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Paychex Annual Report, Year Ended May 31, 2003

Filing Date
Filed August 1, 2003
Period End
May 31, 2003
Security
PAYX
In the record · 2016–202610-K1110-Q328-K99

PAYX filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 99 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Jul ’17Jul ’17
  2. Material agreement8-K · Aug ’19Aug ’19
  3. Material agreement8-K · Sep ’21Sep ’21
  4. Leadership change8-K · Jul ’25Jul ’25

01—Abstract

Summary

Summary of the 10-K filed August 1, 2003. Cited figures are marked; the original filing is the authoritative source.

Paychex, Inc. reported record fiscal 2003 (year ended May 31, 2003) results, with total revenues of $1.10 billiona, up from $954.9 million in fiscal 2002, and net income of $293.5 million, up from $274.5 million.

Diluted earnings per share were $.78 versus $.73. Service revenues reached $1.05 billionb, while interest on funds held for clients fell to $53.1 million from $62.7 million, reflecting lower interest rates. Operating income was $401.0 million.

The filing states the company completed its thirteenth consecutive year of record total revenues and net income, and that lower interest rates and difficult economic conditions continued to weigh on growth. The company spent $492.6 millionc in cash on acquisitions during the year: Advantage Payroll Services, Inc. for $314.4 million (September 20, 2002) and InterPay, Inc., a subsidiary of FleetBoston Financial Corporation, for $181.7 million (April 1, 2003). Together they added over 82,000 clients, bringing the total to approximately 490,000 clients and about 8,850 employees.

The filing notes goodwill of $393.7 milliond and that the integration of both acquisitions is ongoing. Total assets rose to $3.69 billion, and stockholders' equity to $1.08 billion. The company had no debt outstanding.

For fiscal 2004, management projects total service revenue growth of 16% to 18%, net income growth of approximately 10%, and operating income growth (excluding interest on funds held for clients) of 15% to 20%. The filing also discloses 27 pending lawsuits brought by licensees of Rapid Payroll, Inc. software, which management believes will not have a material adverse effect.

02—Key points

Key Highlights

  1. Total revenues rose to $1,099.1 million in fiscal 2003 from $954.9 million, and net income rose to $293.5 million from $274.5 million.
  2. Diluted earnings per share were $.78, compared with $.73 in fiscal 2002.
  3. Interest on funds held for clients declined to $53.1 million from $62.7 million, reflecting lower interest rates; the Federal Reserve lowered the Federal Funds rate twelve times from January 2001 through May 2003 to 1.25%.
  4. Acquisitions of Advantage ($314.4 million) and InterPay ($181.7 million) added over 82,000 clients and $393.7 million of goodwill.
  5. Client base reached approximately 490,000 at May 31, 2003, and the company ended the year with no debt and $381 million in available cash and corporate investments.
  6. Management projects fiscal 2004 total service revenue growth of 16% to 18% and net income growth of approximately 10%.
  7. 27 pending lawsuits from licensees of Rapid Payroll, Inc. software seek unspecified damages; management believes they will not have a material adverse effect.

03—Questions

Frequently Asked Questions

  1. How did Paychex perform financially in fiscal 2003?

    Total revenues grew 15.1% to $1.10 billion and net income grew 6.9% to $293.5 million. Diluted EPS was $.78, up from $.73. Operating income reached $401.0 million, and the company described it as its thirteenth consecutive year of record total revenues and net income.

  2. What drove growth, and what held it back?

    Payroll service revenues rose 16.5% and Human Resource and Benefits revenues rose 21.8%, helped by the Advantage and InterPay acquisitions and organic client growth. Growth was held back by lower interest rates on funds held for clients and corporate investments, a decline in checks per client (down .5% excluding the acquisitions), and difficult economic conditions.

  3. What did Paychex acquire in fiscal 2003?

    Advantage Payroll Services, Inc. was acquired on September 20, 2002 for $314 million in cash, and InterPay, Inc. (a FleetBoston subsidiary) was acquired on April 1, 2003 for $182 million in cash. Together they provided over 82,000 new clients. The integration is ongoing, with InterPay clients expected to convert to Paychex platforms by the end of November 2004.

  4. What is the company's outlook for fiscal 2004?

    Management expects total revenue growth of 15% to 17% (10% to 12% excluding Advantage and InterPay), net income growth of approximately 10%, and operating income growth (excluding interest on funds held for clients) of 15% to 20%. It projects interest on funds held for clients to be flat and corporate investment income to fall about 45%.

  5. Does the company have significant legal or financial risks?

    The company faces 27 pending lawsuits from licensees of Rapid Payroll, Inc. software, which seek unspecified damages and are in early stages. Management believes they will not have a material adverse effect. The company is also exposed to interest rate risk on its investment portfolio and to potential losses if clients have insufficient funds to cover payroll and tax transfers. It carries no debt.

04—Continue

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