Elena Charles - Vice President of Investor Relations Gary Butler - President and CEO Chris Reidy - Chief Financial Officer

Tim Willi – Wells Fargo Ashwin Shirvaikar – Citigroup Jason Kupferberg – UBS Julio Quinteros – Goldman Sachs Rod Bourgeois – Sanford Bernstein James Kissane – Bank of America/Merrill Lynch Glenn Greene – Oppenheimer Kartik Mehta – North Coast Research Jim MacDonald - First Analysis David Grossman - Thomas Weisel Partners Analyst for Adam [Hirsch] – Morgan Stanley Gary [Cushman] – Credit Suisse Analyst for Tien-tsin Huang – JP Morgan Analyst for Gary Bisbee - Barclays Capital Sasa Zorovic – Janney Montgomery Scott Chris Mammone – Deutsche Bank

Welcome everyone to the ADP’s second quarter fiscal 2010 earnings webcast. (Operator Instructions) I would now like to turn the conference over to Elena Charles, Vice President of Investor Relations. Please go ahead.

Thank you. Good morning. I am here today with Gary Butler, ADP's President and CEO, and Chris Reidy, ADP's Chief Financial Officer. Thank you for joining us this morning for our second quarter fiscal 2010 earnings call and webcast. A slide presentation accompanies today's call and webcast and is available for you to print from the Investor Relations homepage of our website at www.ADP.com. Just to remind you, the quarterly history of revenue and pre-tax earnings for our reportable segments has been posted to the IR section of our website. These schedules have been updated to include the second quarter of fiscal 2010. During today's conference call we will make some forward-looking statements that refer to future events and, as such, involve some risks and these are discussed on page two of the slide presentation and in our periodic filings with the SEC. With that, I will now turn the call over to Gary for his opening remarks.

Thank you Elena. Good morning everyone and thank you for joining us today. I will begin today’s call with some opening remarks about our second quarter results. Then I will then turn the call over to Chris Reidy, our CFO, to take you through the detailed results, after which I will return to give you and updated forecast for fiscal 2010. Before we take your questions I will provide some concluding remarks. Let me begin, ADP’s results for the quarter were pretty much in line with our expectations. The cumulative impact from the difficult economic environment we have seen over the last 15 months continued negatively impact our results. Revenues for the second fiscal quarter of 2010 were flat to a year ago but included a benefit of nearly two percentage points from favorable foreign exchange rates as the dollar weakened during the quarter. However, I am pleased that pre-tax and net earnings both grew 1% and earnings per share from continuing operations grew 2% excluding the favorable tax item we had in the quarter. I am also encouraged by our key business metrics. Employer Services new business sales, client retention, client funds balances and number of pays were all somewhat lower compared with a year ago but the pace of the decline has certainly slowed and in some cases our key metrics in the quarter were actually better than we expected. We continue to see some indications of stabilization in terms of employment levels in the US and client retention while still under pressure, leveled off during the quarter. However, as you are aware, the key retention period is our third quarter and until we see those results we are holding our estimate for the full year of up to a full year one point decline. Moving onto sales, although new business sales declined 3% in the second quarter our sales force is seeing market receptivity from companies once again willing to invest again in their businesses. However, the selling environment continues to be somewhat mixed across the business units within Employer Services. Similar to what we told you three months ago, sales cycles for the largest companies, particularly in the US, remain challenged and as a result new business sales in our national accounts business units were behind our expectations and declined year-over-year. That being said, new business sales to mid-sized companies in our major accounts division were flat to a year ago but continued to be ahead of our expectations and sales in Europe, our largest international market, were down year-over-year but also ahead of our expectations. New business sales and small business services grew year-over-year which I am quite pleased with given the sales headcount reductions that were made in last year’s fourth quarter. Total store sales which include the PEO were also strong in the quarter with good growth year-over-year. As a result of this positive sales momentum in most of our markets we are now investing for future growth and have begun the acceleration of next year’s sales force hiring. I believe this will position ADP for stronger sales growth over the next 12-18 months. However, we expect this necessary investment will also be a drag on earnings through the same 12-18 month period. Let me emphasize, this is well worth the investment to increase revenues and in turn profitability over the longer term. Everything considered, we are also more confident in our ability to achieve the same dollar amount of new business sales as last year, or perhaps come in slightly higher than last year. Moving onto Dealer Services, the automotive marketplace is still quite challenged but on a positive note December was the second consecutive month of year-over-year increases in US car sales volume. We are not calling it a trend but it certainly feels a heck of a lot better than the declines over the last couple of years. The industry is certainly not out of the woods as dealership closings continue but Dealer Services’ win/loss rate in the marketplace continue to be strong and resulted in increased North American market share for ADP year-over-year. We continue to estimate that dealership closings will be completed over the next 12 months with about $50 million in total of annualized lost revenues in Dealer Services. Today, closed ADP sites represent about $10 million of the $50 million of annualized revenue. By the end of fiscal 2010 we expect additional dealership closing representing another $20 million in annualized lost revenue and these closings will occur throughout this fiscal year, we estimate the fiscal 2010 impact will be approximately $15 million of lost revenue. Additionally, the larger enterprise accounts have witnessed an increase in activity and are exploring options to expand their market share. We have also seen an increase in the volume of activity and layered applications from the large auto consolidators as they sharpen their operating strategy by improving process and technology. We believe these indicators are all positive signs regarding the future health of the automotive marketplace. With that I will turn it over to Chris to provide the details of our results.

Thanks Gary and good morning everyone. We are on slide four. Total revenues of $2.2 billion in the quarter were flat to a year ago and continue to be negatively impacted by the cumulative impact from the difficult economy that began toward the end of December 2008. As Gary mentioned, the quarter was positively impacted two percentage points by favorable foreign exchange rate comparisons. Pre-tax earnings were up 1% and net earnings and diluted earnings per share were both up 5%. As you read in our press release this morning the current quarter benefited from a favorable tax item. Excluding this tax item, net earnings grew 1% and diluted earnings per share increased 2%. Fiscal year-to-date we have spent about $152 million to purchase over 3.5 million ADP shares in our commitment to returning excess cash to our shareholders. We are on track to return at least $300-400 million of excess cash to our shareholders through share repurchases. Now let’s turn to slide five. Employer Services total revenues declined 2% in the quarter. This was still a tough comparison versus a year ago when ES grew revenue 6%. Revenue in our payroll and tax filing business in the United States declined 7% in the quarter from lower new business sales during fiscal 2009 compared with the year earlier, lower client fund balances from slower sales, slower wage growth, fewer employees on our clients’ payrolls and lower client retention. Our beyond payroll revenues in the US continue to grow with 3% growth in the quarter coming from our ASO, Corporate Benefits Solutions and 401K which benefited from an increase in assets from the lift in the DOW. ES’ pre-tax margin declined 10 basis points. The impact from lower revenues more than offset the benefits from last year’s fourth quarter restructuring and continued expense control. These lower revenues included a decline of high margin interest pass back revenues as a result of the declines in client fund average balances. Pays for control, our same store sales employment metric was down 5% year-over-year which is better than we anticipated. The pace of decline lessened in our client revenue retention metric which declined 0.1% compared to last year. Keep in mind the key retention period is the third fiscal quarter. Gary took you through the sales results a moment ago so let’s move onto the quarter’s results for PEO and turn to slide six. The PEO reported 9% revenue growth for the quarter. This growth was due to increased benefits pass through revenues that resulted from increases in both benefit rates and the number of work site employees. Pre-tax margin declined slightly as the benefits from last year’s restructuring and continued expense control were offset by higher past year revenues. Year-over-year for the second quarter, average work site employees paid increased 4% to nearly 200,000. Now let’s turn to slide seven. In Dealer Services revenues declined as anticipated 5% for the quarter, 8% organic, and continue to be negatively impacted by the cumulative effect of dealership closings and lower transactional revenues year-over-year. There was also a decline in our software license fee revenue which is recognized upon installation in our international business due to several new business installations in last year’s second quarter. Dealer’s pre-tax margin improved 60 basis points due to lower headcount from the expense actions taken in last year’s fourth fiscal quarter as well as the cost control measures we have put in place. Dealer Services competes very well in the markets we serve and continues to increase its share from the consolidated market. Now let’s turn to slide eight. This schedule shows the overall impact of the client fund’s portfolio extended investment strategy. At the top of this slide you see the breakdown of both the average balances and the average interest yields in orange for the short, extended and long portfolio components which corresponds to the pre-tax P&L impact on the bottom of the slide with the total representing the interest on funds held for client P&L revenue line items. Before I take you through the quarter’s results and strategy I would like to remind everyone that the decline in interest rates accelerated back in October 2008. As a result, the year-over-year decline in the P&L from lower rates will increase as the fiscal year progresses. With that in mind, I will take you through the quarterly results and then I will take you through the full-year forecast on the next slide. Near the top right of the slide you can see that the average client fund balances were down $0.7 billion compared with the year-ago period. The cumulative impact of fewer pays, client losses and slower sales compared with a year ago all contributed to the decline in average client fund balances and more than offset the positive impact of Canadian foreign exchange rates during the quarter. Staying in the orange section, in addition to the decline in average client fund balances, average yield on the client fund’s portfolio declined 40 basis points to 3.8% this quarter resulting in an overall decline of $20 million in interest on funds to clients on the P&L. The impact from lower new purchase rates was most pronounced in the client short portfolio where the average yield earned was 170 basis points lower than last year due to the decline in short-term interest rates. Looking at the blue section on the slide, average borrowings were down this quarter and the average interest rate paid on those borrowings dropped about 60 basis points. So a blended average borrowing rate of 0.2%. The result was a $5 million reduction in interest expense. When you take into consideration the entire extended strategy presented here the results are a $21 million pre-tax decrease or a decline of about 12%. Now let’s turn to slide nine where I will take you through the extended investment strategy forecast for fiscal 2010. The anticipated decline in average client fund balances is 4-5% resulting from pressures on the level of new business sales, continued pressures on wage growth as well as the cumulative impact of the decline in the number of employees on our clients’ payrolls and client losses. We are seeing lift in balances from [inaudible] tax rates. However, the level of bonus payments are still unclear and we won’t see the results until they have paid out over our third quarter which is the first calendar quarter. We are anticipating a yield on the client fund’s portfolio of about 3.7%, down 30-40 basis points from fiscal 2009 compared with our prior forecast of down approximately 30 basis points due to a decline in market interest rates across the yield curve. It is important to keep in mind about 20% of the extended and long investments are subject to reinvestment risk each year which is expected to contribute to a decline of about $75 million of client fund interest revenues which is in line with our previous forecast. We are anticipating that average corporate extended balances will decline about $200 million. The average yield on the corporate extended investments is expected to be down 10 basis points. We anticipate average borrowings will decline about $200 million and the average interest rate paid on those borrowings is expected to be down about 90 basis points with blended average borrowing rates of 0.2%. Taking into consideration the overall extended investment strategy including lower borrowing costs, we anticipate a $65-70 million decline in pre-tax earnings for fiscal 2010. Before I turn it back to Gary I want to point out the reserve fund update from this morning’s release, last week ADP received $14.8 million pre-tax or $0.02 per share which will be recorded in the third fiscal quarter. Including this distribution, ADP has received about 99% of its original investment in the reserve fund which leaves approximately $3 million of the original investment unrecovered. As a reminder, last year we recorded an $18 million loss on our investment in the reserve fund. Now I will turn it back to Gary to take you through the remainder of the forecast for fiscal 2010.

Thank you Chris. We are now on slide 10. We are still a little cautious about the remainder of fiscal 2010 but with more visibility on our key metrics and easing comparisons expected over the next two quarters we are slightly improving our fiscal 2010 outlook. For fiscal 2010 we now anticipate total ADP revenues will be flat to slightly down and we anticipate achieving the high end of our diluted EPS from continuing operations forecast to $2.34 to $2.39. This compares with $2.39 in fiscal 2009 and both years exclude favorable income tax items. The fiscal 2010 forecast also includes $14.8 million pre-tax or about $0.02 per share from the sixth distribution of the primary fund of the reserve fund that Chris mentioned earlier we received on January 29, 2010. As is our normal process, no further share buybacks are reflected in the forecast though it is clearly our intent to continue to return excess cash to our shareholders again depending upon market conditions. For our reportable segments we anticipate that ES, Employer Services revenues will decline about 1% which reflects a decline on pays for control of about 4% on average for the year and flat to down one percentage point in client revenue retention. We continue to anticipate that the year-over-year comparisons for pays for control will ease during the second half of fiscal 2009 when this very important metric declines significantly. We anticipate high single digit revenue growth in the PEO and we continue to expect a decline in Dealer Services revenues of roughly minus 3-6%. As you heard me say earlier, we now anticipate slightly higher ES and PEO worldwide new business sales growth compared with our previous forecast for sales dollars to be flat to fiscal 2009. And we continue to anticipate no improvement in our segment pre-tax margins. If you turn with me now to slide 11 I would like to leave you with some closing remarks before we open it up to your questions. While most economists believe that the US economy has bottomed we remain cautious, I believe appropriately so, about the near-term outlook. The remaining six months of 2010 will be challenging. The economy is recovering. It is a matter of timing and we are focused on the right things for the long-term including most importantly accelerating new business sales growth by investing now in our sales team and in the solutions our clients want and need to be successful in their businesses. We are continuing to incrementally invest in Client Services which is critical to our continued success and to maintaining our market leadership position. Our business mode remains solidly intact with highly recurring revenues, client life cycles of just under 10 years and very strong cash flows. I remain committed to returning excess cash to our shareholders including ongoing share repurchases again depending upon market conditions. You have heard me say previously and it is worth repeating now ADP is focused on the future and as a result is well positioned to leverage the inevitable recovery in the economy. Now I will turn it back to the operator and we would be delighted to take your questions.

(Operator Instructions) The first question comes from the line of Tim Willi – Wells Fargo. Tim Willi – Wells Fargo: You mentioned some of the metrics came across a bit better than you had expected. I can’t remember if you had elaborated and highlighted those specifically in your comments but if not could you just talk about the metrics that did seem to surprise you a bit more?

The couple that surprised us was pays was a little bit better than expected and that is reflected in us taking that down from our previous guidance. So it is down now to about a 4% decline over the year. We still have a lot of ground to cover in the second half where we would hope to see the year-over-year situation improve but based on what we have seen in the first half that was better than we expected. I think as Gary went into in his remarks, the sales were a little bit better particularly in certain parts of our business. He mentioned the small business area where we had headcount reductions last year and still grew in sales. So that was a little bit better and is reflected on us bringing up the guidance of flat to slightly up compared to our previous guidance. Tim Willi – Wells Fargo: A follow-up on that second point, in the small business and your sales success on a macro level there still seems to be a lot of crosswinds about the health of the small business market tied into the availability of credit from the regional and community banks. I would be curious of your thoughts as to what portion of better sales environment you have seen internally you would attribute to execution of your sales force and the things you have tweaked there. I would imagine that is part of it. Also, any sort of end market shifts you saw during the quarter in terms of small businesses feeling a bit more confident about where they are economically or credit availability if there is anything there you think also contributed to better results?

We obviously don’t have access to small business credit applications or credit availability. I will tell you though that our small business sales force feels very good right now. People are buying again both in terms of new start ups as well as existing businesses. I think it wouldn’t surprise me to see more buoyancy in the job reports on the low end of the market place for both the BLS and the ADP numbers which will come out tomorrow. Generally the environment on the small end has been both anecdotally as well as data wise much more positive for us over the last number of months. In fact, in terms of sales results they are the most favorable of all of the results we have. So again it feels pretty good. We are starting to see an abatement in terms of price concessions and out of businesses on the lost business side which also feels pretty good. In general I am pretty optimistic that we are at the bottom and starting to see the early stages of a recovery on the small end of the market.

The next question comes from the line of Ashwin Shirvaikar – Citigroup. Ashwin Shirvaikar – Citigroup: I wanted to get more details about your comments on investing in future growth. Could you try and maybe try and quantify what you intend to do in various different areas such as adding sales people, product investments, Europe and so on?

Beginning the last 18 months to 2 years in the traditional ADP model we would be striving to grow new business bookings by 8-11% each and every year in order to grow the business long-term. In order to do that we would normally be hiring 6-7% increases in headcount and then push for new products and productivity improvement to get from the 6-7% headcount to 8-10% sales growth. So in essence we think it is time to turn back to the traditional model so as we look six months out towards fiscal 2011 we are going to basically start hiring now that 6-7% headcount growth so we have people in the territory, people in telesales trained and up to speed and hopefully generating new sales straight out of the box and we move into fiscal 2011 as opposed to waiting to 60 days out because we have better results and plans and we sense an improvement in the economy so we are basically trying to improve our distribution by staffing now. Ashwin Shirvaikar – Citigroup: One question on the regulatory front, obviously if there is stimulus to create jobs that is a good thing but if it includes changes to payroll taxes that may not be necessarily great. Could you provide some thoughts about how you think about that?

Tax credits would normally be the way that people would see incentives. If you go back historically it is either R&D kind of credits or job tax credits. There are already existing job tax credits out there and from what I have read best case is you add 1-2 million jobs through these tax credits so you are talking about 1%. So if I lose a few tax credits on 1% growth in payroll that would be a good problem to have. So I am all for it. I would love to see them bring it on as fast as they can bring it.

The next question comes from the line of Jason Kupferberg – UBS. Jason Kupferberg – UBS: I wanted to start with a question on the core payroll business here. The revenue growth there I guess has been down about 7% year-over-year each of the past two quarters. How do you see that trending during the second half of this fiscal year and also on a longer-term basis once we are out of the recession?

It certainly becomes an easier compare in the second half of this year so we are hoping that 7% is the bottom and so the compare gets easier. We are not in a position to talk beyond this year in any specificity but the second half of this year clearly the compare gets better.

I think a way for you to think about that would be historically again take out the last two years, payroll and payroll tax combined have grown kind of mid single digits. That is driven by 2% payroll growth, driven by 5-6% wage growth and tax growth that comes in that. It is driven by 8-10% sales growth in terms of new business. Bookings, it was I guess in fiscal 2006 and 2007 we were growing that number in the mid single digits. It was even higher in some quarters. So it would certainly be our objective to get back to that and with that you need growth in pays, you need growth in balances both of which will happen in time and you need growth in new business sales which is what we are trying to ramp up more now. Then you need an abatement of losses particularly in the low end of the market where we have seen the pressure on payroll and tax sales. I think it is going to come and get back to those levels. It is just going to take a period of time for us to get there. Jason Kupferberg – UBS: Regarding the key selling season, I know it will continue to play out during the March quarter here but you have some period of time under your belt there already. Anything notable versus prior years you have seen either in terms of competitor behavior or excesses that maybe you are seeing this year that didn’t materialize as much in the past?

Are you talking the third quarter or year-to-date? Jason Kupferberg – UBS: Well I guess I am thinking sort of the December/January period.

First of all, we had a good year operationally which always feels good. That is even better than last year. We had minimal price increases this year so we had less pressure from those kinds of issues. It is really too hard to forecast because the losses really occur in January and early February and some businesses look better than last year and a couple of businesses don’t look quite as good. In the aggregate we think we are in pretty good shape in terms of our forecast. We hope that it is even better than what we forecast but we think it is appropriate to be conservative at this juncture until we get the real data.

We really won’t know particularly on retention. That really is a January and into February kind of thing and we are right in the middle of that now. So our best assumption is holding that retention number of down to up to 100 basis points at this point. Jason Kupferberg – UBS: It seems the payroll cards are becoming increasingly popular among employers. Can you talk a little bit about how ADP’s payroll card product is positioned in this market? To what extent are these cards an opportunity or a threat and how do the economics compare for ADP as the payroll processor when card based solutions are used by your customers rather than by direct deposit or paper check?

Pay cards are continuing to grow. I think to date I don’t know the number exactly but we have well under one million pay cards in total.

Over 800,000 active and another couple of hundred thousand at least loading.

So call it a million give or take. The economics are actually better on pay cards because unless somebody totally cashes out their payroll check the first time they get the pay card which generally isn’t the case for people that are active users of pay cards, we actually get the benefit of the float over the course of the time they spend the entire net payroll. Plus we get transaction fees after the initial 1-2 transactions. So we would be happy to see growth in pay cards and it is continuing to grow. It is just not a buoyant kind of growth. It is a steady growth going forward.

The next question comes from the line of Julio Quinteros – Goldman Sachs. Julio Quinteros – Goldman Sachs: Can we switch real quickly to the margin side of the equation and can you just walk us through if there is any way to sort of think about the basis point impact of the incremental investments you are making? What other levers would be left in I guess kind of a down type scenario to protect the margins from the current flat scenario we have?

I think obviously a number of things go into driving the margins and one of them is the impact of the actions we are talking about taking in terms of ramping up sales. As sales improve you have the commissions on the sales so clearly those are the two pressures we would expect to see for the next period of time. Which is a good pressure to have as Gary mentioned. A lot of the actions that you take have been taken already with the restructuring we took last year was an anticipation of the kind of pressure we would expect to see. When you think about retention down 100 basis points, we have given that metric before. That $50 million of revenue is 100 basis points and for every percentage of pays it is $20 million. So we are talking about down 4% for the year. So $50 million on the retention, $80 million on the pays, that is a lot of rich revenue that puts pressure on your bottom. So that is why we took the restructuring charges we took last year and took the reductions we did. We tried to do that in areas that didn’t warrant client facing, in the sales areas and in service we are continuing to invest. So as you think about the investments for the second half of this year it is the ramping of sales headcount. It is hopefully improvements in sales and the impact that has on the sales incentives as well as continued investments in service and implementation as you get ready for those new sales. So we continue to have very tight expense controls throughout. We have taken the actions and when you put all that together that is what we come up with no improvement in margins. You can see the margin performance to date has been okay. Not our normal 50 basis point up year-over-year but it is all those things we are trying to balance while still investing in the future and be ready for the growth when the economy does turn around.

The next question comes from the line of Rod Bourgeois – Sanford Bernstein. Rod Bourgeois – Sanford Bernstein: With pays for control better than planned or maybe less bad than planned at this point this should be a positive for your margin plan for fiscal 2010. So I am wondering if the better outlook on pays per control is giving you the room to add to your sales force and if that is the case can you quantify how much you are planning to add to your sales force and what that investment might look like?

In terms of the sales force you are talking 300-400 people is a good way to think about it kind of spread across the different market segments. We obviously are trying to push growth in the mid and high end as well. Not just adding feet on the street for small business because that is where the bigger productivity gains we have and we have longer client life cycles than we did at the high end of the market. Surely, pays for control is the highest margin we have that balances. So to the extent balance is improved and pays for control go down less, because we did budget for pays for control to shrink in the area of 5-6% so to the extent it is 4% that is certainly a positive benefit. It is certainly high margin. We would love to see…it is too early to tell because we don’t know about bonuses. We don’t know about exactly what the SUI impact of state unemployment rates but certainly with unemployment levels at the levels they are it is going to drive all the states to ratchet up state unemployment rates in order to keep people in unemployment both in higher numbers and for longer periods. All of those are good. At a personal level I hope they don’t raise taxes in Washington but I think that is a fat chance so it is probably going to happen. Over time that will certainly help as well.

I would say you are thinking about it right. The only nuance is I think as you start seeing the performance in the small business area and some positive signs of sales I would like to think we would add sales headcount growth regardless even if we didn’t have the cover of the pays going down because it is the right thing to do long-term. The fact the pays are going down the two of them do net out to have about the same impact on the bottom as we had planned. Rod Bourgeois – Sanford Bernstein: On pricing and discounting activity, this is an important time of the year to sort of look at that topic again. Are you seeing a better situation with respect to discounting this year than you did last year and if there are any sort of numbers you could put to that, it would be very helpful.

Most of my data is anecdotal as opposed to reported so I can’t really help you in quantifying it. Certainly from a sales force standpoint we are seeing both an abatement in the base of pricing in the base as well as in new sales. As I mentioned in my earlier comments particularly on the low end of the market where we have seen the most pricing pressure that is where our sales results actually at this point are most favorable in the PEO and SBS. So we are feeling pretty good. We are kind of through the cycle and back on the way up.

I would say the timing of this is it is too early to tell in January just yet but what we have seen doesn’t lead us to anything other than what we had expected. Nothing to the real positive and nothing to the real negative so it is coming in about where we had expected in our original planning. Rod Bourgeois – Sanford Bernstein: Is there anything important you are considering from a strategic standpoint either with respect to taking a harder look at the cost structure or to do something beyond what is normal to drive sales growth? Is there something we can look forward to hearing from you on at the next Analyst Day or something with respect to strategic decisions?

In terms of the cost side of that we have been pretty aggressive the last 12-15 months with both our span and level exercise where we took out $80-90 million worth of primarily middle management overhead and last year we also deferred merit increases for the year. So that is a pretty big number as well. So, I don’t see as we look at 2011 a lot of big structural kinds of cost reductions as we go into fiscal 2011. That being said, we are continuing to invest pretty heavily in our new product platform for Run and the SBS environment. We have it rolled out now to about 80% of the sales force. The early results from work force now are pretty darned good in the second quarter and we are expecting them to get even better. We are working on some new acquisitions that will expand our product portfolio including the accounts payable acquisition we just announced in the last 30 days. So all of those things I think are going to put us in good shape for sales next year. On top of that you have the sales force expansion that I talked about. We will take you through a pretty detailed outlook on our product platforms and how that is going to affect us in the future at the February Analyst meeting so we are looking forward to sharing those with you.

I would just add on the cost structure I think we have to look back at what has happened over the last year. As I mentioned before the impact of retention and pays as I quantified before of around $130 million if it hits those ranges, then when you think about the chart I showed on interest on client funds down $65-70 million this year and then if you think about the dealer business for example and what they are going through and the drag that has been on NOI is another 50-60 that is a lot of hurdles to overcome this year. That is why we took the actions we did last year with the restructuring to get us back to the kinds of margins and flattish kind of EPS that we are now guiding to. So those are big actions. I think before that we were doing a lot to take cost out of the cost structure including the off-shoring and the data center consolidation which is ongoing and continuing but we have been able to do a lot on the cost side just to get to the point where we are at now and we will continue to do that.

The next question comes from the line of James Kissane – Bank of America/Merrill Lynch. James Kissane – Bank of America/Merrill Lynch: Just to be clear, if it wasn’t for the investments here in the back half and I guess going into the first half of fiscal 2011 you would be raising your expectations for fiscal 2010 EPS right?

We kind of have raised them. James Kissane – Bank of America/Merrill Lynch: I mean to go above the $2.39.

Well we have been at the $2.34 to $2.39. Clearly with the pays coming down that helps us. The reserve fund obviously helps us as well but we do see the need and desire to invest. I don’t think we are any different than some of our clients that held back a little bit. We continued to invest in service and the product but we would like to ramp that even more to really prepare ourselves for future growth. We continue to expect to do that. James Kissane – Bank of America/Merrill Lynch: It just seems like everyone is trying to quantify it and you guys are sort of dodging it. It does seem like your margins would be up instead of flat.

I didn’t think we were dodging it. James Kissane – Bank of America/Merrill Lynch: Any update on global view and the demand picture, implementations and how they are going and maybe a target for break even?

Coincidentally I just returned from our meeting of the minds which is our March global clients as well as our global prospects. I couldn’t have been more pleased with the both the quality of the people there in terms of level of interest as well as the best selling environment for prospects is to have them talk to clients. In general our implementation and service results are pretty good. Our results in global view for the first six months were terrific on percentage uplift in terms of bookings. You have to remember that compares to the place practically shut down in terms of new sales for a period of time during the middle of fiscal 2009. So they are back to the kind of levels we were tracking towards before all of this started. I don’t think we are going to hit break even in 2011 but I do think we will do it in 2012. But we will make a lot of progress in 2011 as both the revenue grows and our need for continuing investments in infrastructure abate, the two of those together will drive us towards the break even as we get into 2012.

As we look at it right now at the very end of fiscal 2011 we start approaching that break even. Fiscal 2012 is where we would see that happening. James Kissane – Bank of America/Merrill Lynch: In terms of small business sales is it an end market improvement or is it more just market share gains on your part?

I think we are executing well. When we downsized the sales force we obviously kept the good guys. Tried not to keep the nonperformers. So the cadre is more senior and more prepared. So I think we are executing better. I think our product platform is terrific right now. This new run platform with real time payroll and all of the advantages it has and it demos terrific. Our guys are getting a lot of lift from that. All that being said I think the marketplace is starting to cook again and that wasn’t the case six months ago.

You will see at the February 18th meeting we will talk more about run and work force now. Those are two exciting products for us that are well positioned as the market returns. Both of those are areas that we have invested in the past and it looks like they are poised to really capture market growth going forward.

The next question comes from the line of Glenn Greene – Oppenheimer. Glenn Greene – Oppenheimer: On the 300-400 sales people are these all feet on the street or is part of this composition telesales force? I am really just trying to get a sense for the composition of the sales force and if there is any meaningful change.

No real meaningful change. We will uplift our telesales efforts again this year. A little higher percentage than our feet on the street. But in general call it we are going to raise telesales by 10-15% and we are going to grow feet on the street by 5-6% is a good way to think about it. Glenn Greene – Oppenheimer: In aggregate I think you said the headcount ramp was 6-7% as the goal. Is it reasonable to think about your internal…you want to get back to sort of high single digit sales growth in fiscal 2011? Or is that too aggressive at this point?

I think that is a good way to think about it. In terms of an objective that would be our long-term objective. Next year shouldn’t be any different than our basic business model. I think we are through it and we are starting to come up the other side of the valley. The quicker and the most important thing to getting back to growth again is accelerating our sales growth. So we are just trying to get out in front of it and I think you are going to see improving sales results in the second half so we are ramping up accordingly to get ready for next year. Glenn Greene – Oppenheimer: If I sort of read through it as we went through the quarter you got a little bit more comfortable about the pipeline activity and this is the time to sort of push the needle. The environment is getting stable and the sales traction seems like it is there?

Well to one of the earlier questions, our forecast on EPS has come up so obviously whether it is balances or pays for control or losses abating in the quarter. The financial outlook for the year is improving. So we don’t want to repeat the mistakes of 2002 and 2003 and not invest in our distribution and service capability and in fact we are picking it up in the last six months of the year to get us in a better spot in the long-term as opposed to worrying about having a great fourth quarter as opposed to investing for the five-year view.

The next question comes from the line of Kartik Mehta – North Coast Research. Kartik Mehta – North Coast Research: A little bit of a bigger picture question for you. Any thoughts on how you would manage the business going into next year if the recovery is above normal or below normal? Would you change anything in terms of either of the businesses?

Well, you know whether we are flat in terms of employment which is probably more the case next year as opposed to historically growing 2% in terms of pays for control or whether pay growth is flat to only up 4% rather than 5-7% in years past, those are all so much better than where we are today I can’t see we would run the railroad any differently. That coupled with any drag in terms of interest income as we go towards next year we are going to gauge some of our ability to maybe invest as much as we would like to. I don’t see us fundamentally changing the business model or the way we run the railroad around here. Kartik Mehta – North Coast Research: So you look at new sales you are anticipating this year, the desire to invest in the sales force because things are getting better, does that mean in fiscal next year it would be difficult to achieve that 50 basis point margin improvement in Employer Services that is the goal of the company?

I think it is really too early to make that call at this point. There certainly would be pressures that you wouldn’t normally see when you have got organic revenue growth of 8-9% which would not happen next year. So I think it will be more difficult to do that in the year ahead. Again we have to be careful here because I don’t want to make forecasts for fiscal 2011. It certainly will be better than it was this year but maybe not as good traditionally as what we have enjoyed.

As Gary said in his opening remarks as you are investing in the sales force and ramping you don’t get a lot of productivity out of them right away and that will extend it to next year and put pressure on the bottom line. Then as sales do ramp you have the pressure of the sales incentives which short-term pressure on your bottom line but long-term it is the best thing that can happen. I think you are thinking about it right. Kartik Mehta – North Coast Research: The float portfolio obviously the interest rates are bound to go up or at least it seems that way at some point. Any thoughts of changing how you would manage the portfolio or is this a strategy that you would continue regardless of what happens to rates going forward?

A couple of things. One is what you have actually seen us take down our guidance on the performance issue on rates because we tie into the yields curve and we give you those specifics. I am going to go through this in more depth at the February 18th meeting and even give you a glimpse of what we think about next year. The yield curve is staying pretty flat. It is not moving very much. Everything you hear from the Fed is that is going to be the case for awhile. I think that actually shows the benefit of the strategy we are on. There will be a drag next year no doubt about it based on the strategy and the reinvestment of 20% of the portfolio. I think we are sitting here today with 3+% or 3.7% kind of interest on client funds. Compared to what the rate of the market is right now and that is really pretty good. It really takes the volatility out. We think for the long-term investor that is a very good thing and that is what we hear from our longer term investors that they like the fact we took that volatility out. That is not to say you can’t tweak that strategy a little bit going forward when you see rates starting to go up but only in a small way. We like the ladder strategy and we like the result it is having. I don’t see us changing from that.

The next question comes from the line of Jim MacDonald - First Analysis. Jim MacDonald - First Analysis: Could you talk a little bit about what it would take to get back to raising prices in a normal fashion? What you would need to see?

Good question. I would like to see retention rates start to improve and less pressure on the price side because I think our service levels are in good shape. Clearly as you roll out new products your ability to increase prices also goes up. If we get back into an environment of where pays per control is growing as opposed to shrinking then I think you are back into the realm of being able to look at the 1-2% range as opposed to a 0.5-1% range. I don’t really ever see us pushing the envelope beyond like a 1.5% to 2% price increase in the aggregate. Obviously you increase newer clients more because in many cases they may have gotten a slight discount as part of an incentive to come with ADP. So I think it is going to be relatively tough next year and more return to the status quo as we talked about in 2012. Jim MacDonald - First Analysis: One more attempt to get something on the year-end, on the PEO side do you expect headcount to increase over the year-end period. Maybe that is a piece of data you already have.

Headcount for people we service or sales headcount? Jim MacDonald - First Analysis: Serviced employees.

It was definitely up in the first quarter over the fourth quarter. The second quarter was definitely up over the first quarter. I think it went up like over 200,000. Jim MacDonald - First Analysis: I am talking in January over December.

It is too early. We had a very strong sales result for the first half so instinctively I would say yes but I don’t have any digital data to tell you exactly what that is.

The next question comes from the line of David Grossman - Thomas Weisel Partners. David Grossman - Thomas Weisel Partners: While respecting your comment about not providing a forecast I just want to clarify a response to a previous question. Should we be thinking of the investments and perhaps the accelerating sales growth will outweigh the challenge you get from improving retention and pays for control perhaps until the second half of fiscal 2011?

I think that is a little premature. We never give that kind of guidance this early and we understand your need coming out of this downturn but we are right in the middle of our…we are beginning our operating plans process and are right in the middle of the [strat plan] process. We will give you some more on February 18th around the impact of interest because that is kind of mechanical to a certain extent. But you are going to have to be patient until later this year as we close the fourth quarter and give the guidance as we close the year.

The next question comes from the line of Analyst for Adam [Hirsch] – Morgan Stanley. Analyst for Adam [Hirsch] – Morgan Stanley: Just trying to think about your business versus the forecast over the next several quarters, considering some of your portfolio is long-time and some has shorter lead times, if we had to think about where we would see upside and downside to the current forecast based on what you have booked and are implementing and have in the pipeline, where do you see it possibly coming from?

I think the ones that are most unclear to us in terms of metric is the client retention which we talked about. It was up to 100 basis points. It is a pretty wide range but it is always going to be third quarter driven and there is nothing we see now that would take us off that. It looks like it is so far consistent with what we expected. I think client fund balances same kind of thing. We have seen through the mid-point this year our year-to-date better than we expected but bonuses are going to be…that will have a big impact on what the actual growth is. Right now bonuses might be higher but it may not be in cash. It might be in options or restricted stock or that kind of thing. So between the two of those that is where the uncertainty is right now and I guess you could see where there could be some upside but it is too early to tell right now.

I just want to get a little more granular with Employer Services and what is going into guidance. Can you provide color on what type of trajectory you are anticipating for each of your customer categories? So for example in the large markets you still expect challenges and by contrast in the small business market still optimistic and think that is going to continue to do well?

You should know we don’t guide by segment but your comments are pretty much consistent with what we had said. We are still seeing the challenges in the national account space. We have seen evidence of improvement in SBS, small business and majors and we have positive indications of the pipeline on the global view as Gary talked about in the meetings we had just last week internationally. So I think that is what you would expect to see in the second half of this year.

So fair to say a continuation of current trends going forward?

I think so. You would like to see national accounts starting to come back and you would hope our clients are beginning to look at investing but so far that hasn’t translated into increased sales yet and we would hope to see that going forward.

The next question comes from the line of Gary [Cushman] – Credit Suisse. Gary [Cushman] – Credit Suisse: I had a quick question going back to Gary’s comment about how spending at the high end was still cautious. Is that consistent with what you have seen in prior cycles as the economy continues to recover or are there any differences you would highlight that are maybe driving that dynamic?

I am not sure that you can compare this cycle to any of the cycles before. I do think in the last cycle national accounts turned around quicker. It certainly was the first one this time to be affected. If you think back to it must be two years ago now that is where we first started to see the pressure on sales show up. But this is a very different downturn and both on the finance side, the banking side as well as on the Main Street side. I think CFOs like myself at national account type businesses are waiting to see where things are going. They are beginning to talk about possible investments that you would make an investment to get savings going forward but it is still very cautious. Gary [Cushman] – Credit Suisse: Could you comment on your acquisition pipeline and how it compares versus last quarter and as a follow up to that, are you still actively looking at deals even in dealer services given the industry pressures?

Our acquisition pipeline is more healthy today than it was certainly a year ago. We have made more acquisitions, mostly small acquisitions, in the first six months. Some were not material and were not announced and we are working on a number of other ones including some in Dealer Services that make sense. Actually pricing in Dealer Services because of pricing in the industry is actually a little bit better particularly internationally. So I feel very much encouraged by the acquisition environment. Again I don’t want to give anybody the impression we are doing big deals but in terms of product extensions and geographic expansion we are continuing to see good acquisition flow. Gary [Cushman] – Credit Suisse: On the guidance and the segment pre-tax, are you saying that you expect pre-tax to be flat across each segment or just on a consolidated basis?

No. What we said is no improvement.

The next question comes from the line of Analyst for Tien-tsin Huang – JP Morgan. Analyst for Tien-tsin Huang – JP Morgan: I wanted to ask about the accounts payable acquisition you did. How should we be thinking about that whole space of tax finance, the accounting going forward? Is there an opportunity for this to become more strategic, doing something whether it is something with SAP like global view but for F&A or how should we be thinking about that going forward?

Basically what we are putting in place is what we internally call the CFO suite. It is basically those services that affect the financial decision maker. So they would include standalone tax, wage garnishment, sales tax and accounts payable. We were missing the accounts payable. If you go back two years ago we had an arrangement with a company called Harbor Payments which was acquired by another entity which changed their strategic direction and we had to basically retrench. We still think it is a big category potentially for us. So we bought a company that we have been in discussion with for about 6-9 months and we are in the process of expanding out the sales force and so we will go to market after the CFO controllers and tax people in larger organizations to try to sell those four products into the mix. So accounts payable is a good extension of what we already do. It involves money movement and enjoys check printing. It enjoys control and the kinds of things we do well from a transaction processing standpoint. Typically at the decision maker we already have a very strong relationship with. So we think it is a natural extension. It is not huge at this juncture but we do think longer term it has pretty good potential.

The experience we did have with Harper, as Gary mentioned, showed us that we can sell it and that our clients are interested in that suite. So the key going forward is to ramp that up and match it with taxpayer services and tax ware and address that part of the market. The good news is we did have the experience and we know that our clients are interested in that product and we saw that with [inaudible]. Analyst for Tien-tsin Huang – JP Morgan: How are you thinking about sizing the market opportunity for the CFO Suite?

I am not really prepared today to talk about that. If you put those four together it is obviously multiple hundreds of millions of dollars of opportunity for us over a planning period. Probably a good idea if we have others interested in it is maybe we make some general comments about it at the Analyst meeting in February to try and size it for you because with the accounts payable acquisition we are now in control of our own destiny so we are in a better position to speak with a clear direction there. So we will try to give you some clarity at the upcoming meeting.

The next question comes from the line of Analyst for Gary Bisbee - Barclays Capital. Analyst for Gary Bisbee - Barclays Capital: A quick question regarding somewhat of the improvement internationally. Can you address whether that is indicative of end market improvement or is that more sales force execution?

Global view is more of a global product. We are certainly seeing better results in Europe. Sales internationally are in Europe or I guess internationally were slightly down in the second quarter although they were very positive in the first quarter and year-to-date we are positive. We are continuing to add headcount there. We are continuing to expand our China acquisitions. So in general I think our position is improving there. Europe is obviously a little bit behind the economic issues that we have seen in the US but fortunately they are not as deep as what we saw in the US so we think we are not quite at the bottom there yet but we should come out of that in fiscal 2011. So in general it is positive and actually growing at a faster rate than the US business.

The next question comes from the line of Sasa Zorovic – Janney Montgomery Scott. Sasa Zorovic – Janney Montgomery Scott: Actually continuing that last question regarding international, when you are talking about 300-400 sales people to add what percentage of them would be international?

About 10%. Sasa Zorovic – Janney Montgomery Scott: Also, as kind of going back to some of the questions that we were kind of visiting earlier in this Q&A regarding the margins and growth, specifically when we look at kind of as you mentioned being at the bottom and kind of going with this recovery we would obviously like for this to start trickling down to the operating margin line. As we look at sort of the varying line items there what could you sort of tell us in terms of where you see the upside kind of starting to happen and how you think sort of that trade off in capturing this growth such as adding sales people versus letting it flow down given that we just kind of are coming down to this bottom really have a very strong job in protecting these margins?

I think as I said earlier the key drags that we have experienced are in pays for control, retention, the challenges we are seeing in the dealer business as well as in the interest on client funds. So those as they hit us hard this year you will hear on interest on client funds that will continue as well into next year. I will go through that on the February 18th Analyst meeting and you can think about retention and pays yourself. Even if pays just levels off at least you don’t have that drag. The whole key to this business is the scaling that we have in our core payroll business and getting the sales going again. If you are adding sales at that kind of rate that we are striving for and they are a rich component of core payroll that is where you get the margin improvement. So long-term we believe this business drives 50 basis points of margin improvement but in the short-term the challenges are growing the business, investing in the business, adding the headcount and getting that sales going and when you do that you have the sales incentives that are hitting you hard. So there is a period of challenge between getting back to the normal run rate of the 50 basis points.

The next question comes from the line of Chris Mammone – Deutsche Bank. Chris Mammone – Deutsche Bank: The first question is really following on a number of earlier questions on the new sales front. It sounds like the only area that you are going to be disappointed with is the national accounts. Any sense for the timing of when you think we could start to see that starting to turn around? Related to that too on the small business side, from a macro level are you at least willing to say at this point that you would expect small business to sort of lead the economy out of the recession?

That is typically what has happened historically and that is exactly what we are seeing today. I think that is a good sign of things to come. Actually if you look year-to-date we have positive sales growth without national accounts during the first six months. I expect over the next six months that trend will convert over to national accounts as well. National accounts is also somewhat challenged from a standpoint of you have previously booked business that due to the economic conditions was deferred so you have some netting if I could use that term of business from prior periods that is coming down which will again start up. Again, I think we are going to pass through that point in time sometime over the next six months and as we look forward into fiscal 2011 I think we are going to be back on positive growth in all segments. Chris Mammone – Deutsche Bank: On Dealer, I know you frequently mention that you are pretty successful in share gains in that business. I assume, but correct me if I am wrong, those share gains are primarily coming at the expense of your major competitor out there? I guess if you could sort of segment that out, how are you faring against other competitors in the market? Are you a net share gainer against some of those competitors or a net share loser?

If you add everybody in for every dealer we lose we are adding three. Clearly we are winning more in the mid and up market where our historical competitor would be and for those buyers that are focused more just on price we are losing slightly more than we are winning in the low end of the market.

Thank you. I would now like to turn the call back over to Gary for further remarks.

We appreciate everybody joining us together. I think you can tell by the tone of the conversation today we are certainly more positive than we were three or six months ago. I am particularly pleased to see the lessening on the retention or the 0.1% decline we saw in the quarter. I am particularly pleased with the progress we are making on the sales front. I am particularly pleased with the progress we are making on the new product services on our new platform that is helping us. I think that has been reflected in our somewhat improved forecast for the year. I think we are in good shape and we are basically trying to get ready for fiscal 2011 so we can get the ship back on the normal course as we put this recession behind us. Thank you for joining us today. We look forward to seeing all of you in February.

Thank you for participating in today’s conference call. This does conclude the call. You may now disconnect.