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

Rod Bourgeois - Sanford C. Bernstein & Company Adam Frisch - UBS David Grossman - Thomas Weisel Partners Liz Grausam - Goldman Sachs Tien-Tsin Huang - J.P. Morgan James Kissane - Bear Stearns Tim Willey - AG Edwards Glenn Greene - CIBC Gary Bisbee - Lehman Brothers Mark Marcon - R. W. Baird Charlie Murphy - Morgan Stanley T.C. Robillard - Banc of America Securities Dick Patrick - First Manhattan Greg Smith - Merrill Lynch

Good morning. My name is Carl and I will be your conference operator. At this time, I would like to welcome everyone to the Automatic Data Processing Incorporated Fiscal 2007 Earnings Call. I would 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. (Operator Instructions). Thank you. I will now turn the conference over to Ms. Elena Charles, Vice President of Investor Relations. Please go ahead.

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 and 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 on page 2 of the slide presentation and in our periodic filings with the SEC. With that introduction, I will turn the call over to Gary for his opening remarks.

Thank you, Elena. Good morning everyone. I kick off this morning with some opening comments about the quarter and the year. Then I'll turn the program over to Chris, who will take you through the detailed results about the quarter and the year. And then I'll return after that to talk about '08 guidance. First let me begin by saying I am very pleased with the excellent results both for the quarter and for the year. Our metric was strong across the board. Overall revenue was very solid with a 13% quarter and 14% for the year. Probably more importantly our organic revenue was also strong. Overall ES was up 11% organically for the quarter and year-to-date and probably even more important still is that our traditional payroll and tax filing businesses were up 10% for the quarter and 9% year-to-date. As a reminder this is our highest margin contribution part of our business. I was also very pleased with the organic growth and dealer services; that’s 7% for the fourth quarter. This is up from just 2% in the fourth quarter of '06. So quite an improvement on a year-to-year basis and we were up 6% organically for the full year and are very well positioned for '08. We also had good margin expansion across the board. We had an excellent quarter in margin improvement for both ES and dealer services and margin improvement in both businesses for the full year. Our sales results were also very strong for both Employer Services and Dealer Services. This is the third year of double-digit ES sales growth and in the fourth quarter ES sales were up 5% and over our internal plan. You have to remember as we have reminded you throughout the year that last fourth quarter we had a very unusual 28% growth quarter, so our comparison was very difficult, but this result was a 5% improvement over that very high level and a record sales number for a quarter, and a $6 million improvement over our third quarter was quite an achievement, and we are very pleased with these results. Retention was excellent in both Employer Services and Dealer Services with Employer Services reaching a record level for the year. Our cash balances are also under $2 billion, the lowest they have been in quite sometime. We did repurchase 22 million shares in the quarter for $1.1 billion, and we repurchased 40 million shares year-to-date for a total of about $2 million in the year. We continue to execute well on our growth strategies, and as you can see from the results, they are paying off. With that I will turn it over to Chris with more detail on the quarter and the year.

Thanks, Gary, and good morning, everyone. As Gary said earlier, our results for the quarter and for the year were terrific. Focusing on the full year to start, revenues reached 7.8 billion, growing 14%. Net total revenue growth benefited 1% from the acquisitions we made earlier in the year and another 1% from favorable foreign exchange rates. Organic growth rate was 12% up from 10% organic growth rate last year. ADP's pre-tax margin of 20.8% expanded 90 basis points over last year with margin improvement for both ES and Dealer, which I will get into in a moment. Excluding the net onetime gain from the first fiscal quarter diluted earnings per share from continuing operations grew 24% or $0.35 to $1.80 from $1.45. During the fiscal year, we acquired over 40 million ADP shares at a cost of over $1.9 billion. Now let's move onto slide 5. Before I take you through the ES and Dealer results for the year, let me spend a moment on the new reportable segments. You will note in the press release tables that we have reported the PEO, as a separate reportable segment. For the purposes of the fiscal 2007 discussion, we believe it makes sense to take you through the combined Employer Services including the PEL, the way it has been historically reported as this is the way our guidance was set and communicated to you for fiscal 2007. Now you will hear in a few moments when Gary speaks to the fiscal 2008 guidance that we are providing the ES forecast excluding the PEL, and reporting a separate PEL forecast as going forward this is how we will both present and discuss our results. A three-year history of the revenue and pre-tax earnings for the new reportable segments will be posted to the IR section of our website. Now let's talk about the year. Employer Services had a terrific year, over 12% revenue growth with strong 11% organic growth, and 9% growth in our traditional payroll and payroll tax filing business in the U.S. Our beyond payroll revenues grew 21% in the U.S. The PEL, comprehensive outsourcing services, time and attendance, HR administration services, and pre-employment services all posted strong results. ES's pre-tax margin expanded approximately 25 basis points from increasing leverage. New business sales growth for the year was again double-digit, and pays for control same-store sales metric was strong, up 2.3% for the year, and the number of pays in Europe was up this year for the first time in over three years. Client fund balances grew just over 8% for the year and client retention improved 10 basis points from last year to a new record level. Now moving onto Dealer Services, Dealer also had an excellent year. Revenue growth was a strong 14%. Internal revenue growth was 6% for the year, up from 4% last year, improving each quarter during the year. Dealer Services pre-tax margin expanded 160 basis points as we began to leverage the international business and gain cost synergies from our off-shoring and smart shoring initiatives. We also recorded restructuring charges related to the Kerridge acquisition during the second half of last year. New business sales were quite strong for the year, both in North America and internationally. Now, let's turn to slide 6. I will briefly review the fourth quarter. Revenues grew over 13% with 11% organic growth. The quarter revenue growth was lower than the full year growth and this is an indication of any slowdown in the business, it's primarily due to the timing of the Kerridge revenues compared with prior year. You'll recall Kerridge was acquired the prior year in December, the year-over-year revenue growth was higher in the first half of the year versus the second half. In addition, client balance growth was higher in the first half of the year due to the lowest sue rate that took effect January 1, 2007, which was previously discussed with you. As Gary said in his opening remarks, we're very pleased with payroll growth of 10% in the fourth quarter. We anticipated pre-tax margin expansion in the quarter as we are increasing leverage in both ES and Dealer Services. Comps were also somewhat easier as we anniversaried the level of expenses for higher sales and implementation hires and the higher HR BPO spend in ES as well as last year's restructuring charges in Dealer Services. We significantly stepped up the level of share repurchases in the fourth quarter fully utilizing the proceeds from the Broadridge dividend. As you saw in our press release this morning, we sold another non-strategic business that has been reported in discontinued operations reducing earnings per share from continuing operations by a penny in the quarter and $0.03 for the year. Travel clearing operations were part of the May 1st guidance as the sale was not probable at that time. So the bottom line is both a great fourth quarter and fiscal '07 with double-digit revenue growth, total on organic, solid sales results and good margin expansion in both ES and Dealer, and the return of significant levels of cash to shareholders through share repurchases and dividends. Now I will turn it back to Gary to review our '08 guidance.

Thank you, Chris. For those of you following along, I am now on the slide 7. Let me take you first through our fiscal 2008 guidance. We are forecasting another strong year for fiscal '08. Our revenues are anticipated to grow about 12% and as a reminder that includes no acquisitions. We are anticipating growth in client funds interest, 13% to 14%. This results from growth in the balances above were 8% and a 20 basis point increase in the yield on the client fund portfolio up to 4.7% from last year's 4.5. We are also forecasting earnings per share of 18% to 21%, up from the $1.80 in fiscal 2007 from continuing operations. Also to help you frame the impact of our share repurchases in fiscal 2007 on our fiscal 2008 results, we are also providing you today with the June 30, 2007 share count and the estimated additional share dilution for fiscal 2008 due to outstanding stock awards and new awards that will be issued in fiscal 2008. We did end the year of '07 with over 535 million shares outstanding, and we estimate we will issue approximately 10 million additional diluted shares for employee programs in the year ahead. As usual, there are no further share buybacks contemplated in the fiscal '08 guidance, but as you know, we also don't provide quarterly guidance, but I would like to point out that for the first half of the year and particularly the first quarter, comparisons for both pre-tax margins and earnings per share will be somewhat tougher than the second half of the year. This is due primarily to the five ES acquisition that we made last year starting in the late first quarter or early second quarter, and mostly completed by the third quarter of last year. Now let's go to slide 8 to review '08 guidance by business segment. As Chris said a few minutes ago, we are now providing guidance for our three business segments. Employer Services, excluding the PEO, we anticipate to grow about 11% in revenue and to have pre-tax margin expansion of 50 to 100 basis points. We are expecting another strong year in the PEO with strong revenue growth of 18 to 19%, and a margin of expansion of about 50 basis points We anticipate that Dealer will also have improved revenue growth of 8 to 9% for Dealer Services with continued improvement in internal growth rate to around 7 to 8%. We also anticipate pre-tax margin improvement in the Dealer business of over 100 basis points. Before I go to questions, let's now turn to slide 9 and I will provide some closing comments. Fiscal '07 was a good year for the new ADP. It was our third year of the return to double-digit revenue growth, pre-tax margin and earnings per share growth, and I am very pleased with not only the strength, but the breadth of our results. We are forecasting another solid year with double-digit revenue and earnings per share growth in fiscal 2008 with improving margins across the board, the key metrics are solid and the momentum in the businesses is strong. We are executing well against our strategies and initiatives that I have communicated to you over the past year. We have divested a number of slower growing businesses and have become a much more highly-focused new ADP. We are returning excess cash to our shareholders through significant share buybacks and a higher dividend both in terms of yield and payout ratio. And as we move into fiscal '08, I remain excited about ADP's future growth opportunities and believe we have an excellent foundation for sustained double-digit revenue growth with increasing profitability. So, with that I will conclude and turn it over to the operator to take your questions.

Thank you, sir. (Operator Instructions). Our first question will come from the line of Rod Bourgeois with Sanford C. Bernstein & Company. Rod Bourgeois - Sanford C. Bernstein & Company: Hey, Gary, thanks for the clarity in this report here. I wanted to inquire about the core payroll and tax business. You posted 10% core payroll revenue growth in the quarter, which was above the 9% rate that you have achieved for the full year. Can you talk about the outlook for the growth in the core payroll and tax business? And how sustainable that growth rate is and what the underlying drivers are for that business at this point in time?

Sure. As we think about '08, we're in the same order of magnitude in terms of growth rates for '08 that we would be for '07 in our core payroll and tax filing. I think the real reason for the growth is the obviously the sales performance and improved retention both of which keep clients or add new clients. We're also doing very, very well in majors and up markets in national accounts and the international business, and particularly with majors and employees the account the acquisition that we made, a lot of the new accounts that we're getting with employees are bringing in new payroll with them. On top of that most of our GlobalView client and most of our COS clients and a lot of our up-market business are new names to ADP as opposed to just selling additional business through our existing clients. So I think the base fundamentals across the board are terrific. Our new sales rates are strong, and our mix of new sales of new clients is also very strong. Rod Bourgeois - Sanford C. Bernstein & Company: It sounds like we shouldn't worry about any meaningful deceleration in that business and you do have tougher comparisons in all large numbers and other things to deal with, but you seem fairly confident in the outlook there.

I would be. Rod Bourgeois - Sanford C. Bernstein & Company: Okay and then just a clarification on the guidance. I'm assuming your fiscal '08 EPS guidance is impaired somewhat by the divesture that you announced in the press release where the divested business was earning about $0.03, $0.03 to $0.04 annually. Would your fiscal '08 EPS guidance have been higher, have you continued to include the divested business in the numbers?

You have to remember Rod, that this year's results would have been instead of $1.80 would have been $1.83 with that $0.03 in it for the travel clearing business. So the fact that we took it out of next year, we also took it out of '07. So it really doesn't impair it either way. Rod Bourgeois - Sanford C. Bernstein & Company: Right, it doesn't impair the growth rate, but the absolute dollar earnings EPS would have been higher in '08 had you kept that business?

Absolutely, right. Yes, that's true, 25, $30 million something like that. Rod Bourgeois - Sanford C. Bernstein & Company: Great, thank you for the clarification.

Our next question will come from the line of Adam Frisch with UBS. Adam Frisch - UBS: Thanks. Good morning, guys. Wanted to know what makes your guidance conservative or aggressive at this point, maybe if you can talk about some swing factors or if the guidance that you gave for '08 is relatively insulated and predictable at this point?

I think, Adam, we're comfortable with the guidance. Obviously at the beginning of the year we gave a broad range and that's because of all the unknowns, but based on what we see coming out of the fourth quarter with the jump-off that we have, we're comfortable giving that range of guidance. And so we're either overly optimistic or overly conservative. We think we're right in the range. Adam Frisch - UBS: Okay. Maybe as to a different way of getting a little bit more granular here, Chris, if there is a big economic slowdown as some people are expecting not everybody obviously, but some people, what would be impacted the most? Would it be sales or ancillaries or pricing or fund balances in your opinion or how would they all be affected?

Hi. This is Gary. Typically in economic slowdowns in the past, what becomes more difficult is selling new business because people stop expending capital or the time to convert the business, et cetera. So, the thing that would probably be the most visible would be a slight slowing of new sales bookings. Additionally, in severe downturns in the past we've seen some clients cancel ancillary reports or supplemental kinds of things that we were doing for them to try to get the bill down a little bit. And certainly if you had a major slowdown you would see some abatement in the pay growth that we've enjoyed at the 2% plus level over the last three years.

Bear in mind on the pays control as we've said before 1% change relates to about $15 million of revenue, and the other sensitivity obviously is the interest rates, and if there was a 25 basis points swing across all rates, it relate to about or equates to about $10 million of revenue. Adam Frisch - UBS: Okay. Thanks for that sensitivity stuff. Sales growth expectation for fiscal '08, sorry if I missed that in your commentary, but are you giving any kind of indication of what you're expecting for next year?

Yeah. If you recall in the release we indicated high single digits to low double-digits for ES in total. We did not provide guidance for the PEO separate from the pure ES business without the PEO nor have we traditionally provided guidance for Dealer, but we would expect strong results in Dealer in the year ahead as well. Adam Frisch - UBS: Okay.

Going forward, we would expect to provide that information on a total ES including the PEO, also focusing on worldwide, because the lines are blurring in terms of GlobalView and International, et cetera. It really is our one sales force, so you shouldn't expect us to provide that kind of information separately for PEO. It just doesn't make sense to do it that way.

Adam, the other thing you should think about is in '07 our total ES sales growth was 11%, around 10% of that in the US. So, I wouldn't expect a big departure from where we've been the last couple of years. I mean, everything is pretty much business as usual. We didn't add quite as much headcount in new sales and we're a little more focused on productivity in '08 than we are on pure headcount. And you also have to remember that particularly in the mid to the up market sides of our business, our revenue for the year ahead is more about how big the backlog is as we enter the year than it is what we sell because as we sell new accounts, particularly in national accounts or in international, it takes us nine months to a year to get the business installed and up and running. So, you wouldn't see a material impact in '08 even if you had a slight lessening on sales growth. Adam Frisch - UBS: Okay. Great explanations there. One final question here. Given that you just pared down the number of businesses in the ADP family down to two, I don't want to be the guy, who starts ramming when do you add a third leg. But are we still to assume that the distribution of cash will be in the form of buybacks and dividends going forward at least for the foreseeable future or are you guys thinking about adding to the portfolio of companies at this point?

Adam, we've been very clear for the last nine months or so at least that we've no interest in third or fourth legs, and that we are highly focused on close to the core tuck-in kind of acquisitions like the five we did this past year. And I don't expect any departure from that strategy in the year ahead, and we will continue obviously depending upon market conditions to return excess cash to the shareholders through repurchases and dividends. Adam Frisch - UBS: Okay, great perfect answer. Thanks for that.

Thanks.

Our next question will come from the line of David Grossman with Thomas Weisel Partners. David Grossman - Thomas Weisel Partners: Good morning. Thank you. Hi Gary or Chris, could you perhaps talk a little bit about your margin guidance and perhaps help us understand how much of that is offsetting the higher expense levels that were talked about pre-spin off at Broadridge and how much of that is the typical operating leverage that you expect to get out of the business just from the growth year-over-year?

In terms of what we did in terms of the Broadridge spin off, we took out about $15 to $20 million worth of expense in the second half of last year as we moved people over to Broadridge and didn't replace them and eliminated some positions. We further expect to take another $15 to $20 million out of the run rate over the course of '08 as we consolidate the corporate layer with the Employer Services layer. Obviously with only two businesses and the vast majority of it being Employer Services, we don't need a corporate structure and an Employer Services structure. So we're in the process of merging those two businesses and as we go over the course of the year, we would expect to in run rate pick up another $15 to $20 million worth of savings. The other margin improvement would be in pure scale and infrastructure improvement that we get from the data center, off shoring and just the incremental leverage that we get by adding another payroll client on a relatively large infrastructure that we already have.

I would add, David that last year we really had the year-over-year compare issues related to the investments that we had made. For the first three quarters of the year we were suffering those tough compares. As you saw in the fourth quarter, we anniversaried that, and it was an easier compare. Going forward, the way we should think about margins is this, the margin guidance we gave is more of what we traditionally said we should be able to generate. So it's more apples-to-apples. The one difference is what Gary had said in his remarks has to do with the fact that we had the acquisitions towards the end of the first quarter last year and into the second quarter. So that first quarter will be a tough compare from acquisition, but then as you go through further the year, for example, the 50 to 100 basis points in a year as is more of what we would traditionally expect to see. So we're not suffering those year-over-year comparisons other than acquisitions. David Grossman - Thomas Weisel Partners: Okay. So despite the incremental improvement from some of the Broadridge related expenses you still think 50 to 100 in ES, it is a reasonable kind of number to think about going forward?

Yes, it is. And there are a lot of things, that obviously go into the margin improvement. As we grow beyond payroll 20% and as we invest in things like GlobalView, which are early in their stages life cycle that puts pressure on margins, too. So you've got that balance to contend with as well. David Grossman - Thomas Weisel Partners: Okay. And just I know if I heard you right, I think you mentioned that the Broadridge dividend had been fully utilized in the June quarter by the end of the June quarter, I guess. Can you help us understand at least again going forward now that it has been fully utilized should we be thinking about the share repurchases along the same orders of magnitude that ADP has done historically or given your cash flows are you feeling more comfortable of executing perhaps at a higher level than you had historically?

Yeah. There is no question the fourth quarter was higher than our historical announcements. We were going through the Broadridge dividend and wanted to repurchase on an aggressive basis. We would expect to be higher than our historical average, but obviously lower than the fourth quarter. Keep in mind that 1.9 billion of cash we still have excess cash on the balance sheet, and we would expect to spend that down as well as spending some of the cash flow generated in the current year. So, we still have fairly healthy amounts of return to shareholders in '08. David Grossman - Thomas Weisel Partners: And could you just update us what's your thoughts on the dividend and the payout ratio and kind of where you are now versus perhaps where you would like to be given that excess cash balance?

Well, we don't forecast dividends. Obviously that's the Board of Directors decision. I think it's made in November every year for the following calendar year. But I would certainly expect for us to have a healthy increase in the year ahead, whether it's the order of magnitude or maybe even higher or lower, I don't know, of what we've been. I wouldn't expect a big departure from what you've seen over the past couple of years. David Grossman - Thomas Weisel Partners: Okay. Very, good. Thank you very much.

Our next question will come from the line of Liz Grausam with Goldman Sachs. Liz Grausam - Goldman Sachs: Thank you. Just to understand what's being baked into your Employer Services outlook for 2008; can you just share with us what your expectations would be in that guidance for your same-store sales, your pays per control metric as well as retention goals for the year?

Yeah, pays per control has traditionally been around 2% for the last three years or so. And so, we were at 2.3% this year, but we expected to be around 2% next year as well. Client retention, we're expecting to see some mild improvement in client retention in '08. Liz Grausam - Goldman Sachs: Okay. And your pay per control has decelerated a little bit from 3Q into 4Q. Are you seeing anything kind of broad based across your client base one direction or the other in terms of what their hiring trends have been across the year?

No, we're not, and you can't it's hard to look at it quarter-to-quarter. Now, if you look at the trends for the past year, we were as low as 1.7, and as high as 3%. You have got to really look at it on the full year basis, and we aren't seeing anything that would lead us just believe that's decelerating. Liz Grausam - Goldman Sachs: Great. And then on Dealer Services, you are looking for slight acceleration in the internal growth in that business. Can you share with us really where that's originating from it's your US or international businesses, and update a little bit on the strategy, certainly internationally?

It's really all of the above. We continue to execute well in North America. We're getting market share gain in terms of adding new clients. We're having excellent success with our new front office system easy results, but we're selling services that optimize web searches and leads follow-up. And thirdly, again just terrific growth internationally and we have sold two large situations in China where we've got an exclusive with both BMW and Mercedes Benz for all their company-owned stores in China. So, we're very pleased across the board with Dealer's results, and I think we'll continue to see acceleration in '08. Liz Grausam - Goldman Sachs: Great. And just lastly, you've done an excellent job in sort of calling through your business and selling non-core assets. Is there anything left in your other category that you see as non-strategic and potentially could sell over the course of the next year or so?

Nothing of substance. Liz Grausam - Goldman Sachs: Great. Thank you.

(Operator Instructions). Our next question will come from the line of Tien-Tsin Huang with J.P. Morgan. Tien-Tsin Huang - J.P. Morgan: Thanks good morning. And first by the margin guidance for Employer Services we were looking for about 50 basis points of expansion. Can you talk about the factors that were drive you to the high-end of the range versus the low-end?

It's a number of things Tien-Tsin. Obviously the core growth in payroll is much higher margin then our new initiatives, so that certainly helps the higher retention certainly helps because keeping clients at existing margins is the lot better than having to pay sales costs to replace them. We can see improvement from the data center operations as we've consolidated this year, which will help across the board, and we'll continue to see improvement from our near shoring and off-shoring efforts to lower costs labor arbitrages, particularly in India as well as we now have over 1,000 people in our El Paso data center in terms of what's there. And in the core payroll business, we don't have the drag of the lower margin for the PEO which will certainly help the intrinsic payroll growth without it. Tien-Tsin Huang - J.P. Morgan: Right.

The last point you really have to keep in mind this is the first time we're stripping out the PEO which has lower margins, so looking at them separately makes more sense, and that will actually help ES margin growth a little bit. Tien-Tsin Huang - J.P. Morgan: How is the HR or the BPO portfolio tracking in terms of margin performance?

Well, that's a multi-faceted question. The PEO which is part of the HR BPO you can see from the results is doing quite well and will continue to improve. The ASO efforts that we have in the mid-market are still nascent from a revenue standpoint, so we're really losing money as we invest in sales and implementation resource. COS which is the up market HR BPO for national accounts should exit '08 at a breakeven kind of environment as compared to losing around $10 million to $15 million last year, and Global View will be in a loss position again in '08, but substantially improved from where they were in '07. But the good news is there is the backlogs are quite large and we're ramping up the infrastructure to handle the business. Tien-Tsin Huang - J.P. Morgan: Okay. Great. Can I ask a couple quick housekeeping questions, Chris? In discontinued operations I see the penny contribution from travel clearing in the fourth quarter, but what is the penny loss from your other in discontinued operations?

You got a little bit of Sandy in there, right, the Sandy business which we divested, and then there was some cash repay repatriation. We had some tax related to that kind of related to the divesture that is we had, so a bunch of little things in there. Tien-Tsin Huang - J.P. Morgan: I think this should continue and then lastly on the PEO side, don't you get the mix roughly of workers comp and healthcare and the service fees, this is the rough mix would will be helpful?

The healthcare is, I believe the number is somewhere close to 50% plus. The workers comp is around 20 to 25%, and the fees are, call it, roughly a third thereabouts. Tien-Tsin Huang - J.P. Morgan: Terrific. Thank you. Thanks for the guidance.

Thank you.

Our next question will come from the line of Jim cast with Bear Stearns. James Kissane - Bear Stearns: Thanks. Gary or Chris, can you talk about the logic behind separating as a different segment the PEO business?

Yeah. Well, there are a couple of things there. We look at the business that way, and that's a big driver when the SEC looks at reportable segments. We see it as a separate business. We co-employ which is a little bit different. And as we spun the brokerage business which was a separate segment, we have a different size business, and the PEO is a significant size of the business as well. So, as a result of all of those things and mostly driven by the way that that's the way we look at the business, we decide to do break it out. Now, we also think that it gives good visibility in terms of that business because it is a different type of business from a stand point of the pass-throughs, et cetera. So, we thought it was a good idea to give that kind of visibility. James Kissane - Bear Stearns: Great, thanks. And, Gary, when would you expect Global View to be breakeven? Is that an '09 situation?

Yeah. It will be somewhere around '09. Jim, the good news is we continue to see the kind of sales growth that we're seeing that could drag out a little bit. But the margins that you get from the recurring standpoint are very comparable to what we see in the rest of the international business. And I kind of look at sales expense as kind of fungible across the enterprise, and it is not something I necessarily put in one business or the fact that we're charging a lot of sales expense there because our growth rates are terrific is a class problem for me, and hopefully we continue to have more of the same. James Kissane - Bear Stearns: So, you think Global View is ultimately 20% margin business?

Absolutely. James Kissane - Bear Stearns: Okay. And one last question, just the outlook for investment spending for Employer Services business because it was stepped up over the last three years, do you take your foot off the accelerator for the next couple of years?

A couple things are happening there, Jim. One is we're not adding the head count growth that we've added for the last couple of years. We're still adding head count particularly in our growth initiatives, but we're more focused on improving productivity at the salesperson level rather than adding the next salesperson for this year, and really kind of letting our additions that we made over the last couple of years kind of mature and move up in terms of the productivity. We've also spent significant dollars, whether it is the HRBPO or Global View or some of our insurance initiatives, et cetera, to get these initiatives kick started, and now we're kind of building infrastructure to support the growth. So, I think it will be moderate, and you won't have quite the step level expense that we've seen over the last two years. James Kissane - Bear Stearns: Okay. Thanks. Great job.

Thanks.

Our next question comes from the line of Tim Willey with AG Edwards. Tim Willey - AG Edwards: Thank you, and good morning. Two questions. First, you mentioned that I think pays per control in Europe had been positive now for the first time in three years. I was wondering if you could just give some kind of color around sort of what has happened with the margins in that operation during that three-year decline in terms of the magnitude of margin pressure that may have occurred there. And any thoughts you might have around that over the next 12 to 24 months, if you continue to see positive pay per control, what kind of snapback could we see with those margins in Europe.

That the couple things you need to understand, one is you have to take Global View out of the equation. Number two, is over the last couple of years our margins in, say, Europe, for example, have actually been improving, but number three, is we don't have the margins internationally that we have in the US and Canada or Canada is technically international, but in North America, because we don't do money movement in most of that operation. And so, we don't get that lift from the interest income part of it. We are actually in pilot in the UK now with a money movement set of initiatives which we think will help a lot in that view, but I think you will continue again. Have you to take Global View off the table, but core payroll activity in Europe will continue to grow and the margins there will continue to improve in the year ahead. Tim Willey - AG Edwards: And then on the expense side, just curious if you talk about productivity, etcetera, and I apologize if you address this before, but as you think about off shoring, etcetera, is there any way to characterize where you think you add in terms of you just of looking at the entire operation at ADP, whether that be ES or dealer and sort of having a look at everything for productivity gains or cost saved if you feel like sort of halfway through looking at that, just in the beginning stages of looking at that, just trying to gauge where you sit in that process?

I would say Tim that we made good progress so far. We have over 2,000 people in India. We have over 1,000 people down in El Paso. We just opened the operations in Augusta. And I would expect that to get up to 1,000. So, we have got good traction. But I think there is more opportunity as we look out, real business case for that makes sense as you exit other facilities, just moving the people doesn't help if you keep the space. And we made some good progress on that front, and we'll continue to do so going forward. So, I don't know if you characterize it halfway there, but good traction so far. And we continue to look for opportunities to do that when the business case makes sense.

We will also get a further improvement in margins in '08, once we have, I mean in '09 once we have completely finished the data center consolidation into the two locations, so we'll pick up another $25 million, $30 million in savings kind of across the board in '09 that you don't see in '08. Tim Willey - AG Edwards: Great. Thank you.

Our next question comes from Glenn Greene with CIBC. Glenn Greene - CIBC: Thank you. Good morning. A couple questions. I'm wondering if you just sort of articulate your expectations for the ES sales force growth, certainly in the context of your sales outlook and your comments related to increased productivity, so how does the sales force expansion sort of marry to that, and it would be helpful to sort of understand it across the various segments nationals, majors, international?

Well, as I mentioned earlier in the call, we forecasted for next year high single-digits to low double-digits for ES wide including the PEO. And as we said in '07 the US sales were up 10%, and ES in total was up 11% obviously reflecting the higher international growth in terms of what we have. In terms of next year, we instead of adding call at 8 to 10% headcount; we're adding more like 5 to 7% headcount and trying to get the other 3 to 4% growth in productivity measures kind of across the enterprise. So, that's same kind of productivity improvement would be in place for nationals as well as for small business. So, we don't really discuss sales quarters of growth rates, et cetera, by segment, but I think as we think about '08, it ought to improve generally across the board. Glenn Greene - CIBC: That's helpful. And then just drilling down a little bit on GlobalView, I was wondering, if you can just give us a little bit more color from a high level in terms of the sales activity, conversion activity you're seeing, and just sort of frame how big GlobalView is or relative to the overall ES business at this point?

Well, GlobalView in terms of revenue in '07 is relatively small number, call it $20 million give or take. But we've sold over the last year to 18 months multiples of that number in terms of new bookings, as an example although we didn't book all the sales. I mean, we sold $15 million to $20 million a year account in the month of June with over 100,000 employees globally. I am not at liberty to discuss who that was, but it was the largest GlobalView sale that we made, and we continue to book the kind of names like IKEA and Microsoft and American Express that we've talked to you in the past. And we had a number of those kind of household name bookings in the fourth quarter and including the month of June. So, I expect this to see quite strong growth both in '09 and beyond. Glenn Greene - CIBC: That's helpful. Thank you very much.

Our next question will come from Gary Bisbee with Lehman Brothers. Gary Bisbee - Lehman Brothers: Hi, guys, and my congratulations on a good quarter and a great year. I guess, the first question, I understand your commentary, I guess around the comparisons maybe being somewhat more difficult in the first part of the year. But I'm not sure, if that really makes sense. I mean, in the fourth quarter you had terrific pre-tax margin expansion, and obviously the acquisition comparison was similar, i.e. you had the costs this year, but didn't have them in the year ago period. So, why would you go from extremely strong margin gains this quarter to somewhat less robust over the next quarter or two?

Yeah. There are a lot of things going on in that, Gary, and so the fourth quarter obviously the 280 basis points improvement leads you down that path. We had been talking about those comparisons, in the first, second and third quarter of last year, margins were actually down, and we were saying it's because of the compares the 280 that we talked about on the last call. We mentioned the fact, that there were a number of things going on there. They have the drain of the acquisitions clearly. You also had some easier comparison in terms of different one-time kind of investments that we made in the fourth quarter of last year. Bear in mind, you also had 28% sales growth in the fourth quarter of last year, and the corresponding sales commission that go with it. So, the comparison that gets you up to 280, some of those things strip away. And then what you're left with is the normal growth. And we're saying is that also you're left with the acquisition dilution in the first quarter because, because we did not have that in the first quarter of '07, because the acquisitions hadn't been made yet. So, a lot of moving parts to understand, but like we said, we expected the fourth quarter to be as robust as it was, and very much related to certain anomalies that we saw coming, and going forward we would expect to see the more normal margin growth just diluted a little bit by that first quarter acquisition issue. Gary Bisbee - Lehman Brothers: Okay. So, is it safe to assume that it is going to be relatively flat in terms of the margin expansion you're talking about throughout the year and maybe a little stronger in the second half?

That's always saying. When we're saying 50 to 100 for the year, we just don't want you to think that's coming out of the box in the first quarter, so relatively flat is probably a safeguard. Gary Bisbee - Lehman Brothers: Okay, great. Can you give us a sense as to what you're expecting in terms of stock-based comp expense for '08? I think you have been using a lot more restricted stock and maybe less options, but aggregating those two together, is that number likely to be up or is it likely to actually be down due to the spin-off of the brokerage business and what absolute dollar numbers should we think about?

We usually look at that as a cents per share kind of thing. Stock comp expense is about $0.16 or so in '07. That was down a bit as a result of the brokerage spin-off from '06, but we would expect that to pick up slightly into '08 given a penny or so of the increases for normal growth and as well as the lower share count, so we would expect to see that go up slightly, not materially. Gary Bisbee - Lehman Brothers: Okay. And then you've mentioned a couple of times the slower sales headcount and expectations for productivity to increase. Is that productive gain coming largely from just you added a lot of people in the seats and they're getting more seasoned or are there some other strategies you can share with us and then secondly like to just gauge your confidence in how high your confidence is in your ability to produce these sales productivity gains? Thanks a lot.

Well, we strive to improve productivity every year. We did add a good bit of headcount over the last couple years and productivity just through maturity, so a second year person sales 30, 40% more than a first-year person, so as the sales force ages so to speak in terms of tenure, some of that comes through lift. On top of that we have expanded our telesales operations considerably. We now have over 100 people working on telesales activities literally up from virtually nothing a couple years ago, so they drive leads and add-on business to the sales force which will certainly help that. And on top of that all the new products that we've added in the last year with the ASO, employees, our tax wear business that we added and virtual edge will also give our sales force more product to sell, so it is more tenure, more products, and hopefully better execution on lead generation and follow-up. Gary Bisbee - Lehman Brothers: Okay. Thank you for the color.

Thanks.

Our next question comes from the line of Mark Marcon with R. W. Baird. Mark Marcon - R. W. Baird: Good morning. And I would like to add my congratulations for the performance this year on all fronts.

Thanks. Mark Marcon - R. W. Baird: With regards to the margin expansion for Employer Services, is part of the reason, I certainly heard everything you said thus far. But I am wondering is part of the reason also for the margin expansion in the second half that some of your initiatives in terms of near shoring, offshoring, will come closer to fruition in the back half of the year and that will also help productivity?

Absolutely. As I said, there is a number of factors that go into that. And so, what we're doing on smart shoring, offshoring as well as the data center consolidation that Gary mentioned all go into the mix, and that helps. Mark Marcon - R. W. Baird: Great. That certainly makes a lot of sense. And then, the other question I had is on the PEO services I appreciate you splitting it up. It is very interesting. One thing that can't help but notice is the incremental margins that we saw this quarter on the PEO side. You had a 26% increase in revenue and 86% increase in pre-tax profit with the margins improving by 291 bps to 9%. How should we think about the incremental margins in that business from a longer-term perspective? Where could those margins go ultimately? If we're going to look out five to ten years, how should we think about that business?

There are a couple things you should think about here, Mark. One is in the fourth quarter of last year when we had the 28% sales growth, the PEO absolutely blew it through the roof, and they actually had a very, very large charge for because we pre-booked sales expense for the sales expense. And actually in the fourth quarter this year our sales were actually in the PEO a little lower than they were in last year's record. So, the margin improvement is driven both through scale but also because of that very unusual quarter comparison that they had around sales expense. The traditional part of the PEO will have the same kind of margins that we have in the rest of the business, so the recurring services part of it is the way you should think about it. The workers comp piece will have decent margins but not of the kind of margins we see in our normal kind of service bureau operation that we get in terms of payroll, and the medical part is pass-through. So, you just kind of have to do the math. That half the revenue has no margin, and a third of the revenue has ADP kind of traditional margins, and then the workers comp part has a lower margin. So, you just have to kind of do the math and put whatever growth expectations you want to put on the business. Mark Marcon - R. W. Baird: Okay. But clearly there is room for continued expansion here?

No question. Mark Marcon - R. W. Baird: Okay. And then terms of where are you seeing the biggest part of your revenue growth on the PEO side?

I am not sure I understand the question. Mark Marcon - R. W. Baird: From a geographic perspective?

It is pretty much still across the board. We've had just outstanding success in California the last two or three years as we opened up that market. But we're still continuing to see very solid growth throughout the country with no particular part, California would be higher than the rest of the world, but the rest of the world is pretty much business as usual. Mark Marcon - R. W. Baird: Okay. Great. Thank you.

Our next question will come from the line of Charlie Murphy with Morgan Stanley. Charlie Murphy - Morgan Stanley: Thanks. Gary and Chris, if you take the 3% to 4% forecasted salesforce productivity goal in FY '08, is it possible to rank which pieces of ES are most important for you to achieve that?

No. Again, as I said a little bit earlier, we expect improvement in productivity in every business segment every year. We've had outstanding improvement in the high-end of the market over the last couple of years. We had great improvement in major accounts this year, but again as we go into next year, even though you had a good improvement last year, we expect you to do it again and improve in the year ahead. So I think as you think about it, you ought to think about it as pretty much balanced across the enterprise.

Our next question will come from the line of T.C. Robillard, with Banc of America Securities. T.C. Robillard - Banc of America Securities: Great, thank you. Chris, can you give us a sense as to on your balance sheet how much cash is you guys consider excess? I know there is some repatriation issues and you guys have cash offshore. So could you give us a sense as to the balance at the end of the fiscal year as to how much is with excess?

Well, right now as I said we're at about 1.9 billion. We have traditionally said that we would expect that to be able to get down to 1.3, which is a combination of working capital and offshore international cash that as you know is difficult to repatriate tax effectively. However, we are looking at that and doing proper analysis in terms of foreign tax credit utilization and such, and would be hopeful that we would be able to move that total balance from 1.3 down below a $1 billion by being able to repatriate some of that international cash in tax efficient manner in the near future. So, I would say, you should be thinking of something just below a $1 billion dollars or so would be the combination of working capital and the cash would remain overseas. T.C. Robillard - Banc of America Securities: Would that repatriation be similar to what you've recently done with in terms of repatriating from Canada?

Yeah. Not as directly. That was related to the Broadridge spend. This would be just normal one-time kind of choice to bring back the cash in order to repurchase shares. So it wouldn't be the normal, generally under APP 23 you're leaving the cash over indefinitely. I think we would release that APP 23 this one-time and take the tax charge. And I think we'll be able to do that without having an impact on total tax expense through the utilization of foreign tax credits that we have. T.C. Robillard - Banc of America Securities: Okay. And in terms of share buybacks, is that a further Board decision or can you give us a sense as to how you'll communicate that or any timing around communication around that or is it still just in the market when you feel appropriate?

We still have 40 million shares authorization remaining on our overall authorization. And as I said earlier, I wouldn't expect going forward. It all depends on market conditions obviously and stock price and et cetera. But I wouldn't expect that the same level of repurchase activity as we had in the fourth quarter. But more than likely given that we have that excess cash on the balance sheet, we like to time diversify our repurchases and spread it out it over some time, particularly in a market like this that becomes more obvious. But at the same time, I would expect it to be slightly higher than our historical levels. T.C. Robillard - Banc of America Securities: Okay. Great, thank you.

Ladies and gentlemen, we have time for two more questions. (Operator Instructions). Our next question will come from the line of Dick Patrick with First Manhattan. Dick Patrick - First Manhattan: Good morning, Gary and Chris.

Good morning Dick Patrick - First Manhattan: Given your historic partnership with SAP, can you update us on what your plans might be to co-market your payroll and tax filing services along with their new product for the small-to-mid market A1S?

Yeah. SAP has made the strategic decision and hopefully I'm not speaking out of school here to not provide a payroll solution for A1S. And so basically in the US market we're building a web services product that will operate inside of A1S, and become their default payroll solution unless the client wants to do something different. And we'll use a scale down version of GlobalView as that product internationally as they roll it out. Dick Patrick - First Manhattan: Okay. Thank you very much.

Great. Okay. Thanks.

Our next question will come from the line of Greg Smith with Merrill Lynch. Greg Smith - Merrill Lynch: Hi, guys. Can you just give us more color on the travel clearing sale it look likes that your trajectory of that business was sort of negative? Was that the expectation going forward? Just some more color on that, please.

The travel clearing business was a business that we actually acquired when we bought GSI in 1995. We had made the decision to divest the business back in 2001 and actually had it sold in August in 2001, and I don't have to tell you what happened in September of 2001 that kind of put a damper on anything travel related. So, we've continued to manage that business as the good cash flow business, good margin business, but really 100% kind of penetrated market. And last year made the decision to strategically to divest it from the portfolio assuming, we could get initiative buyer, which we finally got late in the fourth quarter. Greg Smith - Merrill Lynch: Okay. Thank you.

At this time, there are no further questions. I will now turn the conference back to Ms. Charles.

I want to thank everybody for coming to the call today. We obviously are very, very pleased with our '07 results, and we're even more pleased with the forecast for '08. As I mentioned earlier when I opened the call, I believe the strategies that we've outlined over the course of the last year are working. We're returning excess cash to our shareholders, our organic revenue growth is accelerating, and we're bringing margin improvements to the table to boot. So, we think we're well positioned for '08, and we appreciate your interest and time in the call today. Thank you very much.

Thanks.

This concludes today's Automatic Data Processing Incorporated fiscal 2007 earnings conference call. Thank you for participating. You may now disconnect.