Gary Butler - President & CEO Chris Reidy - CFO Elena Charles - VP of IR

Rod Bourgeois – Sanford Bernstein Adam Frisch – UBS Kartik Mehta - FTN Midwest Securities Tien-Tsin Huang - JP Morgan Gary Bisbee - Lehman Brothers Mark Marcon - Robert W. Baird Charlie Murphy - Morgan Stanley Bryan Keane – Prudential Jim Kissane - Bear Stearns T.C. Robillard - Banc of America Securities Liz Grausam - Goldman Sachs David Grossman - Thomas Weisel Partners Patrick Burton – Citigroup Tim Willi- A.G. Edwards

Hello and welcome everyone to the Automatic Data Processing Inc. third quarter fiscal 2007 earnings conference call. I would now like to inform you that this conference is being recorded and all lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If you would like to ask a question during this time simply press * and the number 1 on your telephone keypad. (Operator instructions). Thank you. I will now turn the conference over to Miss Elena Charles, Vice President of Investor Relations. Please go ahead Ma’am.

Thank you. Good morning. I’m Elena Charles, ADP’s Vice President of Investor Relations. I’m here this morning with Gary Butler, ADP’s President and CEO and Chris Reidy, ADP’s Chief Financial Officer. A slide presentation accompanies today's earnings call webcast and it is available for you to print from the Investor Relations' home page of our website at adp.com. During today's conference call, we will discuss some forward-looking statements that involve some risks, and these are discussed here on this slide and in our periodic filings with the SEC. With that introduction, now we’ll turn the call over to Gary for his opening remarks.

Thank you Elena and good morning everybody. I’m going to kick off today’s call with some opening remarks about our third quarter and then I’ll turn it over to Chris Reidy, our CFO, who’ll take you through the more detailed results of the quarter and then I’ll come back at the end to update you on the outlook for the full year. Let me begin by telling you that I’m extremely pleased with our results for the third quarter. We continue to maintain the course that we’ve outlined for you over the last year. We have great momentum in our businesses and our investments that we’ve made over the last several years are clearly paying off. I think one of the best indicators of that is our revenue growth which is strong at 14% for the quarter. So as we’ve communicated all year, we do still have some drag on pre-tax margin comps, primarily due to the acquisitions we’ve completed this fiscal year. I want to reiterate to you all of you that margin improvement is our top priority at ADP, and we remain confident that we will achieve fourth quarter margin improvement on employer services and a full year improvement of 20 basis points that we’ve communicated to you over the last several quarters. Sales were strong at both Employer Services and at (inaudible) services and Chris will give you some more detail in his commentary. We continue to anticipate double digit sales growth in ES for the entire ’07, though I want to remind you we do anticipate a very tough fourth quarter comparison in terms of percentage growth due to last year’s particularly strong fourth quarter sales growth of 28%. In terms of dollars, even at a single digit growth percentage that we anticipate in the fourth quarter, the sales dollars generating from that growth are still very strong in absolute dollar amounts. We obviously are very pleased to have completed the tax free brokerage spin off on March 30th resulting in a much more focused ADP. You’ve seen from the release that our cash balances are up again to $2.8 billion from the December level due to the cash dividend we received from brokerage and obviously from our third quarter cash flows. I want to reiterate up front my intent to return excess cash to our share holders, and again depending on market conditions, we will resume aggressive share buy back near term. I would also like to remind you that our acquisition strategy does not include large multi-year diluted transactions. Rather we are focused on close to the core transactions like the ones we’ve completed this year for Employer Services. So with that I’ll turn it over to Chris for some more detailed update on the quarter and then I’ll come back once he concludes with the outlook for the remaining part of ’07.

Thanks Gary and good morning everyone. As Gary said earlier, our third quarter results were terrific. Revenues reached $2.2 billion for the quarter growing 14% and our internal growth rate continued at a very strong 12% in the quarter. ADP’s pre tax margin of 26.4% improved 30 basis points over last years third quarter. The margin performance for both DS and DO were as anticipated with DS declining 50 basis points and DO improving 340 basis points. I’ll provide more details on pre tax margins in a few moments but I’d like to point out that we’re consistent in our fourth quarter and full year forecast for margin expansion. EPS from continuing operations grew 20% or $0.11 from $0.54 to $0.65, about $0.02, which is from lower share count in the quarter versus a year ago. Now turning to the next slide, I’ll go through more highlights for the quarter. As you know we completed the tax free spin off of our brokerage service business on March 30th, therefore the results of operations and related separation costs are reported within discontinued operations in the third quarter. ADP’s quarterly P&Ls have been restated to report the brokerage business in (inaudible) for each quarter in fiscal 2006 and the first two quarters of fiscal 2007. These restated P&Ls were posted to our web site this morning. As Gary mentioned our cash and marketable securities were $2.8 billion in March 31st. This is up from our December balance of $1.7 billion to the cash flows in the quarter and the $690 million cash dividend from brokerage firms. Our intent is to resume aggressive share buy back as an important part of our commitment to return excess cash to our shareholders. I’d like to take you through how we think about our cash balances. ADP’s normal working capital requirements restricted cash and international cash balances total about $1.3 billion, so when we speak with you about returning excess cash to our shareholders, think about balances above that amount. Fiscal year to date we have spent $945 million repurchasing 20.1 million ADP shares. Now turning to the next slide six, we’ll go through ES’s results for the quarter. Internal revenue growth for ES was solid at 11% and you should know Employer Services has held to a constant 4.5% interest rate with a strong revenue growth that does not include any impact from higher interest rates compared with a year ago. Revenue growth from our traditional payroll and payroll tax filing business was 8%. This was our most profitable business and it creates additional opportunities to cross sell our beyond payroll products. This healthy 8% growth in revenue reflects continued double digit new business sales growth which is the single most important contributor to revenue growth, as well as from growth in client fund balances, price increases, and higher pay-slip control. The revenues grew a strong 23%. PEO, COS, Time and Attendance, and HR administration services all posted strong growth in the quarter. We anticipated a decline in pre tax margin of 50 basis points. Acquisitions completed this fiscal year reduced pre tax margins 60 basis points and the higher step off expense level from fiscal ’06 continued to impact the third quarter comparisons. Excluding the impact of acquisitions, ES’s pre tax margin was 30.5%, improved from leveraging the growth of the business. As Gary mentioned in his opening comments we are confident of our forecast for full year margin expansion of 20 basis points. New business sales growth continued at double digit rate with 12% growth world wide and 13% growth in the quarter in the US. Pays per control for the sales metric was quite strong, up 3% the quarter and we continue to see growth in the number of payers in Europe overall with 2.4% year to date pays per control increases we anticipate better than 2% growth in pays per control for full year. We continue to see growth in client fund balances and retention continues at excellent levels. Now let’s turn to slide seven and I’ll take you through a review of further results. We had Deal Services revenue growth of 8% which was strong and the internal growth was 6% for the quarter. Overall pre-tax margins improved 340 basis points compared with a year ago. About half of the improvements were driven by cost synergies which we achieved as we integrated carriage. The other half was a result of restructuring charges relating to the carriage acquisition taken in the third quarter of last year. We’re on track to achieve over 100 basis points of margin expansion for this fiscal year and we’re pleased with the new business sales growth in both the core North American business and in the international business. Now as we move on to slide 8, I’ll turn it back to Gary to review our full year forecast.

Thank you Chris. Now let me take you through our forecast for the full year. I’m sure you recall we had reset our guidance back at the March analysis meeting to reflect pushing brokerage within discontinued operations for the new ADP at 12-13% revenue growth. I am now highly confident that we will achieve over 13% of revenue growth for the full year. This increase from our previous 12-13% revenue growth forecast is primarily due to our current estimate of the benefits from foreign exchange rates. The intrinsic momentum, however, in our business, is quite strong, and the strategic acquisitions we've completed this year in employer services are also contributing to this excellent growth. Our forecast for client funds include gross and interest revenues of approximately 18%, driven primarily by an average pre-tax interest yield improvement of 40 basis points to about 4.5%, and obviously higher client funds balances of about 8%. Now let's turn to slide nine to review the full year EPS from our continuing operations. As you will recall at out March analysis meeting, we also provided our forecast of EPS from continuing operations for the new ADP of between $1.79-1.83 translating into a 20-23% growth. We are highly confident in our ability to attain the high-end of the EPS forecast. This is up from the $1.49 from continuing operations restated to reflect the brokerage business, than the discontinued operations we provided to you back in March. Just to be clear on what's in and what's out, this forecast includes an estimated $0.02 per share dilution from the acquisitions we've announced today and excludes the net one time items from the first quarters that increased earning for share by $0.04 up from the $0.03 previously recorded to you after the first quarter. The penny increase from that previously recorded for the net one time items is due to a brokerage related restructuring charge that is now being classified within discontinued operations. And as you know, the continuing operations forecasts exclude all brokerage-spin related costs of about $40 million. This is down from our previously forecasted estimate of about $45-50 million that we communicated to you earlier in the fiscal year. As is normal process for ADP, this forecast also does not contemplate further share buyback but it does include interest income on our current cash balances. I want to add that as you've heard us say, our intention is to year term aggressive share buyback, depending obviously on market conditions. So let's turn to slide ten to review the forecast for each segment. Employer services, we continue to forecast 12% revenue growth with strong internal revenue growth of around 11%. Our key business metrics are terrific and we are confident that we will achieve twenty basis points in margin expansion for the year driven by a strong fourth quarter improvement. Also with the momentum of the new business sales, we continue to anticipate another year of double digits sales growth. And as I've again said earlier, and I want to remind you again right now, we do anticipate a very strong fourth quarter comparison due to last year's particularly strong fourth quarter sales growth of 28% which was the strongest quarterly growth quarter for about nine years. Let me switch to dealer. We continue to anticipate revenue growth for 2007 of around 14%. I remind you that the total revenue growth is assisted particularly in the first half or in the first half of the year by the Carriage acquisition, which we anniversaried in December. The internal revenue growth is anticipated to be nearly 6% for the year which is up from about 4% last year. And we continue to anticipate full year pre-tax margin improvement of over 100 basis points. Before we go to the Questions and Answers lets turn to slide eleven and I'll make a few closing comments. So, obviously as you can tell by the tone of the call we are very pleased with out progress today and for the quarter. Our third quarter results were very solid with 14% revenue growth and 20% EPS from continuing operations growth. Our key metrics are strong. We are continuing on a clear path to increase shareholder value by executing on the strategic initiatives you've heard me speak about over the last year. The new ADP is clearly a more focused company with the completion of the brokerage spin. Secondly, the business metrics across the board are strong. And thirdly, ADP remains committed to returning excess cash to shareholders. We've demonstrated this clearly by buying over the last twelve months 37.6million shares for over $1.7 billion, which includes last year's fourth quarter fiscal quarter where we received cash from the sales of the claims business. In conjunction with the share buy back, we've also increased our dividends 24% which we held post to spin off effective March 30, 2007. This also raises the payout ratio for the new ADP to over 45% and a dividend yield of about 2% at the current stock price. So in closing as we move toward fiscal year end, I am highly confident in attaining our full year end revenue and EPS growth forecast. With that we'll turn it over to the operator to take your questions.

Thank you. At this time I would like to remind everyone if you would like to ask a question please press star then the number one on your telephone key pad. We'll pause for just a moment to compile the Questions and Answers' roster. Our first question will come from the line of Rod Bourgeois with Sanford Bernstein. Rod Bourgeois – Sanford Bernstein: Gary, I just wanted to ask you about the economy. I get a lot of questions from investors about the impact the US economy is having on your business. Your results suggest that the answer is not really that much but can you give us some more color on where the economy could be having a positive effect and/or a negative effect and then how that positions you from what you can tell right now heading into fiscal 2008. Gary Butler: My general comment would be that I read the same publications you read and I read all the concerns that you read. I don't see any reflection on those concerns in what I see in the numbers that ADP or what I hear anecdotally at ADP. Obviously the 3% same store sales is a very positive metric in terms of growth in our base. These slight fall-offs we've seen in client fund balances are really driven by more positive things called lower unemployment claims, therefore they're reducing their taxes. Generally, in terms of sales results, obviously in the tougher economy you see some more pressure on sales. Then obviously by results we are seeing that. Anecdotally it’s kind of business as usual and more of the same. Although I read the same things you read everyday when I pick up the journal. Rod Bourgeois – Sanford Bernstein: OK, now you've beaten consensus by $0.02 for the March quarter and you've kept your guidance essentially the same for the year. Does that suggest that the outlook for the June quarter is on the conservative side and you have room for an upside to that heading into 2008 or should we not read that far into the results and guidance patterns here? Chris Reidy: Well I think that our communication here is clearly more at the high end of the full year and our confidence level is very strong. Obviously I think the consensus for the quarter was...I don't want to use the word confusion, but I think consensus is trying to find its way to where it should be based upon the number post the spin. But again, I think the momentum is good. The fourth quarter will be what the fourth quarter is and we remain highly confident in the high end of the rank. Rod Bourgeois – Sanford Bernstein: Alright one quick numerical question on that, and I think by the way, the word confusion was probably appropriate, but one of the things I think is important is that you've had step-up investments in recent quarters you've talked about step-up investments in the HRO business and also investments in your sales force and so on. Those step-up investments seemingly are coming down some, can you give us any way to quantify what the benefit of that margin will be as we move from the March quarter to the June quarter or was that benefit already exhausted in March? Chris Reidy: I think if you do the math, we do get a big pickup and benefit in the 4th quarter. If you go back and look at what we’ve said, we’re going to be 20 basis points for the full year…that would kind of imply a very large increase of about 250 basis points for the fourth quarter. So, we look back at the impact of a number of things like selling expense in the fourth quarter of last year, which as you might recall was extremely high. We don’t see that reoccurring at the same rate, and there was some other minor one time investments and implementation in R&D last year. So, as we look back and normalize for those items we’re comfortable with that kind of growth in the ES margin in the fourth quarter, which brings us in the 20 basis points. Rod Bourgeois – Sanford Bernstein: Thanks guys. Operator: Our next question will come from the line of Adam Frisch with UBS. Adam Frisch – UBS: Good morning and thanks for taking my question. Nice job here on the quarter. The results obviously bode well for the last couple of months of the year but I was wondering, even if there were so many one time things going in and out this year, more so, certainly more so than usual…if you could give us a vague idea of what you’re expecting in ’08, if you’re going to experience double digit revenue growth, and some more modest margin expansion going forward? Chris Reidy: Adam, this is Chris. We’re right in the middle of our operating plan right now, so it’s well premature to give any sense of ’08 guidance. And that’s consistent with what we’ve done in past years. But we’re comfortable with the momentum and the strength of the business so more to come in our next earnings call. Adam Frisch - UBS: OK. Maybe looking at it this way...I thought that’s what you were going to say Chris. [Laughter] It’s too predictable these days I guess. The timing and the lag of your investments made last year, obviously they’re reaping a lot of benefits, your sales growth is up, your retention is still good, everything is going well, are we kind of in maintenance mode right now for investments or are there others that might be a little bit larger than what we would call normal heading into next year? Gary Butler: Adam, this is Gary. Clearly we’re not in maintenance mode, but we’re through what I would call the step-rate mode. You’ve probably heard me in the past talk to getting the bow of the ship up from our slower growth periods in ’02 and ’04. And the bow of the ship is up, and so we’re focused on continuing to keep the bow of the ship up while we focus on margin improvement at the same time. But do not read that we’re not investing in the business. We will continue to add resources to sales force for example, but instead of adding 10-12% head count growth, we’ll probably be adding more like 5% as we go in this, and focus on productivity improvement being more efficient in our use of sales investments. And we’ve made a big investment in GlobalView and a lot of our BPO and PEO initiatives, and we’ll continue to expand those investments because it’s paying off great for us and we want to continue the momentum. So I think the correct way to answer it, more historic, keep the bow of the ship as opposed to get it up from the situation we had back in ’03 and ’04. Adam Frisch - UBS: Got it, so based on that commentary, it seems like you’re pretty positive on how your sales force is positioned for fiscal ’08? Gary Butler: I am extremely pleased with where we are from a sales standpoint and our products are lining up well. Our productivity at the sales force level is increasing and I expect it to continue to increase and we’re winning in the market place so that always feels good. Adam Frisch - UBS: OK, good to hear that kind of color. Last question is for Chris here, buybacks are obviously big, the market likes to see it, but it does take a lot to move the EPS needle in terms of how much money you need to spend on the stock. Dividends are up, glad to see you keep the dividend rate where it is, but how do you actually think about how you’re going to balance the return of cash to shareholders between those two initiatives going forward? Could we see the dividend come up even more from where it currently is around 2%? Chris Reidy: I guess it depends on how you measure that. I think 2% is about right and the effective return of about 45%, you’d want to hold that, so that requires an increase going forward. But we’re constantly looking at the blend of how to do that, whether it’s through buybacks or dividends. I think what you can take from that is, we’ve demonstrated a significant commitment to return excess cash both through buybacks and through dividends. Adam Frisch - UBS: OK, thank you. Operator: Our next question will come from the line of Kartik Mehta with FTN Midwest. Kartik Mehta - FTN Midwest Securities: Good morning. Gary, I wanted to find out if you could provide some color on how to think of new sales turning into revenue. I know at one point, I think you tried to describe how to look at sales growth and the timing, of how that relates into revenue growth? Gary Butler: Sure, I’ll give you a little color and it’s more of an art than it is a science, particularly on the outside looking in. First of all, you have to look at how long it takes for new business to start, so sales that occur for example in our small business, literally start within a week of when the order is placed, in some cases even less than that. If you’re a GlobalView client like Ikea, you signed up to put on 90,000 employees in 20 countries, it’s a 2.5-3 year implementation, it takes 6-9 months for it even to get started. So it depends on where it is and the complexity of the implementation. But typically, if we sell a dollar in a current fiscal year, we would expect somewhere between 40-45% of that dollar to actually appear in revenue in the current fiscal year. And obviously then you have the 55% of the previous year overlaying in the forward year. I mean, we could spend the next hour of the call talking about how we do that, but that’s the most simplistic way to think about it. Kartik Mehta - FTN Midwest Securities: I think in your opening remarks, you talked a little about acquisitions and I think you implied that there weren’t any large acquisitions. Is that a result of, you not seeing any large acquisition opportunities that could help ADP, or is it that right now, the core business is going so well you’d rather focus on that and it makes more sense to do smaller acquisitions that add product and services that you can provide clients? Gary Butler: Well, first of all, I think your prediction is accurate in the sense of the current business. It’s going terrific, and we’re very focused on the acquisitions that we’ve made, trying to get them through into our distribution channel. We’re very pleased with the results into our expansion in the BPO arena and come to the PEO, our ASO business and our COS and GlobalView businesses and in terms of large acquisitions, there aren’t a lot that are available at good prices that are really a net add to our current platform. So, just by revenue for revenue’s sake, I don’t find overly attractive, but we are clearly on a path to drive margin improvement. So my desire to pay big prices for acquisitions that don’t bring large strategic benefits and potentially could be problematic, and drag on a margin. It just isn’t something we want to do. Kartik Mehta - FTN Midwest Securities: And just one final question, if you look at pays per control at 3%, I think that seems to be a historical high and fairly good, what would need to impact revenue earning if there was a decline in pays per control, I don’t think it’s that much, but I just wanted to make sure that I understood it? Chris Reidy: There’s a bunch of different ranges as we talk about that, it’s kind of a broad question because we have growth and pays per control. Generally it’s because things are a little bit better in the economy and we’ll get higher client fund balances, perhaps participation 401K plans, and the like. On payroll only, a 1% change on pays per control across the entire client basis is about $15 million, if you add some of the other items, pace is about $20 million. Elena Charles: And Kartik just to add one thing for you. The 3% is not actually a high for us, six years ago, it was over 3% and I think if you go back, six, seven, eight, 10 years, I think we’ve shown some periods of 4% pace growth. Gary Butler: And let me just add a little bit of the caveat here, I believe our pays per control was 1.7, and so we’re up to three, and the overlap from the holidays, and as things happen in that payroll cycle, you know, we don’t pay a lot of attention to what happens month to month, but we do look at quarterlies. I think you have to look at the blending that we’re experiencing in the 2-2.5 range and not either be disappointed in the one set of last quarter or be overly optimistic on the 3%. But we’re feeling pretty good that the blended average is at 2.4 or something, for the nine months, which I think bodes well for where we are. Kartik Mehta - FTN Midwest Securities: Just one clarification, you’re at the $15-20 million. I’m assuming that’s revenue, correct?

Yes it is. Kartik Mehta - FTN Midwest Securities: Thank you very much.

Our next question will come from the line of Tien-Tsin Huang, with JP Morgan. Tien-Tsin Huang - JP Morgan: Thanks and good morning. Question on payroll and tax filing; 8% growth, that’s pretty solid, and consistent with recent entries, should we think of this level as being sustainable in the midterm?

I mean clearly Tien-Tsin that would be our intention, because if you can get internal growth rates to the levels that we’re getting, and you’re adding new payroll revenue into that mix, that would certainly be our plan going forward. So, to whatever extent you have comfort in our current metrics around organic revenue growth, which I have a good bit of comfort in, it would certainly lead to those kinds of results, if we execute on the strategy. Tien-Tsin Huang - JP Morgan: That’s very good, any notable change in the competitive advantage on the ES side? Is there any notable change in behavior from Ceridian?

Our business with Ceridian is pretty much as it has been for the last nine months. Most of the competitors are pretty rational people, and there’s nothing notable here on the competitive landscape that I think we would need to talk about. Tien-Tsin Huang - JP Morgan: Good, good. Let me just get one more I guess. Question on GlobalView, do they meet expectations in the quarter, and also, Gary, if you could maybe talk about payments, given its new tie-up with American Express, how has that changed the accounts payable market going forward for you?

In terms of GlobalView, we expect to make our plan for the full year, the quarter results were good, about where we expected them to be, and we remain very enthusiastic about that product and what it can do for us in a global context. We’re still in pilot mode with payments, we’ve seen no notable difference in behavior from them since being acquired by American Express, and we’ll continue with the pilot, and I’m sure as we get into next fiscal year and make decisions to either get more aggressive or go another way. But you know, so far so good.

Our next question will come from the line of Gary Bisbee with Lehman Brothers. Gary Bisbee - Lehman Brothers: Hi guys. Congratulations on the strong numbers. The first question, the beyond payroll revenue growth has really accelerated pretty dramatically over the last 4-6 quarters, can you give us any sense how much of that improvement is on acquisitions you’ve done this year versus just gaining traction on all the products you discussed at the recent investor day?

I don’t have the individual breakdown by all the different products, but I would say it’s both Gary. We’re continuing to see very nice growth in our time and labor management. We expect very strong growth in our benefits area. We’ve added some new products there and we’re going gangbusters with some of our acquisitions, most notably virtual edge and employees, which are doing terrific in their respective spaces. So I would say it’s both, and it’s up nicely, but both of them are contributing, not just the new stuff and not just the stuff we’ve had for a while.

Yes, and if I could also mention, don’t forget the biggest part of our payroll is the PEO, which is continuing to show very very strong results. Gary Bisbee - Lehman Brothers: OK. Second question is on the PEO. Can you give us an update on exactly where you are today in terms of the non co-employ? And if you are successful in growing that over the next 12-18 months, do you expect that the revenue growth rate in PEO would decelerate due to lower average pricing there?

That’s the $64,000 question, in terms of some of the issues there. We are in pilot now with our new, as we call it, ASO, administrative services offering. We are primarily targeted below 100 pays, which the PEO is more below 50, although we do sell some above that, whereas the ASO will clearly go up into the 200-300 person. But for now we’re under 100 pay, and based on our results so far, the PEO is continuing to have very robust sales results. We now have over 300 clients in the ASO area, and we plan to expand that rapidly next year in ’08 without any real significant lessening in the PEO pay. So I think we can manage it, because one of the challenges that we have in the PEO is underwriting, so it takes us a lot of prospects to achieve a PEO client, because we are very stringent in underwriting characteristics for both worker’s comp and healthcare. So in a lot of ways, we’re going to be able to convert more prospects where we don’t have to underwrite our insurance products, as opposed to what we do in the PEO. So, at the end of the day, the plan is to end up with the best of both worlds, with more clients and different configurations. Gary Bisbee - Lehman Brothers: OK. And then, in that last point, which I think is an important one, are you going to help in terms of sourcing insurance for the people in the ASO who might not meet your underwriting standards for PEO, or are they basically on their own?

Yes. Gary Bisbee - Lehman Brothers: Just a last question, the dealer margins are obviously doing terrific now. Can you give us a sense, as you look out over the next few years, what’s sort of the margin potential of this business? Does it remain substantially above the levels you’ve been reporting in the last couple of quarters?

Again, the business model there is no different than Employer Services, and again, sans acquisitions or significant investments, we would expect the core dealer business to improve its margins a half a point a year as a way to think about it. So there are clearly two or three more points of margin improvement available in the dealer market over a planning horizon. Gary Bisbee - Lehman Brothers: OK great, thanks a lot.

Our next question will come from the line of Mark Marcon with Robert W. Baird. Mark Marcon - Robert W. Baird: Good morning and congratulations on all the progress that you’ve made over the entire year, it’s been fantastic. With regards to the core payroll business, in terms of the 8% growth, can you give us just a little bit of color, just in terms of majors versus nationals? And what percentage of the growth is coming from price increase versus an increase in terms of the total number of clients, just a little more color there in terms of the core business?

Well, price increase, you have to also think about our US-based price increases and are around 1.5%-2% max, depending upon the client and the industry and the size segment and what their contractual terms are, so I think that’s a good way to think about it. In our international business, it’s less focused on price increases, so the numbers I’m quoting you there are around a US-based issue. And most of the rest of it obviously comes from increases in employment or float balances and that increase in float balances also comes from adding new clients. So I think the majority of it is still going to come from adding new clients, whether they bring balances or pays or more revenues for payroll and other things. And I think that’s the best way to think about it. Mark Marcon - Robert W. Baird: So when we think about that 8% growth that you’ve had, how much of that was just client growth, roughly speaking?

I would say half, or better. Mark Marcon - Robert W. Baird: OK, great. With regards to the margin guidance as it relates to the full year, which implies that we're going to see a big step up in the fourth quarter, is it because we are going to annualize all the investments? Is there anything, aside from the leveraging of the investments that you've made in the past and maybe a continuation of investments, but not at the stepped-up rates that you've made previously…is there anything else that would be contributing to the strong margin of improvement, which it appears you are forecasting for the fiscal fourth quarter ES? Chris Reidy: I think, Mark, the way to think about that is the first three quarters we were suffering in terms of difficulty and compares because of the stepped-up level of investment that we made in the first three quarters of last year. That is lacking, so to a certain extent we will have an easier compare, which is kind-of just math. On the other hand, fourth quarter last year, as we said, sales growth was 28%, and with that came a stepped-up amount of selling expense. And so that makes it an easier compare as well. So, it's basically the momentum that we have in the first three quarters of this year. For example, we mentioned that we were down 50 basis points in the quarter, but if you backed-out the acquisitions, that would have been growth despite the fact that we have that grow-over issue. So as we look at that, we're very comfortable with the fourth quarter margin increase. We'll yield 20 basis points for the full year.

Mark, that sales expense is not a trivial number because ADP, in its own conservative way, we book the full sales expense at the time we write the order and report it, even though it may not be installed for a number of months to come. So, the good news is that sales are up 28%. But what goes along with that is a much higher sales expense than we had planned or built into the operating model in the '06 year. There were a few odds and ends, one-time expenses that were incurred in last year's fourth quarter. But mostly the thing that Chris alluded to. Mark Marcon - Robert W. Baird: OK, thanks for the information. Operator: Our next question will come from the line of Charlie Murphy with Morgan Stanley. Charlie Murphy - Morgan Stanley: Thanks. Could you tell us what the North American dealer revenues were in the quarter? Could you talk a little bit about what you think the sustainable growth rate of North American and international dealers are? And then can you remind us of what the profitability of each of those segments are now, versus last year? Elena Charles: This is Elena. For the North American, I don't have the exact dollar amounts of the revenue for that by quarter, but the growth was strong. We generally don't speak about the segments separately. You know, we just talk about dealer as a whole. So the growth was strong. Certainly we posted up the internal growth reaching actually 6% in the quarter this year, versus under 4% a year ago and that came really both from growth in North America and International. We talked about the add-on products. We've got their results, you heard about it at our March analysis conference, as well as an international force with the Carriage acquisition and gaining some traction there. And what was the other part of your question? Charlie Murphy - Morgan Stanley: I was trying to figure out what the pre-tax margin was for the North America dealer business versus the international business. Elena Charles: You know, again, we really don't separate margins.

We haven't figured that out. But obviously, North American is more profitable than the international. Elena Charles: Yeah, and the international, we can discuss that one. Give me a call afterward and we can go through some of it if we go back to where it is presented at the March conference talking about the patent dealers’ double digit. We did talk about some of the products there, and the North American over international. Charlie Murphy - Morgan Stanley: OK, thanks. Operator: Our next question will come from the line of Bryan Keane with Prudential. Bryan Keane – Prudential: Hi, good morning. I just want to go back. I know it was the key client-selling point, and it seemed like you guys were happy with the growth in clients. Can you talk about, did you hit your goals of adding new clients, and do you think ADP is taking any market share in the marketplace?

Well, clearly we're on an internal plan in terms of sales. Obviously there are pluses and minuses across the very broad spectrum of all the segments where we operate. So in terms of our plan and how we're executing against new clients retention, obviously we're pleased with the overall result. I think that as a release, we were particularly pleased with what's happening in the high end of the market in national accounts, and in GlobalView with what's happening there. But we're very pleased with the results in our major accounts, which did well also. We're clearly taking share in the PEO, but again, these are small, un-penetrated markets with a lot of room to grow. So I think we're doing fine across the board both in terms of share and against the plant. Bryan Keane – Prudential: Do you guys have a way to measure market-share gains, I guess in core payroll sales throughout the year, versus some of the traditional competitors like Paychex and Ceridian?

Sure. We do outside third-party analysis where we call large segments of the businesses to determine there methodology, plus we clearly determine the track wins and losses by competitors. Bryan Keane – Prudential: OK. And market-share gains seem to be up, down, or sideways compared to years past?

Again, that goes all over the map. If you have small competitors who are trying to go after a very large ADP base, wins and losses against a small, $10 million competitor in the Southeast is not a valid comparison. But clearly in terms of Paychex and the other major kind of competitors, I think we're doing fine. Bryan Keane – Prudential: OK. And then I just had a question on client retention. I know it fell just below record levels at 3Q06. Do you think we're at peak levels there for retention? And what are some of the things you're doing, I guess, to improve that?

Well, you shouldn't read anything into a particular quarter. Our service levels remain very strong, and our retention rates remain very strong. We would continue to plan on improving our retention two-tenths to a half a point every year, depending upon circumstances. One of the things you have to remember is, the bigger the bundle a client buys from ADP, the better the retention. And a larger client can stay with ADP much longer periods of time than smaller clients stay with ADP. So our growth in the multi-faceted multi-product line is extremely strong. And our growth up-market, you know, between GlobalView, IBPO Offering, national accounts, major accounts, is also very strong. So the mix of new business and the product breadth is also going to drive retention beyond just service level. Bryan Keane – Prudential: OK, great. Thanks for the color. Operator: Our next question will come from the line of Jim Kissane with Bear Stearns. Jim Kissane - Bear Stearns: Thanks. Gary, can you give us an update on the progress with your GlobalView implementations? Any challenges with the big implementations? Thanks.

No, Jim. We continue to be very pleased both with the overall results and the pace of implementation. We're right on top, not ahead and not behind, of our internal plan on revenue and implementation. For GlobalView, we expect to meet our GlobalView plan for the full year. The biggest challenge for us is getting the resources in place to deal with the volume. And we've done a pretty good job so far. It was a little bit of a slow start last year, but we've caught up, and I expect GlobalView view to continue to be a very grower for us as we go into '08 and beyond. Jim Kissane - Bear Stearns: OK, great. Is there any way you can reconcile your strong pays numbers with the relatively weak macro data that you've been putting out? I know it's not your firm that puts out the data, but... (laughter)

I don't think there's a huge disconnect but if you look at the growth that has come from the NER and the BLS, it's been very positive. It isn't buoyant, I guess, when you looked a few years back when it was 300,000 net new jobs, as opposed to the last couple of quarters and last number of months, being more like 100,000 to 150,000. So I would say it is more that you have to remember also that statistically our clients grow faster than the general population. People that outsource typically are more challenged by growth and other complexities and statistically, people that do the compilation of the NER would tell you that 80 piece client basis grows statistically faster than the population of business as a whole. Jim Kissane - Bear Stearns: OK, thanks. Great quarter. Operator: Our next question will come from the line of T.C. Robillard with Banc of America Securities. T.C. Robillard - Banc of America Securities: Thank you Gary, or even Chris. If we look at employer service margins and historically you’ve said on a steady state to business should improve margin each year 50 basis points just on leverage. If we were to take the fiscal fourth quarter cost levels down from the step up level but certainly higher than just maintenance level, what type of revenue growth do you need to maintain for that type of margin improvement going forward? Gary Butler: The way I think about that, if you’re growing organically in the double digit area, call it 9,10, 11, or 12%, achieving half a point margin improvement should be expected business as usual. You have to park acquisitions or any other kind of step up things that you might be doing on top of that. Obviously if your revenue growth is much lower, you don’t get the improvements in leveraging the infrastructure in computing things that we have. Plus, on top of that, we’re getting big savings from our data center consolidation, we’re getting big savings from our off-shoring of both R&D and some of the customer service functions and technical support that we have in India. We’re approaching, well over 2,000 people in India today. So there’s a lot of moving parts to that equation but in aggregate, if organic growth is good, margin improvement is much easier if it’s not. Chris Reidy: The only thing I’d add, T.C., is if we look at it, obviously if you’re growing the core payroll business, which is a higher margin business, that helps significantly, but as you grow beyond payroll, it does put some pressure on margins just from a math standpoint. In addition, as you look at our acquisitions, we talk about the acquisitions we made this year being basically non-dilutive next year. That doesn’t necessarily mean that non-dilutive to margins if you’re adding $150 million in revenue that’s break even, that’s going to put pressure on your margins. So, the combination of those two factors that are pricing the margin require you to do some cost cutting, and some things like we’re doing with the data center consolidation, and with the off-shoring and other initiatives that we have. Basically, we are very focused on margins, but it’s not a lay-up and there are some forces that put pressure on those margins and as a result, we have to do some cost improvement to get there. T.C. Robillard - Banc of America Securities: OK, great, and then just quickly on the share buyback. Can you tell us if you bought any shares back since the close of the acquisitions…so basically in the month of April? And also, are you still planning for returning the $690 million dividend from brokerage in terms of share buybacks within a 12 month period? Chris Reidy: Yeah, well you’ll actually see it when you do the math. We bought 20.1 million shares here to date and I think we showed somewhere that it was about 18.1 million through the end of the second quarter. So we did buy some shares early in the fourth quarter after the brokerage, and we were aggressive there. But again, there are not many days there before we go into a blackout where we can’t. We do fully intend to return that $690 million. We have 12 months as prescribed by the IRS, but we intend to be more aggressive than that in terms of returning that, market conditions obviously preventing. T.C. Robillard - Banc of America Securities: OK, thank you. Operator: Our next question will come from the line of Liz Grausam with Goldman Sachs. Liz Grausam - Goldman Sachs: Thanks, I still have T.C.’s question on the ES margin. We’re certainly exiting this year with very strong year over year margin improvements. And despite those kind of 50 basis points of annualized margin improvements you expect in ES, can we expect fiscal ’08 just due to easy comps, to be an above trend year for margin expansion in ES? Chris Reidy: I think, again, you have to go back to my comments regarding the acquisitions that we had this year which put pressure, 23% growth and beyond payroll, which pressures margins. I wouldn’t use the 250 basis points growth in the fourth quarter because that was against an easy fourth quarter compare. And thinking through that, we’ll have more to say obviously, as we give guidance at the next earnings call. But those are a couple factors that you have to take into consideration. Liz Grausam - Goldman Sachs: Great, and then just back onto the employment numbers. Is there anything outside, I know you said the propensity to outsource makes your clients generally experience a little bit faster growth, but there have been certain times where your pays per control have decoupled from the non-payroll growth particularly in the last downturn in ’01. And in ’02 you were more negative than the non-farm payroll growth, and now you’re more positive. In terms of industry exposure, are you particularly underweight or overweight certain parts of the economy? Certainly looking at construction currently that would lead to above trend numbers continuing for you on a year over year basis relative to non-farms? Gary Butler: Well, just in terms of thinking about the ADP base, the strongest portions of our base have the service economy and manufacturing, which are typically medium and small manufacturing as opposed to very large manufacturing. We have very little concentration in the building trade, just because that part of the industry requires a very tight coupling of labor costs with building costs so that they can do proper costing as they build out homes or whatever the case may be. So, we are not at all tied to what happens in the construction area, but are more tied to manufacturing and service economy. Liz Grausam - Goldman Sachs: OK, thank you. Operator: Our next question will come from the line of David Grossman with Thomas Weisel. David Grossman - Thomas Weisel Partners: Hi, my questions have been answered. Thank you. Operator: We have time for one or two more questions. Our next question will come from the line of Patrick Burton with Citigroup. Patrick Burton – Citigroup: Hi, good morning and congratulations on the quarter. My question relates to the funds held from clients, where do you stand right on the structure of the portfolio and duration and the outlook for yield as we move forward? Thanks. Chris Reidy: Well, the duration obviously doesn’t move all that quickly but you would see a slight decrease in duration for the quarter primarily because we had $690 million in cash come in on the last day of the quarter which brings it down and prior to that, it was just consistent with the 2.3 that we had. But obviously, it’s an in-inverted curve which doesn’t help us as much, but we still do weight the portfolio in order to hedge against interest rates fluctuations. We do still invest longer term. Patrick Burton – Citigroup: Without getting into ’08 comments, at what point would you expect the yield on the portfolio to flatten out if the curve remains inverted? Thanks. Chris Reidy: Let’s see if I can understand that. As we re-invest, as investments mature, we’re still seeing an investment at higher rates and we still have a ways to go on that. So, I don’t see any flattening right away. Gary Butler: Yeah our current investments are more in the 5% kind of range so when you look at a full year return of 4.5%, obviously, these other dollars mature and as we generate new cash, we’re investing it at 5% or thereabouts, so you should continue to see an improvement as we go into ’08 with the overall interest income. Patrick Burton – Citigroup: Thank you. That’s helpful. Operator: Our final question will come from the line of Tim Willi with A.G. Edwards. Tim Willi - A.G. Edwards: Thank you. I wanted to ask a question about, just on the topic again of the employment services margins, if you think about core versus beyond payroll, looking out multiple years going forward, as you look at those sort of beyond payroll businesses and the bigger ones, if you think about where those margins might eventually move to at a much more mature run rate, would those margins approach the (inaudible) between segments 50-60% and 60-63.5%, or is it truly a situation where those margins even at a mature level or lower or low enough where there would be an on-going sort of margin burn if you would even looking out 3, 4, or 5 years? Chris Reidy: A couple things on that, on the beyond payroll, certainly there is something there that are growing margins that are early in their stages so that’s why they have low margins. We have the PEO business, obviously that has a lot of that and when you take those out they tend to be lower margins, and they’re good margins, they’re growing margins, but they’re not as equal to the core. If you look on average, with the beyond payroll, they will approach the average kinds of margins that we have as a business, obviously our core payroll, bread and butter kind of businesses, is even higher margins than that. So, on average, we would expect those beyond payroll, excluding the PEO business, to get up to normal average kind of margins we experience. Gary Butler: Is there moving pieces here? Tim, nothing will ever have the margins of our core AutoPay. We pay 25 million people in the United States or thereabouts, and call it 20 million or so of them are paid on one engine and running in one data center ultimately, so that kind of scale margin would be difficult to replicate anywhere for ADP. That being said, as our beyond payroll businesses get scale, and scale can mean $100 million revenue or $200 million in revenue, the margin improvement is quite large there and very attractive but never at the level of the core AutoPay. Obviously as we expand globally, we have infrastructure costs that we build up, but as that business gets scale over the next couple years, we would expect significant margin improvement from there as well. And Chris’s point, the PEO, because 60+% of it is passed through, will never have the margins of the other businesses. Tim Willi - A.G. Edwards: Great, that’s very helpful. Thank you. Operator: I will now turn the conference back to Miss Charles. Elena Charles: Thank you and I’ll actually turn it to Gary for a couple closing remarks. Gary Butler: I appreciate all of your calls, very constructive, and very helpful for us, there’s a way to think about it. As I concluded earlier, I think we had a terrific quarter, we think we’re going to have an even stronger fourth quarter in terms of where we are particularly in margin improvement, and I remain very confident that the business is strategically in the right place for a continuation of the great results that we’ve had over the last 12 months. So, thank you for joining us today and I’ll look forward to talking with you again at the end of the fourth quarter when we give our ’08 forecast as well. Have a good day. Operator: This concludes today’s Automatic Data Processing Incorporated third quarter fiscal 2007 earnings conference call. Thank you for participating, you may now disconnect.