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

James Kissane - Banc of America Securities Jason Kupferberg - UBS Kartik Mehta - FTN Midwest Drew Tannenbaum - Morgan Stanley Rod Bourgeois - Bernstein David Grossman - Thomas Wiesel Michael Baker - Raymond James Glenn Greene - Oppenheimer Gary Bisbee - Barclays Capital Mark Marcon - R. W. Baird Tien-Tsin Huang - JPMorgan Nathan Rozof - Citi Franco Turrinelli - William Blair

Good afternoon. My name is Carol, and I will be your conference operator. At this time, I would like to welcome everyone to the Automatic Data Processing, Incorporated fiscal analyst webcast and conference 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 Instruction). I will now turn the conference over to Ms. Elena Charles, Vice President of Investor Relations. Please go ahead, ma'am.

Thank you, and good afternoon. I'm here today with Gary Butler, ADP's President and CEO, and Chris Reidy, ADP's Chief Financial Officer. Thank you for joining us this afternoon for our fiscal 2009 first quarter earnings call and webcast. A slide presentation accompanies today's following webcast, and it's available for you to print from the Investor Relations home page of our web site at adp.com. Just to remind you, the quarterly history of revenue and free tax earnings for our reportable segment has been posted to the IR section of our website. These schedules include the first quarter of fiscal 2009 and all prior periods have been updated to reflect fiscal 2009 budgeted foreign exchange rates. During today's conference call, we'll discuss some forward-looking statements that 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'll now turn the call over to Gary for his opening remarks.

Thank you, Elena. Good afternoon, everyone. I'll begin today's call with some opening remarks about our first quarter and the current economic environment that we find ourselves in. Then I'll turn the call over to Chris to take you through the detailed results, and I'll return a little later to provide you with an update on our guidance for fiscal 2009. Then I'll give a few concluding remarks before we take your questions. Overall, ADP posted good results for the first quarter of fiscal 2009, pretty much in line with our expectations, with the exception of our new business sales results, which I'll circle back to in a moment. Revenues grew 9.5% for the quarter. Pretax earnings were strong at 16% growth, and earnings per share from continuing operations grew 20%, all very solid results for the quarter despite the challenging economic headwind. That said, the economic situation became much more challenging during the quarter than when we last spoke with you at the earnings call in late July. Most notably impacted was the selling environment. As you read in our press release, new business sales did slow, declining some 8% from last year's first quarter. We indicated on our earnings call in July that comparisons for sales growth would be tougher in the first half, and particularly the first quarter, and they were. However, the volatile financial markets during the quarter led to a further slowdown on the part of businesses around the world, making outsourcing decisions. We are seeing companies across all market segments taking more time with outsourcing decision, and in some cases deferring the decisions, in this challenging economic environment. As a result, we are being much more conservative with our sales forecast for fiscal 2009. We are currently estimating that new business sales will be approximately 10% lower than the $1.15 billion in new annual revenue that we sold in fiscal 2008. As you read in the earnings release, employer services client retention declined slightly by 0.3 percentage points from the record levels a year ago. The number of employees on our client's payrolls, our pays per control metric, continues to show growth from the first quarter at 0.4% improvement, but slower than the 0.8% we saw in the fourth quarter of fiscal 2008. As a reminder, the same store sales metric is a measure of employment across our major accounts, Autopay client base. The first quarter growth and pays per control for both small business and national accounts has slowed as well, but they both continue to be slightly stronger than in our major account segment. Dealer services were significantly impacted by the slowing economy, where new car sales have drastically declined, resulting in increased dealership consolidations and closing. This is putting pressure on dealers to reduce costs, which is having a direct impact on our results and is reflected in our revised revenue guidance for dealers. I'm pleased that we continue to take market share nonetheless, but at the same time, we are seeing considerable pricing pressure during the selling process. Despite the stronger than anticipated economic headwinds, we achieved a solid first quarter, but we are cautious regarding the selling environment as we look out over the remainder of fiscal 2009. Let me make a few comments on the turmoil in the financial market and the impact through various financial institutions that have been in the media over the recent weeks. I think its worthwhile spending a minute or two on that subject and how it relates to ADP. With respect to revenues, ADP does have concentration of clients in specific industries, but no one client or industry group is material to ADP's overall revenues. Revenues from financial services clients broadly defined to include banks, brokers and insurance companies, credit unions, and investment advisers make up approximately 3% of ADP's total revenues. From another perspective, the top 20 financial services account for only about 0.5%, one half percent, of ADP's total revenues. So, while we certainly don't want to see any more failings of financial institutions for the far reaching market implications that we might see, ADP's client base is broad so as not to be significantly impacted. With respect to the investment portfolio, you'll hear in a few moments from Chris Reidy that there were no material write-offs of investments in our portfolio. No one in any economic environment is immune to investment risks, but I want to remind all of you that safety of the investment portfolio and liquidity are the primary goals of the client funds investment strategy and we continue to scrub the portfolio on a daily basis, as is our normal prudent business practice. With that, I'll turn it over to Chris Reidy, our CFO to provide the details on our first quarter results.

Thanks Gary, and good afternoon, everyone. We're on slide 4. As Gary said earlier, total revenues grew 9.5%, to $2.18 billion, assisted by favorable foreign exchange rates due to the weak dollar at that time. For example, at September 30th, euro was trading at $1.41, whereas today it is around $1.28. So, at current rates, FX will work against us the rest of the year. Free tax and net earnings grew nearly 16%. Earnings per share from continuing operations increased 20%, to $0.54, a share driven largely by revenue growth and margin expansion as well as from lower average shares outstanding. We continue to repurchase shares, buying back nearly 6.6 million shares fiscal year-to-date for over $280 million, reflecting our long-term optimism regarding ADP and consistent with our ongoing commitment to return excess cash to shareholders. Let's turn to slide 5. This slide is now a standard part of our earnings presentation, as it provides the succinct view of the overall impact of our extended investment strategy for the client funds portfolio. This strategy includes interest on funds held for client, corporate extended interest income, and corporate interest expense on our short-term financing. I think it's important with the current state of the financial markets to remind you that the safety and liquidity of our claims funds are the foremost objectives of our investment strategy. Client funds are invested in fixed income securities, in accordance with ADP's prudent and conservative investment guidelines. Our strategy is to ladder and extend the maturities of our client fund. On days when inflows of cash from clients and maturing investments are lower than the day's cash obligations, we may choose to borrow short-term to satisfy client fund obligations. This extended investment strategy allows us to temper the effects of interest rate fluctuations and average our way through an interest rate cycle. Since our last earnings call July 31st, we have had full and uninterrupted access to the U.S. commercial paper market to fund client fund obligations. There is a seasonality to our client balances, with our first fiscal quarter being our lowest average balance quarter, thus our highest borrowing quarter. Our second fiscal quarter ending December 31st is our second highest borrowing quarter. Our commercial paper borrowings during the quarter averaged $2.4 billion, compared to $1.8 billion in the first quarter last year. Average client fund balances grew 4.2% for the quarter, to $14 billion, and the yield on the client fund portfolio was 4.3%, down 25 basis points from last year's first quarter. But when you take into consideration the entire extended strategy, which also includes the lower borrowing cost and the interest income on the corporate extended, the result was a $16 million P&L increase before tax, or an 11% increase over last year. The $167 million of pre-tax generated by the strategy in the quarter resulted in an overall yield of 4.8%, compared with 4.5% in last year's first quarter. This shows the benefit of the extended ladder strategy and declining interest rate environment. The fed funds rate was 5.25% for most of last year's first quarter, and was 2.0% for the full quarter this year, yet the net impact to the P&L was positive. Let's move to slide 6 where I'll take you through the segment results. Employer Services revenues grew 8%, organic revenue growth was also 8%. Revenue growth in our traditional payroll and tax filing business in the United States grew 5% in the quarter. This is slower than a year ago due to slower balance growth and lower pay growth. We are pleased with this 5% growth, despite the tough economy. Our beyond payroll revenues in the U.S. grew 13%. ES' pre-tax margin expanded 150 basis points due to operating leverage, continued expense control and lower selling expenses from lower than anticipated new business sales. Pace for control showed growth in the quarter, up 0.4% but the slower rate than the 0.8% growth in the last quarter of fiscal 2008. Growth in the number of pays in Europe continues to be positive. Client retention did decline 0.3 percentage points in the quarter, but remained at excellent levels. New business sales growth declined 8% in the quarter for ES and PEO Services on the weaker-than-anticipated economy. New business sales represents the expected annual recurring dollar value of the sales, and our incremental recurring revenues to our existing recurring revenue base. When Gary takes you through our updated guidance, he'll take you through our Employer Services and PEO Services revenue waterfall chart, which will show you the relation of sales to revenues, as well as the contribution of our other revenue drivers. Let's continue with the quarter's results. The PEO continues to grow with over 18% revenue growth, organic. Pre-tax margin decreased about 40 basis points, as a result of higher pass-through costs. Average worksite increased 15.5% to approximately 190,000 in the quarter. Let's turn to slide 8, Dealer Services. Total revenues grew 2%, with 1% organic revenue growth. Dealer Services pre-tax margin increased nearly 10 basis points in the quarter. Recession and credit crisis are negatively impacting the automobile industry, and the manufacturers and dealers are feeling the pressure of a slowdown in car sales. Dealer Services is gaining market share, however, with considerable pressures on pricing. Now, I'll turn it back to Gary to take you through the updated forecast for fiscal 2009.

Thank you, Chris. For those of you following along, we are on slide 9. Before I get into the numbers, I want to let you know that this forecast reflects the difficulties present in the economy today and we're assuming no change or improvement or degradation in the current economic environment in this forecast. This environment is obviously significantly more challenging from a sales perspective than when we first provided our fiscal 2009 forecast at the end of July. As you read in the press release, we are reducing our revenue growth forecast for the year to 2% to 3% growth, from the 7% to 8% previously forecasted for ADP. Over 2 percentage points of the reduced forecast is due to unfavorable FX rates as the dollar strengthens. The benefit we enjoyed during the first quarter, and all of last year, as the dollar weakened, will turn around and work against us for the remainder of fiscal '09 based on current exchange rates. Additionally, we are forecasting lower revenue growth. For Employer Services, we are forecasting about 5% revenue growth, PEO Services 14% to 16% revenue growth, and flat revenues for Dealer Services. We anticipate continued pre-tax margin expansions across all segments. We continue to anticipate 10% to 14% earnings per share growth, up from $2.18 per share from continuing operations in fiscal 2008. This excludes the gain on the sale of a building in last year's fourth quarter. Consistent with our practice there are no additional share buybacks contemplated in the fiscal '09 guidance, so it is our intent to continue to buy back shares depending on market conditions. Chris will also discuss the '09 extended portfolio forecast in a later slide after my remarks. Let's move on to slide 10, where I'll take you through our Employer Services and PEO Services revenue forecast, with a waterfall chart view. I'm on page 10. At ADP, the term sales and revenue are not synonymous. Sales is the dollar value of the 12 months annualized value of the recurring revenue portion of new bookings, whether it be a new client or an additional offering sold to an existing client. A sale turns into revenue in either the current fiscal year or the next fiscal year, depending on when it is sold and how quickly we get the client implemented. For smaller clients and SPS and the PEO, clients can be implemented in a matter of days or weeks. With larger accounts, and with larger clients and National Accounts, it could be 6 to 12 months and even longer for global view. Major accounts fall in between SPS and national. Revenue is P&L revenue, generated during the fiscal period and includes both recurring, what we refer to internally as processing revenue, and non-recurring revenue, what we refer to internally as set-up or one-time revenue. Sales start to become recurring revenue once a client is installed. With that as a background, the drivers of employer services and PEO services revenue growth are best depicted in a waterfall chart as shown on this slide on page 10. If you start on the left side of the chart, you will see our '08 revenues, $7.4 billion when you add ES and PEO services together. The second column represents new annual recurring sales. About 50% to 60% of fiscal '08's annual sales value will become incremental revenue in fiscal 2009. And about 40% to 50% of fiscal 2009 sales will become revenue in the current '09 year. These percentages are not digitally accurate, so we use 50% on this slide as a proxy for both years to give you an idea of how sales become incremental revenue over the course of the two fiscal years. Just as an example for clarification purposes, if we sold a new COS, which is our BPO offering in National Account, for $100,000 a month for a seven-year contract, we would report that as a $1.2 million sale. This is the 12-months, annual value of the $100,000 of monthly recurring revenue. We do not report or include in any of these numbers the total contract value of $8.4 million as a sale like some other companies in the BTO business do. As a percent of fiscal '08's revenues, new sales from both '08 and those sold in '09 are expected to equate to roughly 15% to 16% revenue growth over '08 revenue. So, if we were able to retain all of our clients, we would generate recurring revenue from new sales of approximately $1.1 to $1.2 billion during fiscal '09. I mean $1.1 to $1.2 billion on a denominator of $7.4 billion is 15% to 16%, as I mentioned being driven by sales and sales alone. In addition, we have excellent retention levels, about 90% on average across employer services in the PEO. When we quote retention, it is a revenue retention metric. So, if we retain 90% of our revenues, that means we lose about 10% a year as depicted by the red bar on the chart. Other revenue drivers include our annual price increase, which went into effect on July 1st at about 1.5%. And growth in our client fund balances and other revenues are expected to contribute somewhere under 1% to revenue growth in fiscal 2009. Other revenue categories typically include acquisitions, employment growth, wage growth, and changes in one-time revenue up or down. When you add it all up, you get 7.6% to 7% forecasted revenue growth or ES and PEO combined. This is the sum of the guidance of about 5% revenue growth for ES and 14% to 16% for the PEO. While this chart depicts our fiscal '09 forecast, it's really how we think about our business model, adding to our recurring revenue base by growing sales, reducing losses, modest price increases and a normal intrinsic growth in pays and balances from our base. In more normal times, the sales growth bar would show something around 10% sales growth, which would drive 16% to 17% revenue growth and also growth in client balances, pays, acquisitions and other revenues driving an additional 3% to 5% revenue growth. Now, Chris will take you through our forecast for the client funds extended investment strategy, I'll come back with some concluding remarks, and then we'll be happy to take your questions.

Thanks, Gary. We're on slide 11. You've seen this information on slide 5 for the quarter. This slide gives you a full-year view. I would focus your attention on the P&L impact on the lower portion of the slide. When you take into consideration the overall extended investment strategy, which also includes lower borrowing cost in our short-term financing, and corporate extended interest income, the impact on P&L for fiscal 2009 is not significant, and the overall yield of 4.4% is flat with the '08 overall yield. With that, I'll turn it over to Gary for some concluding remarks.

Thank you, Chris. Let me just give you some general overviews from my perspective. This challenging economic environment is the toughest that I've seen in my 30 plus years at ADP. I look at ADP's first quarter results and updated forecast for the year and I'm certainly not satisfied by ADPs standards, but ADP is doing pretty well relative to the pressures on the global economy today. I believe our fiscal '09 forecast reflects solid growth in a very difficult economy. As you can see from this forecast, our near-term revenue growth outlook is clearly being impacted by the weakened economy. We are anticipating that it remains challenging for the rest of fiscal '09. ADP's business model has tremendous scale. We have further tightened our cost containment measures, but we're also continuing to invest in client facing resources. We remain on track to deliver at least 50 basis points of pretax margin expansion across the board, and we remain confident in obtaining our forecasted 10% to 14% earnings per share growth for the fiscal year. You have seen that we remain committed to returning excess cash to our shareholders, as clearly evidenced by continued share repurchases and our 30 plus year history of raising the dividend to our shareholders. I would also like to remind you that ADP is a great company with a great business model. We have about 90% recurring revenues in our businesses, client life cycles of ten years, excellent margins with strong and consistent cash flows, very low capital requirement, a true AAA credit rating, and the markets we serve remain underpenetrated and growing. So despite the strong economic headwinds we are facing today, I remain optimistic about ADP's long-term opportunities for growth. Now, I'll turn it back over to the operator, and we'll be happy to take your questions.

(Operator Instructions) Our first question will come from the line of James Kissane with Banc of America Securities. James Kissane - Banc of America Securities: Thanks. Gary, just a quick question. How would you characterize your guidance right now, particularly around new sales? No, I am trying to thing, is this the first time you will see a full year decline in new sales?

No, we actually had decline, I think it was '03, either '02 or '03, I can not remember. It was about, I think, minus 5% or something along that order. We have seen this bumping along starting in the end of our third fiscal quarter, but it dropped off pretty dramatically in the last 60 days or so. So we are trying to be realistic and we are trying to be conservative because obviously it would not be my desire to have to come back and change that forecast. So, I certainly think we are going to make this plan, this forecast. This forecast is more conservative than what our business unit would be telling me on a collective basis. I have never seen anything like what happened in October in late September either. So, if we return to some normalcy in the markets, then I would characterize it as one that I feel pretty comfortable we can make. James Kissane - Banc of America Securities: Now, not to get into the quarterly detail but it sounds like the December quarter will be worse than the September quarter in terms of new sales. Are you looking at may be a positive new sales before you exit the year?

I would not agree necessarily with your first comment. You got to remember that this quarter was the most difficult comparison. We actually were up 11% in the first quarter of last year, with a full year average, I think, around 8%. The second quarter was around 8%. So, this quarter is by far the toughest quarterly comparison, and the comparisons get significantly easier in the second half of the year. So, I mean, there is about 14 scenarios that you can paint on what is happening in the economy and the sales force, but our folks in the field remain pretty optimistic. I am just trying to not overcommit in terms of new bookings as we look over the next nine months. James Kissane - Banc of America Securities: Yes. I can definitely appreciate that. As you look at the cost structure, where do you see the most opportunities to cut back to help you make the bottom line?

A couple of things, Jim. One thing is, I have used this statement with you in the past. This is my third time to this movie. The plot is a little longer and a little deeper in this movie than it was the last movie in '02 and '03. Fortunately, I think we saw this coming back in April and May. So, I really started ratcheting back on optional expense back in the fourth quarter. So, as a result, we started off in real good shape from an expense standpoint in the first quarter and I further tightened it since then. As a general statement, we are continuing at close to planned levels at sales headcount. We are still expanding headcount in places where we have new product. We are certainly making sure we have enough appropriate levels of people. We are not cutting back in terms of service. In areas where we have got a backlog, we are going to have enough implementation, people get the business installed. There are a lot of other areas where you can hold back headcount and optional spending which is exactly what we are doing. James Kissane - Banc of America Securities: Great. Good job, Gary. Thanks.

Our next question will come from the line of Adam Frisch with UBS. Jason Kupferberg - UBS: Hi, good afternoon. This is Jason Kupferberg for Adam. I wanted to touch on the EPS outlook a bit and trying to understand the moving parts here that would enable you to make, sustain EPS forecast that you previously had but obviously with much lower revenue growth because presumably there would be a significant amount of operating profit dollars to make up here. Can you walk through some of the shortfall there and maybe that is just built on some of the last question with some more detail on how much cost can you really cut considering that you are still staying committed to the sales effort?

Sure, Jason. I would lay it out this way. First, you have got the impact of foreign exchange on the revenue, which does not drop to the bottom line. So, you have got over 2 percentage points of dropping the revenue that does not impact your bottom line. So, that is a big piece. Then you have got the slight decline in the PEO in the pass-through costs so you have got them coming out. So that helps your bottom line growth. Then as you look at the sales impact on revenue and ES, you have got the selling expenses coming out. Combine all of those things with what Gary was talking about in terms of cutting back on discretionary expenses and that is what makes us confident that we can still meet the 10% to 14% bottom line EPS guidance.

We also had considered some issues in terms of FX decline as we built the plan. Not anywhere near the level that it actually occurred but we certainly did have some of that in our thinking. Jason Kupferberg - UBS: Okay. That is helpful. Would you talk a little bit about buying habits among your customers as it relates to the add-on ancillaries, some think those might be a little more discretionary in this economy since employee retention might be a little bit easier in these employment markets. Are you seeing anymore hesitancy in terms of the add-ons?

No. In fact, if anything, first of all, we are seeing hesitancy across the board not just in large account, whereas before this last quarter it was pretty much of an up-market phenomenon. Typically in these tighter environments, we actually in some ways do better with add-on products because if you think things like benefits outsourcing or time and labor management, they actually drive efficiency in cost savings for our clients. Since the client is already using the service, there is an immediate benefit to get him up and going. So, I would not expect in fact if anything, I think it would be easier for us to sell add-on services than it would to unhook someone from either the in-house solution or whatever.

At this point in the cycle, I think what you have got is a lot of other companies including a lot of our clients that are reacting the same way we are, which is cutting all discretionary costs to our freezing in place. So at this point in the cycle, we are not seeing that directly. But, as Gary said, as we progress through this economic downturn, you would expect to be able to see more in terms of the beyond payroll sales. Jason Kupferberg - UBS: And, just last question on dealer. Some media reports obviously suggesting that Chrysler and GM could merge and presumably, that would mean more dealership consolidation. Can you give us any sense of how much of your dealer revenue come from Chrysler and GM dealerships and anyway to frame the potential impact on growth and margin, if this were to happen?

I think the way for you to think about it is we have about 10,000 or 11,000 dealership sites for ADP in the US marketplace. About 1500 of the 4500 Chrysler sites are ADP clients. Those Chrysler dealers tend to be smaller and in many cases, more rural as is GM in terms of some of these. So, you know, it depends on what happens. If they consolidated, and there is a couple of things you have to consider. One is the dealers have franchise rights and GM or Chrysler just can not arbitrarily change it without making them whole. On top of that, all of those dealers, if they are using ADP services, have long-term contracts and if they own hardware, they have leased obligations that they have to satisfy in terms of those things. All of that being said they ended up closing, 20% of the dealerships, mostly smaller dealerships over a multiyear period. It could make up a difference of $20 or $30 million in terms of recurring revenue to ADP. This is manageable but certainly not desirable. Jason Kupferberg - UBS: Thanks for the color.

Our next question comes from the line of Kartik Mehta with FTN Midwest. Kartik Mehta - FTN Midwest: Gary, I just wanted to better understand the statement you made during the call where you said this could be one of the toughest economic times you have seen in your career, but you have been able to maintain your revenue and EPS guidance. And, I heard Chris explain why the EPS guidance, and I was wondering if any of the other part was just the fact of what you have said in the past that ADP is a little bit different today than what it was in the last recession or there are other changes, which gives you the confidence that you have, at least for overall revenue and EPS.

There is a couple of things. One is clearly, our product positioning today is much stronger, wider, deeper, and more global than it was the last time around. Secondly, we do not have the brokerage business, which was really a drag during that period of 2002 and 2003. That being said, we are, pretty challenged in the dealer environment right now, but not to the tune that we were challenged in the brokerage industry back in after the Internet bubble collapsed and the consolidation of the mid tier trading organizations. I have seen in previous periods is a slowdown in sales, you know, tougher to get people to make decisions. I have never had that coupled with a credit freeze and the inability for people to operate, invest their cash and borrow money to run businesses or start up businesses. So, I think the combination of what to me appears to be a recession, again, the lowest interest rate that we saw since that last time; the dramatic drop-off in people's willingness to make decisions, coupled with the credit freeze is why I think it is tougher this time than what we saw before. That being said, when you have 90% recurring revenue and you go back and look at the waterfall chart that we talked about, we have got fairly large backlogs that will continue, to be installed and even though we may not sell as much as we did last year, we will still sell well over a billion dollars in new revenue. So, it is still pretty good revenue growth and our scale models are so good and particularly if we are focused on margin, we continue to bring down pretty high incremental margins on those recurring revenues. So, that being said, along with the things that we have enjoyed with moving more and more employees now to offsite locations in India and near shore locations in El Paso and Augusta and places like that we are in pretty good shape from controlling our cost. So, I remain pretty comfortable that we can achieve these levels of EPS growth.

I think the other point that I would make is unlike the last economic downturn, the laddering strategy we have in the portfolio is making a significance difference from the last time. As you saw in the forecast chart that I gave, it really is basically neutral to the bottom line. I can assure you that were not the case the last time we went through an economic downturn. We are completely impacted by the decline in rate. So, I think that is a significant difference from the last time. Kartik Mehta - FTN Midwest: So Chris, are you going to make any changes to your investment strategy or philosophy just because of the type of environment we are in?

No. I think the good news is that we have always had the safety and the liquidity of the portfolio in mind. I do not see us changing. The thing is that, we invest quite a bit, government sponsored entities like Fannie Mae, Freddie Mac. They are yielding significant yields right now around 4%, and corporate bonds are higher than that. These yields are significantly higher than if you check the recent yields of the latest offerings. So, investing a little bit more in corporate than we did, the last time I went through the detail at the March analyst meeting, the only really difference is a little bit more in corporate but other than that, it is pretty much the same. In addition, you as Gary mentioned and we have talked about on our prepared remarks, even during this environment, we have had no material write-downs in the investment portfolio at all. So, it is pretty much the same strategy and a continuation of the strategy of where we invest. Kartik Mehta - FTN Midwest: Great. Thank you very much.

Our next question comes from the line of Charles Murphy with Morgan Stanley. Drew Tannenbaum - Morgan Stanley: Hi, this is actually Drew Tannenbaum in for Charlie Murphy. I had a question for you about margin expansion with relation to ES. Just wanted to see I think historically, you have said you should get about 50 basis points of margin expansion just for showing up. We wanted to see to what level of revenue growth is necessary to gain the scale necessary to have that 50 basis points?

Well, the 50 basis point comment would be normally when we would have slightly higher organic revenue growth than we are experiencing today, but it would also include higher investment levels or higher spending levels than what I would call optional items which I am not doing today. So, I do not know if there is a floor because it is not just the amount of revenue growth, it is how much you want to invest in sales. It is how much you want to invest in acquisitions. How much intangible expense you want to cover up. How much R&D expansion you want to do, there is a host of expenses that you can control which will have no short-term negative effect. You might not want to do them over a three-year period, but I do not know that there is some magic number because there are other levers that you can pull but you just can not do it for three years in a row. Drew Tannenbaum - Morgan Stanley: Thank you. One other additional question; can you comment on dealer growth in the U.S. versus International? Is there any reason that growth internationally should be materially different than in the United States?

There are a couple of things. We are obviously dealers much higher in terms of international revenues so they are more impacted from an FX standpoint short-term. That being said though, our opportunities to grow particularly in the Pacific Rim, China, Thailand, and Europe have been very strong. Our new sales rates have been much stronger internationally even though they have been good in the U.S. They have been much stronger. Even with our forecast, there will still be a delta between international growth over domestic growth in the combined Dealer Services unit. Drew Tannenbaum - Morgan Stanley: Okay. Thank you very much.

Our next question comes from the line of Rod Bourgeois with Bernstein. Rod Bourgeois - Bernstein: Hey. I just want to be completely clear on the guidance outlook factors here. Your revenue guidance is down understandably. Your stated margin guidance appears essentially unchanged. So, how is the EPS outlook unchanged? I am assuming your implied margin guidance is higher, although we are not necessarily seeing it in the stated numbers. Is that the way to think about it?

No, I think you have to go back to what I said before, Rod, is that you have got to peel back the onion a bit and look at what is driving the revenue down and take it piece by piece, because mix has a lot to do with it. Over 2 percentage points of revenue decline being FX that has no material impact on the EPS is a big driver. Then you have got the PEO going down slightly to 14% to 16% growth, down from our previous guidance. That is all pass-through cost that helps us on the bottom line. Then you have got on the ES, for example, you have got the impact of the lower selling which goes with it is the lower selling expense. So, when you take all of those things into consideration, we see the ability to hold the 10% to 14%. I would also mention that we have had some share repurchases on the first quarter that is giving us about a list of about 1 percentage growth for the full year. So, that is arguably in there as well. Rod Bourgeois - Bernstein: Having said all that, you still need a better margin outlook to keep earnings growth intact versus where you were three months ago, right?

No, I do not follow your logic there because the revenues come down, the margin's holding. Rod Bourgeois - Bernstein: Okay. Well, the share count coming down versus your assumption helps but seems like you still need a little better on the margin outlook. Let me ask a different question on the sales force, on the selling side. Can you talk about the feedback you are getting from the sales force in terms of the factors that are hurting the booking situation? Is it primarily credit issues, uncertainty about solvency, are clients moving over to cheaper payroll solutions? Can you categorize the main factors at work in terms of what is hurting your bookings outlook?

I think it is just a lot of people have been on the sidelines. I mean, if you go to ADP today and people underneath us want to make investments or spending decisions, we are going a lot slower internally in terms of any optional investment. I think that is happening basically particularly in the U.S. but around the world, people await to see where this thing is going to settle out before they jump into a new process, new application, whatever the case may be. Other people are having difficulty getting credit to do things, to finance implementations or spending those monies in other places and people are just down in the bunker. If you go and talk to our sales force, they would tell you the perspective business outlook in terms of the number of prospects is high as or higher than they ever seen. They are just having trouble getting them into the boat. Hopefully as the economy settles out here, we will be able to do a better job more efficiently moving those into the decisions. You got to be careful to give them too much incentive in terms of either cheaper prices or lower set-up or things like that because that is not a sustainable strategy. It just comes back and bites you a quarter or two down the road. There is more pricing pressure particularly in the U.S. services around renewals and add-on applications. So, it is tougher to get a dealer to sign up for new applications.

Slower new business formations at the slow company end and SDS. Rod Bourgeois - Bernstein: Right. In the Employer Services business, you are not seeing discounting activity go up in any meaningful way?

It is up. Rod Bourgeois - Bernstein: It is up. Is it up similar to what it was in the last cycle? Because I know that was your main issue in the last cycle on the pricing front.

I could not answer that question digitally. It feels like it is about the same or maybe a little worse. Rod Bourgeois - Bernstein: Right. Is there a way to quantify, I mean you normally get a 1.5 point price increase. How much did the increase discount offset that?

Well, we put the 1.5% increase in July. So, that is already in the number. We will not do any a significant price increase again until at the beginning of next fiscal year. You have people who call up and say I want to discontinue this service, because I can not afford it. So, you may give them a discount on maybe the benefits and the payroll in order to get them to stay, in order to help them with the issues. So, you see those kinds of things and we also see, from the competitive standpoint, particularly with the small regional competitors, who are typically under priced to ADP's pricing umbrella, they are willing to go in and take big discounts to try to unhook an ADP client. So in some cases, we may match it. We may come down partially. We may try to give them a different add-on product at a discounted price. So, it really is no one universal answer and it is pretty much across the board. Rod Bourgeois - Bernstein: In a normal year, your normal price increase net of the discount is around 1.5%. What are you thinking that will be this year? I am assuming it will be less than 1.5%.

You are combining an apple and an orange. When we do the 1.5%, which we put in this year, just for conversation purposes, we put out like 1.75 because we know we will have to deal with some client, but we still get the 1.5. That is over and done and it really does not impact our current pricing going forward, because most of the time we are bringing older clients up to the new book and if you have got a discount that is 10%, I may give you a 4% increase but if someone else is at book, I may only give you a 1% increase. So, that is really the existing book of business. Going forward, you are reacting to whatever the competition is, how many services they are buying and trying to get as close to book price as you can going forward. Rod Bourgeois - Bernstein: Right. The challenge is in looking at the blended pricing on new and existing deals. So, I see the point there.

It is tougher for us still today because in both SPS and majors, we are selling bundles much more so today than we used to be just selling payroll. Because, if you buy our employees, our benefit solution and the TLM product and the payroll product, we will give you a consolidated discount over what you would have bought if you bought all three of them independently. Rod Bourgeois - Bernstein: Okay, great. Thanks, Gary.

Our next question comes from the line of Julio Quinteros with Goldman Sachs.

Hi, this is [Helio] sitting in for Julio. On the dealer's side, you said that you have seen pricing compression. Can you give us a sense of like what the amount is?

Well, obviously there is really three things that are affecting dealers' revenue. One is pricing on renewals. So, if a client is at the end of term and they want to upgrade or they want to add applications or they want to just renew and try to cut their bill, we have got pressures in that environment. Additionally, when we are trying to unhook client competition, we certainly have to get fairly aggressive on pricing. The other thing that is reflecting in the dealer services revenue is, we are certainly seeing a higher number of out-of-business and consolidations, significantly higher than what we saw last year. Then thirdly, you are seeing a dramatic drop-off in transaction volumes. So, fewer credit checks, fewer vehicle registrations taking place, fewer laser printing and closing documents that would get printed that we get paid for each that are happening in dealers. So, it is really a combination of all of those three, and I do not think I would feel comfortable giving you digital accuracy around each one of those three individually.

Got it. Thank you. Then lastly, on the margin side on dealer, I think in the last quarter's press release the language was around at least 50 basis points and this quarter, it is up to 50 basis points. With the flat revenue growth, how comfortable are you with increasing margins in dealers? Is there a possibility to have flat margins in dealers this year?

I think it is going to be someplace in between without giving a forecast. That is the reason why we wrote it up to. They are obviously being more aggressive on cost containment because of the status of the industry and the pressures that flat revenue growth does. That being said, they are still doing a good job of keeping costs, they got a good backlog which they are installing and I think they are going to have margin improvement. I do not think it is going to be over 50, but I do not think it is going to be flat either.

Got it. Thank you very much.

Our next question comes from the line of David Grossman with Thomas Wiesel. David Grossman - Thomas Wiesel: Thanks. Chris, I am wondering if you would briefly remind us of the process that you follow once a security goes below investment grade and you would be based on your investment policies, be forced to liquidate? Then secondly, as you mentioned, the realized losses were fairly modest in the September quarter, given everything that was going on. That was followed obviously by an even more difficult October. So, given how difficult October was, can you just give us, a quick snapshot of how those things trended in the month of October as well.

Let me just, David, this is Elena. We are not done with October since it is November 3rd so he might be able to give you some preliminary direction, but we are not done with October.

Actually, to that point, if we did have any realized losses that were material, we would have to disclose that in our Q, which will be coming out and we do not have any. So, that is good news as well. To your original point, if it falls below our investment guidelines, we would be forced to sell and take a realized gain or loss on that transaction. So, that automatically forces your hand. That is something that the Board has imposed thing. So, we are very proud of the fact that we had only the $1.9 million realized loss in the quarter. What I would mention is that we did have some money in the reserve fund. That was the money market fund, obviously that you all know about. We took a $3 million loss on that that shows up in other income. You also read about that in the 10-Q coming up, but that is really the full disclosure of what we had. Nothing, you are right, October was dramatic in terms of the financial stress, but nothing additional in our portfolio. It would have to be disclosed in the 10-Q and there was nothing. David Grossman - Thomas Wiesel: I know there have been several questions about this, but in terms of your visibility on that business, compared to the ES business, is the waterfall chart, if you did one for the dealer business, are the characteristics similar to what was outlined in your presentation as it relates to the ES and beyond payroll?

I mean the business model is similar. Dealer has more one-time revenues in it because of the sale of hardware revenue that goes with some client. There are a minimum amount of software licenses, more so internationally than the US that do get recorded. So, I would say it is not as predictable as the ES model, but it is still pretty darn close to that in terms of the reliability. We are again just so much stress in the dealer industry and again, we are trying to be conservative here and get our expenses in line with what could potentially be a further drag of what happens in the industry and you do that in some ways by putting pressure on the revenue growth line to try to get the expenses out. So we have chosen to take that approach to how we come up with the forecast and how we get our expenses in line. David Grossman - Thomas Wiesel: Okay, great. Thanks. Just two other really quick questions, just in terms of your guidance in FX, do you assume current spot rates or spot rates at the end of the quarter or do you make some projections?

We do not make any projections on FX. It is current rate. David Grossman - Thomas Wiesel: Great. You did mention the dividend increase, Gary. What are the parameters again that we use to gauge what that increases, is it last year's earnings growth or is it this year's earnings growth that we use as a benchmark for where that dividend may go?

The answer is really both. I mean we really focus on payout ratio which would argue that you take into consideration this year's EPS growth, but it is a combination of both.

I mean we were consistently and have historically tried to increase the dividend equal to better than the run rate EPS growth. It is not my authority to make that prediction, but I would be surprised if the Board of Directors did not conclude that something in that order was appropriate, despite the challenges we see in the economy. David Grossman - Thomas Wiesel: Great. Thanks very much.

Our next question comes from the line of Michael Baker with Raymond James. Michael Baker - Raymond James: Thanks. I was wondering if you could give us an update on the underlying pays per control assumption.

Chris, do you want to?

Yes, I will do that. I think we are, as Gary mentioned, being conservative in our guidance or being prudent in terms of what might happen with the economy. You saw that pays per control was still growing in the first quarter. We do not expect that to be the case. We would expect that pays per control may become 1% to 2% down and we have actually taken into consideration a worst case than that in setting our guidance range. So, I think you would expect for the year that it would be between 1% and 2% down.

You got to also remember that we were conservative when we built that plan this year as we have assumed flat or zero growth anyway. So, we were in pretty good shape and we actually had positive growth in the first quarter so even if it goes down, we are in pretty good shape for the full year. Michael Baker - Raymond James: That is helpful. I had another question regarding, as you look at in Employer Services, the performance of the business units. Can you give us a sense as to the impact on the economy on a relatively basis? In other words, which size employers seem to be feeling it the most now?

I think it really goes all over the map. I mean, certainly, we have seen an increase in out of business and those kinds of things, across the board. National accounts on the high end of the market continue to enjoy despite that very positive retention rate. We are seeing a little more pressure in the mid market than the low end than we would in national accounts. Again, in this particular environment, it is pretty much across the board, although slightly better up market. Also, recall that in our European operations and with global view, as we have extremely high retention because it tends to be larger clients in general and people therefore that another reasons just do not seem to change as easily as they do in the US market. Michael Baker - Raymond James: Thanks for the update.

Our next question comes from the line of Glenn Greene with Oppenheimer. Glenn Greene - Oppenheimer: Thank you. Good afternoon. I was wondering if we could dive into the retention rate a little bit, the second quarter in a row where it is down. I was wondering if you would qualitatively talk about, what the drivers are there. Has it been impacted by bankruptcies or is it just the environment? Just little bit of color on retention rates and where you think it is going?

I think there is a little bit of an up tick in terms of out-of-businesses. I think, Gary mentioned earlier as well that we have seen a little bit more pricing pressure from some of the regional competitors that are coming in at very low prices to try to take share. So, it was down 30 basis points in the quarter. It is hard to extrapolate that across the whole year, because the third quarter of our fiscal year is really our biggest retention period. So, it is hard to say, but really depends on what, how deep you expect the economic downturn to be, but we said flat to slightly up at the beginning of the year. Our guidance now contemplates that being negative down could be as much as 30 or more. We have that contemplated in our guidance range.

You got to remember that one quarter does not make retention. If you look at last year's results, we actually had a negative retention statistic in the second fiscal quarter of last year and then bounce back, had a very nice third quarter. That being said, with the anecdotal things that I hear in the marketplace and the pricing pressures, I think it would be very difficult for us to hold the current levels, the levels that we enjoy last year. So, I expect it will be 30 basis points or slightly higher than that over the course of the year and we will continue to give you our best judgment on that as each quarter unfolds. Glenn Greene - Oppenheimer: It is similar to the last question. It relates to the sales activity across the major segments in ES. Is qualitatively any differences? It sounded like national might have been relatively stronger overall. But, is that what you saw in terms of sales activity as well?

We have had pressure at the high end of the market for both global view and national for like the last six months. What was different this time is we saw pretty much the pressure all the way across the board, in majors, SDS and the PEO just getting people to make decisions. So, it is pretty much universal today. I mean there is a point here and two points there, some up and some down. As a general statement, the malaise or whatever you want to call it, is pretty universal across the business unit with Europe probably being a little bit stronger and some of the Asia Pacific things being a little bit stronger, because they have not had some of the negatives that we have had here. Glenn Greene - Oppenheimer: Okay. Thank you.

Our next question comes from the line of Gary Bisbee with Barclays capital. Gary Bisbee - Barclays Capital: Hello and good afternoon. SG&A was actually down in percentage terms slightly year-over-year. Can you just give us some flavor; how much of that is the lower sales commissions from the down year-over-year sales versus cost reduction efforts on the G&A side?

Truly a combination of both the G&A being down. It is lower commissions due to lower business sales, but we are also cutting back. On the nine clients basing cost; I would not feel comfortable giving you a lot of detail between the two of those, but you can take from that it is really a combination of the two. Gary Bisbee - Barclays Capital: So, given what you are trying to do on the cost side and the guidance calling for down sales for the full year, is it realistic to assume that SG&A could, in this lower revenue growth environment actually be slightly negative throughout the remainder of '09?

I think you could come to that conclusion.

I think you have to be a little careful when you do that because the sales expense part of that in SPS, for example, the low end of the market, probably 70% to 80% of our sales expense is fixed costs around SEs. As opposed to the high end of the market, 60% or 70% of the sales expense is commission dollars. It is a little bit different as you go further down market. You have to be careful with the sales force in that you just can not dial their commission earnings back long-term, because they will go someplace else to work, which is not what we want to have happen. So, there is a fine line of something in between, during constructive retention tactics, but at the same time, putting some filter where those sales happen in global view versus SPS. Certainly, it will be, lower than what we would have contemplated otherwise. Gary Bisbee - Barclays Capital: Okay. Concerning depreciation and amortization; these have really have not grown in five quarters, and I wonder is part of what is going on there, that there is some savings from the data center consolidations and other things you have done and would it be reasonable to assume a D&A number somewhere in line with what you did this quarter through the rest of the year?

Well, you would not see any additional D&A from capital outlays. There is nothing significant there. But, we have not really had any acquisitions either. We do hope to, every year, we look to do $300 to $400 million of acquisitions. We did more than that two years ago, but less than that last year. But, we do like to do that amount, and if we were, then that would significantly swing D&A going forward. Absent that, I think your assumption is a fair one. Gary Bisbee - Barclays Capital: Okay. On global view; obviously you have been talking about a tougher time selling new business, are there any instances or a number of instances where customers have signed contracts, are now deferring them or telling you to delay implementation or is it pretty much just the new ones? Because you talked about the million employees that had been signed up but not all brought on yet. Is most of that business still going forward?

Yes. I think we have about, 100,000, I mean, excuse me, 1 million signed up and I think installed, and actually, we were looking at that number the other day. I think its 500,000 or 600,000 of those employees are up and running and another 400 and something thousand in the backlog. Chris has got the…

450 thereabouts processing.

450 processing and another 550 or so in the backlog. So, I mean, we have had a few fits and starts where somebody may defer something a quarter or two. I think of the 80 accounts we have had sign up or thereabouts, we have had one or two that have canceled. We would have that anyway despite the environment. I mean, we call them no starts. It is not uncommon even in the high end of the market to have, a 5% to 10% no start rate. We have seen less than that in global view. Gary Bisbee - Barclays Capital: Okay. Then just a big picture question on dealer; when you spun off the brokerage business, a lot of us asked why not dealer as well and you talked about, your confidence in their ability to be double digit growers overtime. Obviously unfair to ask the question now given that the economic pressures but do you think…

Yes. I agree it is unfair. Gary Bisbee - Barclays Capital: If you assume that the US is going to be challenged for awhile, are you still positive enough and I am talking over several years, outlook in the international, in Asia and eastern Europe and what not, growth opportunity that you still think is an opportunity that you want to be involved with?

I am probably even more optimistic about the international opportunity, not just Asia Pacific, but the Middle East and Russia and what is going on in Europe. We have got a number of really good things going on there. I think the real issue is the US market, and in a normal credit and in a normal economy, I still have the same degree of confidence in dealer that I had before. That being said, I could not sit here and accurately predict how long this slowdown is going to take place in the US If past is prologue, it may last a year to 18 months, but then it will come back and when it comes back, it comes back pretty dramatically. I think we are very well-positioned and continue to take share and can probably live through the vagaries of the industry better than most anybody else in the industry. So, I still, my still thesis still remains intact albeit in for a difficult sled ride over the next 12 to 18 months.

I think it is important to point out domestically that our dealership offerings, our dealer offerings are really positioned to help dealers improve their processes and improve their cost structure. That does not help when they are not selling any cars because they are not going to spend money on anything. It is a displacement of cost and some of our offerings that will help them operate more efficiently and that will position us well when a rebound does occur. Gary Bisbee - Barclays Capital: Great. Thanks a lot.

Our next question comes from the line of Mark Marcon with R. W. Baird. Mark Marcon - R. W. Baird: Good afternoon. You have mentioned that there is a number of reasons, why you are incremental margins have improved on the ES side. One thing I am wondering is how far along are you with regards to your near-shoring, off-shoring efforts, how much more do we have to go there, and how much more do we have to go in terms of COS transitioning from being a drag to ultimately being profitable, things of that nature, aside from this what you are doing in terms of managing the expenses?

COS just for you ratification Mark is profitable today. Mark Marcon - R. W. Baird: Okay.

We actually turned the corner in the fourth quarter of last year. Today, we have about 5700 people, who are in some a low-cost location. There is about 3000 in India. There is about 900 or thereabout in low-cost international locations like Tunisia or Dresden in Germany, and we have an additional 1800 people in smart shore locations in El Paso, Augusta, Jackson Island, town places like that. Our current forecast would be to add another thousand people or so in '09. I suspect it may be a little less than that depending upon what happens with revenue growth. We continuing to move to those smart shore locations, and plus all of what we have this year, we are up from the first quarter of '08, we are up almost 2000 people in terms of smart shore locations from first quarter of '08 to first quarter of '09 and we will get part of that benefit in '09 and we will get more benefit in '10 and in addition to what else we do in '09. So I think we have done a pretty good job here. Mark Marcon - R. W. Baird: Yes. Certainly looks that way. Can you talk a little bit about what percentage of your servicing is now done from these lower cost locations and what feedback you have gotten from client perspective in terms of satisfaction and touching?

Most the U.S. smart shore are both client call center as well as participant call centers. So lot of the folks we have got are COS participant call center people. We have had no issue with any of the US smart shore opposite. I mean, you always have, if you start problems when you move something out, et cetera, but we have got no intrinsic core issues. In India most of what we do in India is either R&D or a process outsourcing. We do very little client or participant call centers unless is specifically required by the client in order to hit a price point, in which case they know they are going to have some issue around accents and those things. Again, we have enjoyed mid-teens turnover in India and the quality and the talent that we had there is excellent. In place like Tunisia, we are there because they speak French and we are adding people in Paris. The same way with some of our outsourcing centers that we have in Czechoslovakia because of the German and English expertise. So we are pretty pleased with the outcome there. Mark Marcon - R. W. Baird: It sounds like you still have ways to go?

Yes, we have got lot of room to move. I mean I do not think we are going to double it in the next three years. I think you are going to continue to see 10% to 15% increases in headcount transfer to those places over the next several years. Mark Marcon - R. W. Baird: Right. Can you talk a little bit about why the smaller regional competitors are more price competitive during this downturn and during the last one. Is it because of the severity of the downturn or is there something from a technology or something from a financial stability perspective that is causing them to be more competitive?

Well, we generally are the price umbrella in most of the markets. That being said, we are not that different in terms of pricing parity with the paychecks of the world or the (Ceridian's) of the world for that matter. So I think everybody is more price sensitive from the company to size of ADP or the Joe's Bar & Grill. So I think it is a lot easier to get somebody listen to you today and tie terms in these local regional competitors, they are very hungry. To the extent there in the flow business, they do not have five-year extended portfolios. They have got pretty lousy rate, so they are getting own overnight fund. So they are lot more desperate for clients than maybe normally would have been, but I mean tell you it is worse then, it is not crazy worse, but it is definitely worse. Mark Marcon - R. W. Baird: Do you foresee any of those folks exiting any time soon and potentially the opportunity for you to gain share or?

I mean we do not talk about in the call, Mark, but we probably buy 30 to 40 of these every year, 100,000 here and 200,000 there, CPA practice here, CPA practice there. Mark Marcon - R. W. Baird: Okay, great. Then just last question just to confirm, you did say that you were basically looking at something that could be on the order of phase for control being potentially worse than 2% and still getting towards your EPS guidance?

Yes. We stressed all of the metrics and I want to make sure that the guidance we give contemplates that, so yes you are right, basic control we stressed that worse than 2%.

I think the good news here Mark is that, fortunately for us we had a little luck and little foresight and started ratcheting ranching down some of the expenses ahead of time, and we did not wait until the last minute. Our step-off rates in the first quarter were very strong. We had an excellent first quarter in terms of EPS growth, in terms of margin improvement and we think that is going to help us carry over for the remainder of the fiscal year. Mark Marcon - R. W. Baird: Excellent job. Thank you.

Our next question comes from the line of Tien-Tsin Huang with JPMorgan. Tien-Tsin Huang - JPMorgan: Hi, thanks. Hi, Gary, I have a couple of questions. You said that ADP's clients generally do not look like the broader US economy. How should we think about ES growth if unemployment levels get worse to say 9%, 10%?

Well, unemployment rate certainly affect us, but they infect us in terms of lack of lessening pay growth. So they affect us clearly and the float balances that we get, the per pay charge that we charge, the bonuses that they do not get, so if went from 6.5% to 9.5% from where we are today that hits you down. I think the thing that does happen as we have got a failure large concentration in the service industry which is growing the best. We have got good concentration on the low end of the market. Our clients on the high end, they have got excellent retention. We really do not have a lot of payroll revenue and the higher manufacturing like the auto sector and the industries that bit it. Even in the financial services, there are areas, we do business with a lot of those folks, but we are seeing some pay decline. But, as a general statement, most of them are still around or being acquired by somebody else who might be an ADP client already. So, I think it will hurt us to the tune of the active participants in terms of it is decline. The interesting thing that happen though is that, unemployment goes up, unemployment taxes have to rise and unemployment taxes in FY '10 for example, would go up dramatically if that continues to happen. Tien-Tsin Huang - JPMorgan: Right.

It is not something we talk about frequently, but unemployment taxes are the taxes that we hold for the longest period of time and have a significant effect on the earnings in our client earns portfolio. So, it is funny, how one hand washes the other, it just takes a year for it to take effect. Tien-Tsin Huang - JPMorgan: Sure. There is a little bit of it hedge. You mentioned fiscal '10, I know, you gave a lot of color about new sales. What implications the current new sales trends have for fiscal '10? Is there a rule of thumb that we should consider, and then also related to the new sales, can you just distinguish for us how new sales are performing versus the new clients and what are you seeing in terms of selling to existing clients?

I would say it is a little easier today, the sales to existing clients. That being said, we are still selling to both. So I would say, it is little more positive on selling beyond the payroll products. I think your assumptions as you look beyond this year, even if our sales were to stay flat, and we would get no balance growth, in ’10 we would still see 5, 6, 7% revenue growth in employer services in FY'10. If sales went up 10%, and we got some balance growth, we might see another point or two of growth, on top of that in FY ’10 and beyond. I think you can go back and work that waterfall chart pretty easily. Tien-Tsin Huang - JPMorgan: Will do. I appreciate it. Thank you.

We have time for one or two more questions. Our next question will come from the line of Pat Burton with Citi. Nathan Rozof - Citi: Hi, this is Nathan Rozof in for Pat Burton. Just wanted to continue the logic as it pertains to the waterfall chart. For the new sales growth, in order to make sure we understand the implications correctly, in order to have a flat sales starts metric for FY’10, new sales would have to grow 15% next year. Is that growth achievable?

Well your, because you got half of last year which was, if our forecast is correct, is 10% higher, so you would have to equal ’08 roughly in ’10 in order for it to be flat. You are following me? Nathan Rozof - Citi: Yes. Is that growth back to the ’08 level achievable you think in FY’10?

If the economy settles down, it would certainly be our aspiration to grow new sales by 8%, 10%, 12% every year. If the economy stays really bad, and we are not seeing any momentum in the sale force we would be reluctant to try to drive that too much in FY‘10. The economy is starting to bounce back; we would be much more aggressive on investment in sales.

Whereby no means trying to imply any guidance for our fiscal year '10, but at the same time we provided that waterfall chart with a way to think about things so that you can plug in a set of assumptions that you can come to yourself as each of those columns and use that as something that you can come to your conclusions around them. Nathan Rozof - Citi: Got it. I appreciate the color there. Two quick modeling questions and I will let you go. The first is, can you provide any indication of what the share count is, that is assumed in the FY '09 guidance. The last is, was there any change to your underlying tax rate assumptions? Thanks.

I will take the last one first, which is the tax rate. We would assume that the projected effect of tax rate excluding the one-time item is basically flat to slightly down from the prior year, excluding the one-time benefit we have got in California of last year. I would remind you that it was down significantly in '08 versus '07, whereas '07 on an apples-to-apples basis was about 37.8% effective tax rate. So, continued coming down. What was the other question? Nathan Rozof - Citi: Share count.

The share count; I do not have the diluted shares count with me, it will obviously be in the 10-Q. So when we had given the guidance in July, we said Q is about, there was about 10 million share impact at that time anticipated from dilution for the benefit plans and that because of the low share price, let say, look at what we gave, what we obtain in Q and then assume maybe about 5 million for the year. Nathan Rozof - Citi: Got it. Thank you.

Our final question will come from the line of Franco Turrinelli with William Blair. Franco Turrinelli - William Blair: Thank you. My questions have asked.

Sir, I will now turn the call back over to you, Mr. Butler.

Thank you, Carol. We appreciate everybody attending the call. Obviously, it is an unusual time for us, but I think ADP has responded appropriately. We feel very good about being able to meet our full year EPS target that we had forecasted earlier. Despite some of the pressures that we see in the economy, we think we are still well positioned to continue with very good strong long-term growth for the future. So thank you very much for coming.

This concludes today's Automatic Data Processing, Incorporated financial analyst webcast and conference call. Thank you for participating. You may now disconnect.