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 ======== ======== ======== ========