 28, 2001, corporate expenses decreased .9% from $50.4
million to $49.9 million. The relatively flat year-over-year comparisons
reflect additional expenditures to support the growth of the company offset by
lower spending on national marketing efforts and other areas in fiscal 2001.
Looking forward, the Company expects the growth in corporate expenses to be
flat in the fourth quarter and up less than 10% in fiscal 2002.
INVESTMENT INCOME
Investment income from corporate investments for the quarter ended February 28,
2001 increased 80% to $7.2 million from $4.0 million for the third quarter last
year. Investment income for the nine-month period increased 62% to $18.7
million from $11.6 million in the prior year period. The increases are due to
higher comparable rates of return, higher balances of investments and net
realized gains on the sale of available-for-sale securities.
INCOME TAXES
The income tax rate for the third quarter and nine months ended February 28,
2001 was 29.5% and 30.1%, respectively, as compared to 31.0% for the same
periods last year. The Company expects the income tax rate to approximate
29.5% and 30.0% for the fourth quarter and full year fiscal 2001, respectively.
B. Thomas Golisano, Chairman, President and Chief Executive Officer of Paychex,
said, "We are pleased with our financial results for the first nine months of
fiscal 2001 and look forward to completing another successful fiscal year, as
we continue to generate revenue and profit growth from expansion of our client
base, increased client utilization of ancillary products and leveraging of our
infrastructure."
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
Certain written and oral statements made by Paychex, Inc., (the "Company")
management may constitute "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
are identified by such words and phrases as "we expect", "expects", "expected
to", "we look forward to", "we believe", "could be" and other similar phrases.
Because they are forward-looking, they should be evaluated in light of
important risk factors. These risk factors include, but are not limited to,
general market and economic conditions, including demand for the Company's
products and services, availability of internal and external resources,
executing expansion plans, competition, and price levels; changes in the laws
regulating collection and payment of payroll taxes, professional employer
organizations, and employee benefits, including 401(k) plans, workers'
compensation, state unemployment, and section 125 plans; delays in the
development, timing of the introduction, and marketing of new products and
services; changes in technology including the use of the Internet; the
possibility of catastrophic events that could impact the Company's operating
facilities, computer technology and communication systems; and changes in
short- and long-term interest rates and the credit rating of cash, cash
equivalents, and securities held in the Company's investment portfolios, all of
which could cause actual results to differ materially from anticipated results.
The information provided in this document is based upon the facts and
circumstances known at this time. The Company assumes no obligation to update
this document for new information subsequent to its issuance.
PAYCHEX, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
For the three months ended For the nine months ended
February 28, February 29, February 28, February 29,
2001 2000(B) 2001 2000(B)
Service revenues:
Payroll $177,842 $155,466 $509,496 $437,044
ENS investment revenue 25,905 16,355 60,671 40,595
-------- -------- -------- --------
Total payroll service
revenues 203,747 171,821 570,167 477,639
HRS-PEO 25,509 20,362 71,070 53,294
-------- -------- -------- --------
Total service revenues 229,256 192,183 641,237 530,933
Operating costs 54,376 45,964 147,398 126,686
Selling, general and
administrative expenses 87,998 78,316 244,706 215,152
-------- -------- -------- --------
Operating income 86,882 67,903 249,133 189,095
Investment income 7,234 4,012 18,733 11,554
-------- -------- -------- --------
Income before income taxes 94,116 71,915 267,866 200,649
Income taxes 27,764 22,294 80,758 62,201
-------- -------- -------- --------
Net income $ 66,352 $ 49,621 $187,108 $138,448
======== ======== ======== ========
Basic earnings per share(A) $ .18 $ .13 $ .50 $ .37
======== ======== ======== ========
Diluted earnings per share(A) $ .18 $ .13 $ .50 $ .37
======== ======== ======== ========
Weighted-average common
shares outstanding(A) 373,057 370,973 372,560 370,284
======== ======== ======== ========
Weighted-average shares
assuming dilution(A) 377,681 377,723 377,558 375,309
======== ======== ======== ========
Cash dividends per common
share(A) $ .09 $ .06 $ .24 $ .16
======== ======== ======== ========
(A) Financial information for the periods ended February 29, 2000, have been
adjusted for a three-for-two stock split distributed in May 2000.
(B) Certain amounts from the prior year are reclassified to conform to the
current year presentation.
PAYCHEX, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
February 28, May 31,
2001 2000
ASSETS
Cash and cash equivalents $ 106,796 $ 47,136
Corporate investments 506,273 412,357
Interest receivable 20,173 22,436
Accounts receivable 89,898 87,608
Deferred income taxes -- 9,539
Prepaid expenses and other current assets 8,185 6,531
---------- ----------
Current assets before ENS investments 731,325 585,607
ENS investments 1,833,417 1,776,968
---------- ----------
Total current assets 2,564,742 2,362,575
Property and equipment - net 86,291 75,375
Goodwill and intangible assets - net 8,843 5,584
Deferred income taxes 2,294 2,494
Other assets 8,961 9,549
---------- ----------
Total assets $2,671,131 $2,455,577
========== ==========
LIABILITIES
Accounts payable $ 14,116 $ 17,086
Accrued compensation and related items 59,246 52,631
Deferred revenue 6,093 4,719
Accrued income taxes 21,963 2,969
Deferred income taxes 1,190 --
Other current liabilities 22,305 24,400
---------- ----------
Current liabilities before ENS client deposits 124,913 101,805
ENS client deposits 1,823,693 1,785,140
---------- ----------
Total current liabilities 1,948,606 1,886,945
Long-term liabilities 5,134 5,200
---------- ----------
Total liabilities 1,953,740 1,892,145
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value,
600,000 authorized shares
Issued: 373,323/February 28, 2001
and 371,769/May 31, 2000 3,733 3,718
Additional paid-in capital 133,434 98,904
Retained earnings 566,993 469,385
Accumulated other comprehensive income/(loss) 13,231 (8,575)
---------- ----------
Total stockholders' equity 717,391 563,432
---------- ----------
Total liabilities and stockholders' equity $2,671,131 $2,455,577
========== ==========
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, workers' compensation insurance administration,
section 125 plan administration, group benefits, state unemployment insurance,
employee handbooks and management services, Paychex Administrative Services and
Professional Employer Organization (PEO) 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 For the nine months ended
February 28, February 29, February 28, February 29,
2001 2000 2001 2000
------------ ------------ ------------ ------------
Service revenues:
Payroll $177,842 $155,466 $509,496 $437,044
ENS investment revenue 25,905 16,355 60,671 40,595
-------- -------- -------- --------
Total payroll service
revenues 203,747 171,821 570,167 477,639
HRS-PEO 25,509 20,362 71,070 53,294
-------- -------- -------- --------
Total service revenues $229,256 $192,183 $641,237 $530,933
======== ======== ======== ========
Operating income:
Payroll $ 94,259 $ 77,683 $272,121 $222,434
HRS-PEO 9,349 6,831 26,942 17,064
-------- -------- -------- --------
Segment operating income 103,608 84,514 299,063 239,498
Corporate expenses 16,726 16,611 49,930 50,403
-------- -------- -------- --------
Total operating income 86,882 67,903 249,133 189,095
Investment income 7,234 4,012 18,733 11,554
-------- -------- -------- --------
Income before income taxes $ 94,116 $ 71,915 $267,866 $200,649
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