Good morning. My name is Amanda, and I will be your conference operator. At this time, I would like to welcome everyone to ADP First Quarter 2011 Earnings Webcast. [Operator Instructions] I will now turn the conference over to Ms. Elena Charles, Vice President, Investor Relations. Please go ahead.

Thank you. Good morning. 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 morning for our First Quarter Fiscal 2011 Earnings Call and Webcast. Our slide presentation for today's call and webcast is available for you to print from the Investor Relations homepage of our website at adp.com. As a reminder, the quarterly history of revenue and pretax earnings for our reportable segments has been posted to the IR section of our website. These schedules have been updated to include the first quarter of fiscal 2011, and all prior periods have been updated to reflect 2011 budgeted foreign exchange rates. During today's conference call, we will make some forward-looking statements that refer to future events and as such, involve some risks, and these are discussed on Page 2 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, Elen. Good morning, everyone, and thank you for joining us. I'll begin today's call with some opening comments about our first quarter results, then I'll turn the call over to Chris Reidy, our CFO, to take you through the detailed results. After which, I'll return to provide you with an updated forecast for fiscal '11. And before we take your questions, I'll also provide some concluding remarks. Overall, I am quite pleased with ADP's first quarter results for fiscal 2011 which, as you can see from the release, were better than anticipated. You recall as we exited last fiscal year, we did reach positive inflection points in our key business metrics. I'm pleased to report for the most part, that those positive trends continued into this first quarter of '11. Let's start with new business sales which, as you saw in this morning's release, were flat to last year. However, results were different by market segment. In the Small Business marketplace, including the PEO [Professional Employer Organization], we posted strong double-digit growth year-over-year. I believe our investments in our new RUN products and in our sales force has had a very positive impact in this market. Having said that, we are somewhat cautious as we move up market. The pipeline for new business sales is good, but the sale cycles remain relatively long and new business sales in the medium-large company markets were slightly below last year. New business sales in our international business were up nicely, excluding GlobalView sales, which declined year-over-year. We closed three quite large GlobalView transactions in the first quarter of last year, which impacted the total sales comparison from last year by a couple of points. All in all, we are still comfortable with our full year forecast for high single-digit new business sales growth for the year. As we look at retention, I believe that the improved economy, coupled with the technology investments we have made in our service solutions and the significant increases in client service associates, helped drive this notable improvement in client revenue retention during the quarter. This increase of 1.7 percentage points clearly exceeded our expectations. And for the record, is the largest quarterly increase we have seen in this metric in about five years. Employment levels in the U.S. have stabilized and our pays per control same-store sales employment metric was actually up 1.7% in the quarter and also ahead of our expectations. Average client funds balances increased 9% and were higher than anticipated driven by higher wage growth, growth in pays for control and increased SUI tax. It's also noteworthy that the number of worksite employees paid in our PEO grew 9.5% in the quarter. I am very pleased with the acquisitions we closed in the first quarter and the pipeline of potential transactions is also quite good. To remind you, our M&A strategy is primarily focused on entering adjacent markets that leverage our core franchise as well as competitive roll-ups within our existing product portfolio. We are currently in the process of integrating the two largest transactions we completed this quarter: Workscape and Employer Services and Cobalt and Dealer Services, and continue to be quite pleased as we go deeper with each business. Moving onto Dealer Services. The automotive landscape is relatively stable, and dealership closings have greatly subsided. Revenues in Dealer, however, continued to be negatively impacted by the carry-forward effects of dealership closings over the past year, but fewer current closings bodes well for continued improvement in the year ahead. With that, let me turn it over to Chris to provide you the details of our results.

Thanks, Gary. Turning to Slide 4. We are very pleased as total revenues increased 6% to $2.2 billion in the quarter, including acquisitions. Revenues were negatively impacted nearly 1% from unfavorable foreign exchange rates as the dollar strengthened during the quarter compared with last year. However, our forecast assumes that foreign exchange impacts will turn favorable during the second half of the year and have no impact on the full year as compared to a year ago. Excluding acquisitions, revenues grew 4% in the quarter. Pretax and net earnings were down 2% and as anticipated, first quarter earnings and margins were lower from the investments we made over the second half of fiscal 2010 to drive growth. But I'd also like to remind you that we had frozen merit increases until the fourth quarter of last year, which also resulted in negative year-to-year grow over comparisons. Earnings per share from continuing operations of $0.56 a share were flat with a year ago on fewer shares outstanding. And before we leave this slide, I'll also like to speak briefly about ADP's cash balance. As you know, our intent is to target the cash balance toward the $1 billion level at a minimum. We moved closer to this level during the first quarter by closing three strategic acquisitions for $475 million in net cash, and we bought back 1.2 million shares for about $50 million. As a result, our cash and marketable securities balance was $1.3 billion at the end of the quarter compared with $1.8 billion at June 30. Let's turn to Slide 5 and go through the business unit results for the quarter. Employment Services total revenues grew 6% or 5% organically for the quarter. We are pleased that revenues in our Payroll and Tax Filing business in the United States grew 2% during the quarter as we continue to see strong demand for our payroll solutions particularly in the Small Business marketplace. Beyond payroll revenues in the U.S. continued to grow with 9% growth in the quarter, including about 2% growth from the Workscape acquisition closed early in the quarter. ASO, our BPO offering at the low end of the market, retirement services and other beyond payroll solutions such as Tax Credit Services also grew nicely during the quarter. ES' pretax margin declined 80 basis points as leverage from increased revenues was more than offset by the incremental hiring of sales and service over the second half of fiscal 2010 as well as higher compensation expense. Pays per control, which is our same-store sales employment metric, increased 1.7% in the quarter compared to the first quarter last year, which was higher than we anticipated. The number of pays in Europe declined in the quarter compared with a year ago in the same-store sales basis though the trends improved during the quarter. Client revenue retention continued to improve with a notable increase of 1.7 percentage points in the quarter. Gary will take you through the new business sales, so I will just repeat that sales were in line with our expectations for the quarter and also remind you that new business sales represents the expected new annual recurring dollar value of these sales and our incremental recurring revenues through our existing recurring revenue base. Let's continue with the quarter's results. Turning to Slide 6 and the PEO. The PEO reported 15% revenue growth for the quarter, all organic, primarily from increased pass-through revenues and an increase in the number of worksite employees paid. Pretax margin declined 370 basis points primarily due to a tough compare with last year's first quarter, which included a $9 million favorable settlement on a state unemployment tax matter causing 310 basis points of the degradation. Additionally, compression from price sensitivity related to higher pass-through costs, as well as increased compensation expense, pressured the pretax margin. Excluding last year settlement, pretax earnings grew 8%. Year-over-year for the first quarter, average worksite employees increased 9.5% to nearly 214,000. Moving onto Dealer Services on Slide 7. Dealer Services revenues grew 12% for the quarter, including revenues from Cobalt. Organic revenue growth was 1%, including about one point of grow-over challenge from last year's revenue from the Cash for Clunkers program. Dealer's pretax margin improved 25 basis points. The current quarter was negatively impacted about 225 basis points from the Cobalt transaction and was offset by a 225 basis point benefit from the $7 million intangible asset impairment charge in last year's first quarter relating to General Motors' announced closure of its Saturn brand. Dealer Services continued to gain market share with strong competitive win rate. Now let's turn to Slide 8. Before we get into the results of our investment strategy for client funds, I want to remind everyone that the safety liquidity and diversification of our client funds continue to be the foremost objective of our strategy. Client funds are invested primarily in fixed income securities and in accordance with ADP's prudent and conservative investment guideline. To give you a quick understanding of how to read the schedule as most of you have previously seen, the schedule shows the overall impact of our client funds portfolio extended investment strategy with the average balances and interest yield shown in the top half of the slide and the corresponding pretax P&L impact shown in the lower half, all color coded to help you transition from the top half to the bottom half of the slide. Getting into the details for the quarter, the results were slightly better than anticipated primarily due to client fund balance growth, offset by lower than anticipated yield. For the quarter, average client fund balances were up $1.1 billion or 9% compared with the year-ago period. The average yield on the client funds portfolio declined 40 basis points to 3.7%, resulting in a slight decline of $1.1 million in interest on funds held for clients on the P&L. You can see that lower new purchase rates impacted the extended and long portfolios where the average yields earned 20 to 40 basis points lower than last year. Average borrowings were down in the quarter and the average interest rate paid on these borrowings increased to a blended average borrowing rate of 0.3% from 0.2% last year. The result was a negligible impact to the P&L. So focusing your attention on the net P&L impact on the lower portion of the slide, taking into consideration the entire extended strategy presented here, the results was a $7 million P&L decrease before tax or a decline of 4%. The overall yield of the bottom line impact when calculated is 4.4% compared to 5.0% last year. Now let's turn to Slide 9 where I'll take you through the extended investment strategy updated forecast of fiscal 2011. Before I get into discussing the detailed forecast, I'd like to update you on the credit quality of the portfolio and what we are seeing in the marketplace regarding the current fixed income investment landscape. As was the case when we last showed you the details at our February analyst conference, currently of that 85% of the portfolio remains AAA or AA rated. As you have observed in the marketplace, the recent decline in U.S. Treasury yields and the narrow credit spread have led many corporations to issue new debt. Fully consistent with our client funds portfolio objectives of safety, liquidity and diversification, we're able to take advantage of the greater supply of new investment-grade corporate fixed income securities and add more corporate bonds to our portfolio. In addition, the steep yield curve presented greater opportunities at the longer end of the maturity curve in both the extended and long portfolios. And as a result, the duration lengthened slightly to 2.8 years at the end of the first quarter compared to 2.7 years at June 30 and 2.4 years at the end of last year's first quarter. I want to be clear that we have not taken more risk in the portfolio by going out further along the yield curve. There has been no change to our board-approved investment guidelines or our intent to hold the securities to maturity. Since we do not believe it's possible to accurately predict future interest rates, the shape of the yield curve or the new security issuance behavior of corporations, we continue to base our interest assumptions in our forecast on hedged funds, future contracts and the forward yield curves for the three and a half and five-year U.S. government agencies. In the current forecast ranges we have provided, we have also taken into consideration the potential investments we may make in corporate fixed income securities as well as investing further out on the yield curve. Net unrealized gains as of last week were about the same as the net gain of $853 million as of September 30 reported in this morning's earnings release. Although level of unrealized gains will change as the interest rate environment changes, the way to think about this is that the unrealized gains indicate we are holding securities yielding higher rates than current market rates. As part of our extended investment strategy, our intent is to hold these securities to maturity and over time earn these higher than current market yields. I'd also like to point out that this $850 million-plus of net unrealized gain includes gross unrealized losses of just $1 million. Now for the fiscal 2011 forecast. This slide summarizes the anticipated pretax earnings impact of the extended investment strategy for the client funds investment portfolio for fiscal 2011. And it's important to keep in mind that 15% to 20% of the investments are subject to reinvestment risk each year. We have updated our forecast for growth in average client fund balances to 5% to 7% growth, which is up from our prior forecast of 2% to 3% growth. The increase is driven by better than anticipated wage growth and pays per control. You recall that the first quarter average client balances grew 9%. I want to provide a few comments to help you frame why we're not expecting that level of growth in balances for the full year. We saw higher wage growth in the second half of fiscal 2010 influenced by over 30% growth in bonuses, a return to merit increases and higher SUI rates. Therefore, we anticipate tougher comparisons in the second half of fiscal 2011. We're anticipating a yield on the client funds portfolio of 3.2% to 3.3%, down 30 to 40 basis points from fiscal 2010. We are anticipating a decline of $20 million to $25 million in client funds interests as the lower anticipated interest yield offset the expected growth in balances. Average new purchase rates are expected to be about 300 basis points lower than the embedded rates on maturing investments. We are anticipating that average corporate extended balances will be flat to up $100 million and the average yield on the corporate extended will be down 30 to 40 basis points. We're anticipating average borrowings will also be flat to up $100 million and the average interest rate paid on those borrowings will be up slightly in fiscal 2011 10 to 20 basis points to a blended average borrowing rate of 0.3% to 0.4%. Looking now at the lower right of the chart, you see that the continued anticipated decline in interest rate is expected to outweigh the benefit of growing average balances, resulting in a decline in pretax earnings of $30 million to $35 million for fiscal 2011. For fiscal 2011, we anticipate a decline of about 40 basis points from fiscal 2010's overall yield of 4.1% from the net impact of this strategy. Now I'll turn it back to Gary to take you through the remainder of the forecast for fiscal 2011.

Thank you, Chris. We're now on Slide 10. In our fiscal 2011 outlook, we are assuming no change in the current economic landscape. We have also updated our forecast for you to include the impact of the acquisitions that closed during the first quarter of fiscal '11. We still anticipate that the Cobalt transaction will be slightly accretive to ADP. However, as I will discuss in a moment, cost relating to the acquisition will be dilutive to Dealer Services pretax margin. We continue to anticipate year-over-year earnings pressures from the impact of merit increases in last year's fourth quarter as well as from the sales force and service hirings that took place over the second half of fiscal 2010. Now let me take you through the forecast you see here on this slide. The total ADP revenues, we anticipate growth of 7% to 8%, which reflects the recent acquisition activity mentioned a few moments ago. Excluding revenues from the acquisitions closed in the first quarter, as they were not contemplated in our prior forecast, we anticipate 3% of 5% revenue growth. This is up from our prior forecast of 1% to 3% growth due to better than anticipated results in the first quarter. We do anticipate 3% to 5% growth in diluted EPS from continuing operations compared to $2.37 from last year, which excluded favorable tax items in fiscal 2010. This compares to our prior forecast of 1% to 3% growth. We anticipate no impact to diluted earnings per share from the acquisitions closed during the first quarter of fiscal '11. As is our normal practice, no further share backs are contemplated in the forecast, although it is clearly our intent to continue to return excess cash to our shareholders obviously depending upon market conditions. Now let's turn to Slide 11 for the segment update. For our ES business, excluding revenues from the acquisitions closed in the first quarter, as again they were not contemplated in our prior forecast, we anticipate revenue growth of about 4%, which is up from our prior forecast for 1% to 3% revenue growth. Including acquisitions, we anticipate about 5% growth. We continue to expect, for the full year, to be up some 50 basis points of pretax margin improvement, including the first quarter acquisition activity. Our forecast for both pays per control and client revenue retention had been updated to reflect the better than anticipated results in our first quarter. We anticipate an increase in our pays per control metric in the U.S. of at least 1%, with more favorable pays per control comparables expected early in fiscal 2011 due to the significant declines in this metric that we saw early in fiscal 2010. We do anticipate a slight decline in pays per control in our international market of about 0.005% for the year, and we anticipate client revenue retention will improve about 50 basis points for the year. We anticipate 13% to 15% revenue growth for PEO Services with a decline in pretax margins due to higher benefit pass-through revenues and the grow-over impact of last year's $9 million favorable tax settlement as we had mentioned earlier. We continue to anticipate high single-digit growth in the annual dollar value of ES and PEO worldwide new business sales from the $1 billion in the same metric sold in fiscal 2010. And for Dealer Services, excluding Cobalt, we anticipate up to 2% revenue growth and a slight improvement in pretax margin. Including Cobalt, we anticipate over 20% revenue growth and a decline in pretax margin up to 200 basis points. Turning to Slide 12. I'd like to leave you with some closing remarks before we open it up for your questions. As you can hopefully summarize from my comments, I am quite pleased with ADP's results for the first quarter of fiscal '11, and I hope they came through to you on this call. The economy is stable, but does remain challenging with interest rates stuck at record lows and millions of people still out of work. However, I believe ADP entered fiscal '11 from a position of considerable strength. The positive inflection points reached most of our key business metrics exiting last fiscal continued into our first quarter of fiscal '11, resulting in ADP achieving better than anticipated results for the first quarter. Our updated forecast for the year reflects these positive results as well as the impact from the strategic acquisitions closed during the quarter. I can assure you that ADP's business model remains solidly intact. ADP's highly recurring revenues with strong and consistent cash flow generation enabled us to continue incremental investments in our client-facing associates and in our market-leading solutions during the economic downturn. A good example is the investment we had made to roll out our initial mobile application for RUN payrolls for Small Business, and we are further investing in mobile applications across our entire solution set. ADP has been performing exceptionally well on the acquisition front. During the first quarter, we spent nearly $500 million on strategic acquisitions that we believe will help fuel ADP's future growth, and there is more to come. We continue to execute against our five-point strategic growth program, and I remain very optimistic about ADP's long-term growth opportunities. Now let me turn it back to the operator, and we'll be happy to take your questions.

[Operator Instructions] And your first question is from the line of Adam Frisch with Morgan Stanley.

Can you talk about sales in the quarter and how the important upcoming selling season is shaping up? I know May and June is important for international accounts but January is probably the bigger test. Anything you can point to in terms of the size or recent retention figures in your sales force, new products, pricing terms or anything that you think could be incrementally positive?

We were only a few percentage points under our plan for the first quarter even though we would love to think it's a little bit stronger than it was, it still was very close to our plan. And with a very strong fourth quarter we had and what potentially was pulled out of the first quarter, we certainly are quite comfortable with our forecast for the rest of the year. I actually talked to most of my senior sales leaders yesterday in preparation for the call, and they all remain very optimistic about being at or above their plans for the full year. Most of them would say to you that their backlog of prospective clients was actually stronger at this point versus last year, which I think bodes well for the selling season. Our product position, particularly in the low end of the market with our new RUN platform and the new mobile applications that we've launched, our people there are actually quite bullish, and we actually had strong double-digit growth there in the first quarter. Workforce now continues to do well in the mid-market, and we've got a very strong pipeline of GlobalView prospect. So I'm pretty comfortable that we're going to have a good second quarter and a solid finish for the year.

On M&A, you guys closed on acquisitions in the quarter. Can you talk about your strategy in terms of maybe expanding the footprint a little bit in tangential businesses to the quarter? I know Paycheck mentioned merchant processing on their calls. Wondering what your view was on expanding the footprint a little bit?

Well, we're always looking for expanding our geographic footprint. Regrettably, there are not as many service-oriented companies. Once you leave Western Europe in the U.S. to acquire, we're continuing to push the envelope in terms of expanding our HR and benefits and performance planning on kind of products. So we are trying to build a wider array in the portfolio of the products that we take into the marketplace. We're also doing some analysis, which is no secret in the marketplace, around healthcare kind of solutions that we can offer to our base or to the market in general as it has a pretty good go-forward growth outlook. So we are looking at those kind of things as well. But I think it's going to be pretty much business as usual, but you are seeing us move into the accounts payable market with the acquisition we made last year. We are looking at healthcare and we're down the path to continue to expand the portfolio.

Your next question is from Ashwin Shirvaikar with Citi.

My first question is with regards to pays per control, can you comment you on how the international part of business trending, I believe, last quarter that wasn't negative impact?

I think last year, and then correct if I'm wrong, I think we were down around 2% to 3%, around 3%. And that gradually has improved over the quarters. In our forecast is, I think, as I mentioned in my forecast will still to be slightly negative. I think like half a point down for the go-forward year.

And with regards to the balance growth, are you assuming anything specific with regards to SUI increase or higher bonuses, et cetera, that should help or hurt early 2011

We had experiences, we said in the comments, 30% growth in bonuses last year. So we're not expecting too much in the way of incremental bonus growth, although we will likely see some companies that didn't get bonuses last year. So there's a little bit of there. And the bulk of the SUI increases also -- we have experienced throughout -- although there are some states that we anticipate having increases going forward. So not as much as we have experienced last year, but a little bit of growth on both of those metrics.

Just a couple of other general comments. One is that I noticed that as I was listening to Chris' comment, the other thing that's helping our balances is our strong sales growth so we're winning market share, which is obviously driving more balanced growth at the same thing at the same time. We are seeing increases in net pay because I think the economy is a little better and people are working more hours and they are hiring, to some degree, from that standpoint. The SUI increases were quite significant this past year because they generally follow by year the steepest decline in employment, but they will likely continue at these higher levels for at least this year and next, if not beyond, because the state coffers are basically empty in terms of that regard. So we're also very cautious on this metric because of the income that's earned off that is very high margin. And so we want to make sure we don't put the cart out in front of the horse, even though we are very pleased with the results we saw in the fourth quarter and the first quarter.

Your next question is from Jim Macdonald with First Analysis.

Could you correlate the strong results you're seeing in Small Business with the drop in clients that you reported that presumably were mostly in the Small Business area?

Actually, no. That's not the case. If you go back to the 10-K that we issued and the 10-Q that's about to come out, we actually experienced growth from the Small Business area. And what had happened was -- and I think I talked about this on an earlier call, counting the number of clients is not the easiest thing to do because clients go by different names and different divisions, et cetera. So we went back and re-scrubbed the way we analyze clients about six months ago before the 10-K. And we went back and restated previous number so if you look at it on a restated basis, from 10-K to 10-K, and you'll see on the Q coming out, we're actually up in the SBS area. We're about flat overall. And the increases in SBS were primarily offset in the mid-market where we did and have talked about having some losses in terms of regional competitors during the last couple of years, but we are actually working the growth where we had growth in the SBS area.

I think there's a couple other things that you're seeing there. One is as you may recall in fiscal '10, SBS, Small Business, was the one place where we did reduce headcount in the sales force over the fiscal '09 and '10. Over the second half of fiscal '10, we did restore most of that headcount that we reduced. So we're seeing the rebound there. Additionally, our product positioning and the strength of our product offering has never been stronger than it is today with our own RUN platform, our new mobile applications, our ASO offering, what we're doing with the PEO. So we're winning in the marketplace both through increased headcount, but more importantly longer term through better product positioning, which leads to less discounting and a more healthy environment.

I think you reported a 20,000 drop in clients. So that, you're saying, was in the mid-market, not in Small Business? Or is that just a scrubbing issue?

Well, we restated in the 10-K, so we showed the comparable. We're up in the Small Business, and we were down in majors. And in total, we were about flat.

Your next question is from Julio Quinteros with Goldman Sachs.

Can you go through the competitive dynamics in that SMB segment? Obviously, I'm trying to understand where your momentum is coming from. Is it all zero sum or are you penetrating more in-house accounts? Just any color you can provide there would be helpful.

Well, I think it's all of the above. As I said, we've added back significant headcount that we had cut in prior period. And we were fortunate to get that earlier in last year so the people are out in their territory's, selling deals. Secondly, our product position today is superior, in our view, to anything else in the marketplace. Again the dynamic has not changed in terms of the competition except in the sense that we continue to see discount providers up from the regional service companies. And that still has not changed. And we're changing our offerings, depending upon local market conditions to better meet those kind of challenges. But in general, the economy is better and there's not as much pressure on price. And we're just doing well there.

Thinking about your headcount additions as you go forward, any way to sort of characterize where into fiscal '11 the focus will be in terms of new headcount addition for sales or other employees? Should we be thinking about more growth in the majors headcount side or more in the Small Business side?

Typically, we try to concentrate, if we're looking in the growth sales 10%, which is kind of general target each and every year and you're not in a severe down cycle or a buoyant up cycle, then we traditionally would add 6% to 7% headcount growth and strive to get two to three points of productivity or price improvement or new products into the mix to drive that 10-plus kind of percent. So as we returned to what I'd call more historical norms in the business, I would expect we'll continue to expand there. I mean there are some areas, particularly in the mid- and up market where our benefit offerings are getting much more robust and complete across the product line where we may add more, on a percentage basis, the headcount to pursue benefits, which we think particularly as healthcare rolls out is going to be an ever more important growth area for us. So I think we will continue to see that. But the way for you to think about it I think is more around 6%, 7%, 8% in headcount and 2%, 3%, 4% in productivity.

Your next question is from Kelly Flynn with Credit Suisse.

I just want to drill down a little bit more into the increase in the organic growth guidance at Employer Services. Is it more the Q1 upside that's driving the guidance change? Or are you increasing your expectations for the out quarters?

Well, I think it's both, Kelly. Because what you -- what we've seen is increasing metrics. So if you look at the client retention metric, it was tremendous growth in the first quarter. And pays per control increased as well. And so as you look at that continuing in the year, it's what you grew in the first quarter, but that flows into the whole year. So those are the biggest drivers, as well sales.

In the fourth quarter, we were up 25% sales in the fourth quarter. And so we fortunately were able to convert a large part of that into revenue, which we're now should get the residual impact of that for the full year aided by balance growth, pay growth and much stronger retention. So if all that happens, then we make our sales plan as we are forecasting then it certainly bodes well for the rest of the year.

I mean, you referred to the economy as stable, but as you pointed out, you're underlying metrics are improving. So could you talk a little bit about what you're hearing from your clients as far as business confidence? I mean, have you seen a positive inflection point there over the last quarter?

I mean if you park all the banter about the elections in Washington and you just go to a more straightforward kind of view, when I talk to clients or I talk to other CEOs in other industry, I think everybody's kind of back to business as usual to some degree, because you got to get back to growing your business. And I think it's quit going the wrong way, and it's now a debate about how fast it's going to come back. And so in that kind of environment, people are still careful about their decisions, but they are investing in infrastructure, which would include payroll and HR, and time and labor systems. And I think generally, environment is pretty good. And at the low end of the market, you got to do your payroll. And so the easier it is to do it, the better your product is, the easier it is for people to switch over to you.

And as far as being business as usual, I mean there's not a change versus last quarter? Or would you say it's pretty consistent with what's going on...

I think it was getting better over the second half of last year. It's about like it's been for the last three to six months. I'm not seeing -- if you look at the BRT's surveys and those kind of things, there's still a lot of hesitancy on employment. But most of the BRT's CEOs would tell you they expect to spend more capital this year than last year, and they expect their revenues to go up and not down.

Keep in mind that stable does not mean we're buoyant and excited. It's just more that the decline that we had experienced over the last couple of years seems to have stabilized.

I mean what's happening if you go talk to the economists is that the GDP slowdown that occurred in the second calendar quarter that dropped down to like 1.7%, they're forecasting only 1.3% this quarter. And when you look at the productivity gain that we've seen across the U.S., it basically doesn't give you a real reason to go do a lot of employment, which is why the Fed is trying to do this easing, this qualitative easing. And the forecast call for as you get into calendar '11, they return to more 3% to 4% GDP growth, which then should be sufficiently be higher than the productivity increases, which should then drive an acceleration of employment.

Your next question is from Rod Bourgeois with Bernstein.

But I wanted to inquire on what the specific drivers of the improved retention are. In other words, what client-facing activities have you ratcheted up and how is that having an impact? And then on the same note, to what extent did lessened bankruptcy trends help the retention? If you can get some specifics of that, that will be great.

I think on retention, there are a number of things. And I think Gary referred to some of them in his remarks this morning and I think those were the primary drivers. We have invested in service throughout the business. And I think that in our technology investment, the combination of those have driven the bulk of the retention. There has been some abatement in the bankruptcies on the low end, kind of back to normal levels, but I think that was less of a driver than our proactive investments in the service area.

And much less dropped services, pricing concessions, those kinds of issues, drop reports, we're kind of through that, and it's kind of back to business as usual.

And I think that's two consecutive quarters now. And if you go back to a year and half ago, we were predicting up to 100 basis point decline last year. And the second half of the year turned that around, so we're actually up 40 basis points. And what we're seeing is that this continued and improved even more. So absolutely, a great experience in the quarter for that metric.

It seems that the area of the business where competitive takes have been a problem has been in the mid-market. It sounds like that losses to competitors in the mid-market had subsided. And then I guess also the discounting and pricing issues that had been more pronounced in that market, those have subsided as well? Does that impact your interpretation?

Yes, Rod, it is. Obviously, we still see some pressure from regional competitors in the mid-market, but that has abated from the height of a year and half ago. And I think our workforce now product in the mid-market has certainly helped as well. And our sales people are excited about that, and it sells well and it demos well and everything else. So I think a combination of those things. But I think you're accurate.

Yes, I mean, Rod, there's two areas in that mid-market. We've made big investments in our designated reps. The actual call center people that you call in plus we're doing a much higher level of proactive outreach into our client base to make sure we're ahead of the curve as opposed to behind the curve in trying to catch up with price at the last minute when somebody has given us a notification. So those investments in client services and proactive outreach are clearly making a difference as well.

On the bookings front, your bookings growth has to accelerate as the year progresses. Are you expecting that acceleration at the high end of the market? Or are there other specific areas where you think the growth trend on bookings will improve?

Well, our GlobalView backlog of business is quite good. We did have a very strong quarter last year. And we had a decent finish the first quarter last year and we had a pretty good finish in GlobalView last year. So their backlog and their confidence around their plan is pretty positive. Majors and nationals were down slightly in the quarter, call it mid-single digits just to give you a frame around that. But if you go talk to those guys, their PBRs are much stronger today than they were a year ago. And based on my anecdotal feedback, and I've been doing this for a long time and I have a pretty good nose for it, I think we're in decent shape in both of those for the rest of the year.

I'd also say that the flat sales in the first quarter we mentioned the GlobalView grow over, that was worth a couple of points because we had a couple of big GlobalView sales in the first quarter of last year so that put pressure on the first quarter. But if you normalize for that, it would give you another 2%. And then we haven't mentioned it, but clearly when you have a 24% blowout fourth quarter, you probably pulled up a little bit from the first quarter. So it wasn't -- as we've said, it was in line with our expectation. And I think, as Gary said, the growth is expected to occur.

And just to give you some flavor for that, I mean, we had a pretty soft July after a great June, which is no surprise. And we had a pretty strong September in terms of growth. So I'm expecting that to continue. We had good growth in October. We're really not into that. It's too early to say, but we had good growth in October, so our confidence level here is pretty good.

And as you know, what drives this business is sales engine going and retention and making sure that you're keeping as much of that revenue. And that's really what drives future revenue growth. And we're very happy with seeing the retention improved and sales picking up.

Your next question is from Glenn Greene with Oppenheimer.

I wanted to talk a little bit about the SMB market competitively and sort of in the context of your national competitor just sort of how the recent management change alluded to, maybe making some pricing tactical changes. It's obviously early, but any sense or if you've seen anything new or different out in the marketplace competitively in the SMB market?

Yes. Paychecks, historically, they're very rational competitor. And I guess, from at least my 40,000 point of view, they remain that way. I mean if you read the high-level things that you hear, basically they're just lowering their kind of book price to more of what it was after discounting. And greatly encouraging no further discounting from that. So the actual price point that the services are being sold is not dramatically different than where we've been. So it's really around the skill set of the sales folks and the references from the CPAs and the banks and the product. And so we're not dosing any big swing in direction in the marketplace in general. Again, we still continue to see more difficulty around pricing with the local competitors. There's half a dozen of them around the country that are just focused on mostly single location, discounted payroll sales and not really chasing value as opposed to price.

And again our emphasis on that part of the market has been in the improvements on the products. And during the downturn, we continued to invest in RUN. We released it last year. It's got a lot of traction. I think the salespeople are excited about it and they're even more excited now that we have the mobile applications, which are pretty cool. So that's been the thrust in that part of the market for us.

This is going to help us even more because shortly after year end, we'll be releasing the BlackBerry platform and the Android platform, which will open up the entire market for us as opposed to just the iPhone, iPad market.

The high single-digit sales growth for the year sort of in the context of what you've seen in the first quarter, sort of the pipeline and backlog that you know going forward for the back three quarters. The small market obviously did well. And mid-large I think you suggested down mid-single digits. GlobalView may -- somewhat of the grow over this quarter. But directionally, qualitatively, how should we think about sort of the sales growth across the subsegments for the year?

That's a good question. And we typically don't go there for those kinds of reasons, but if we are budgeting, just to give you a way to think about it, if we're budgeting at the end of one fiscal year for the following year, we're trying to drive 8% to 12% growth almost across every businesses in terms of new sales bookings. Now if one unit has an exceptionally strong fourth quarter, then that grow over for the following year instead of being 10%, may be 6% or 7% because they had a strong fourth quarter. So I think within the context of what we're talking about here, generally speaking, we're pushing toward 8% to 10% growth in terms of new sales in every one of our businesses in terms of the planning process. So to the extent that a majors or nationals was down mid-single digits, then we're still looking for them to grow 8% to 10% for the year. Majors had a very strong finish last year, so it may be a little bit lower than that number in terms of their full year forecast. But nothing remarkable to note in terms of the composition of that growth.

Quick one for Chris. Just any seasonality we should be thinking about on Cobalt?

On Cobalt? No, I think that's not a particularly seasonal business. It's pretty consistent throughout the year.

Most of their pricing is on a per dealer per service offering as opposed to number of vehicles sold. They provide a lot of business analytics back on helping dealers understand that. But it's more driven whether it's an OEM program in terms of an offering that they're rolling out or a requirement that they have for their dealers as opposed to vehicle sales.

[Operator Instructions] Your next question is from the line of Jason Kupferberg with UBS.

Going back to last quarter you guys had that really nice waterfall chart to walk us from fiscal '10 to fiscal '11. And if I recall, you showed a price increase there for fiscal '11, I think, of less than 1%. Do you consider that kind of range to be the new normal, if you will, beyond this current fiscal year? Or do you expect to regain some more pricing power when employment markets improve because it sounds like broadly speaking clearly the worst of the major discounting is over. But just trying to gauge sort of the new normal going forward.

I think the way I would think about it is our focus was more around improving retention than it was in optimizing price. So as we were going through last year and as we were preparing for this year, the focus was on sales and retention as opposed to driving margin expansion through a higher price increase. And if the economy stays in the shape that it's in, then I would suspect that will continue more in the future as opposed to going back up to the 1.5% to 2% level. If the economy gets back to where they're adding 2% to 3% growth in the workforce, and people are more buoyant about buying our products and services, then I would expect the appetite to more optimize that price would increase in time.

Any updated view on how we should think about your dividend conceptually? The current payout ratio I think has been increasing gradually over the last few years. I mean, are you at a point of kind of equilibrium now? Or do you see a room for it to increase?

Yes, I think what we have said, you're absolutely right, it has increased over the last several years. We are comfortable with it in the 50%, 55-kind-of-percent payout ratio. And so I think as we go forward, you would expect to see that increasing with earnings per share. Obviously, it's subject to board approval and clearly, as you know, we normally announce our dividend in the November timeframe. And that will be a discussion at the November board meeting.

Your next question is from Jim Kissane with Bank of America Merrill Lynch.

The GlobalView implementations, Gary, how are those going and maybe an update on GlobalView breakeven?

The implementations on GlobalView in the backlog are proceeding pretty much as planned. The big challenge we have in GlobalView is finding the SAP talent around the world to do some of these implementations. And to that extent, we have to use consultants more than frankly we would like to, which does put pressure on the bottom line. GlobalView continues to be a drag in '11. And I think our current forecast is to get through the breakeven in one of the second half quarters. I don't remember which one, in the '12.

And, Chris, a quick follow-up. Did you lower your desired cash level from $1.3 billion to $1 billion? I'm just trying to reconcile that depending the duration add a little bit.

What we did was we've said at one point, we were saying that we wanted to hold about $1.5 billion through the downturn. And I think in the last two quarters I've said that's going to -- beginning to float down more towards $1 billion. This particular quarter, we went down from $1.8 billion at the end of June to the $1.3 billion level, primarily driven by the $500 million of acquisitions that we had. Cash flow can bring that up and obviously future acquisitions and share repurchases, et cetera, will tamp that down, but the minimum level that we see is $1 billion.

And Jim, the duration that Chris spoke about is on the client funds in his opening comments not the corporate funds, which is still short.

The increase in the client fund yield that was due to extending the duration?

We did pick up some from extending because what we saw historically, we were getting more spread than we normally see between three and five years and five and seven years, so we took advantage of that. And there'd been some nice increases in corporate yields as well, very high quality. As a matter of public record, companies like Microsoft and Wal-Mart, with very high quality, are issuing debt and tenured debt kind of maturities. So we did take advantage of that, Charles (sic).

Your next question is from David Togut with Evercore Partners.

What specific features does the RUN product have in Small Business that can't be found either in your direct national competitors' offering or that of local regionals?

Well, the most obvious one is the mobile applications are very complete. And you can actually do a realtime payroll on those apps, including all the banking information, all the reporting access, all the register's access, the employee records, standard reporting, et cetera. So the breadth of the offering versus just being able -- and some of the other regional competitors have inquiry kind of capability where you can see things or do some basic things, but the mobile application is much more complete. That being said, the RUN platform is, getting mobile for a moment, exceptionally user-friendly. It's very easy to navigate. It is literally a realtime payroll. So you run your payroll, you have the entire thing back. You can preview everything. You then release the payroll. You can do all your direct deposits, everything through that. So it's a very complete offering. But if you just go down and check a box, well, can I calculate a check and hold this record or whatever, I'd tell you it's more of a presentation in realtime nature and ease of use as it is opposed to just that purely functional can we calculate a check or print a report. But if you ever look at them side by side, it would be very apparent to you.

Just a quick follow-up on Dealer. You mentioned significant market share gains there. Is that coming in the core DMS business or from your strategy to expand share of wallet in other applications?

We continue to do quite well against our national competitor there. We continue to have some drag from DealerTrack and our corner [ph]. We kind of quantify it as cheap but cheerful. We're in the low end of the market so we're doing very well in the mid- and high end of the market where the revenue is as opposed to the dealer count. And we're getting great expansion particularly in our voice over IP and lead management and the other kind of things that are going to flow out of Cobalt and our BZ results.

Your next question is from Tien-Tsin Huang with JPMorgan. Tien-Tsin Huang: I wanted to ask about retention as well because obviously that was up 1.3 points. You're expecting it to be up. It looks like half a point for the year. I'm trying to understand what that means. Do you expect it to pick up in attrition for the rest of the year or is it just a comparison issue?

No. It's just a comparison issue. So you've got to look -- when you look quarterly it's not the same as looking at the full year retention number. So the retention we expect to be up in the year brings us up to about the highest levels of retention that we've experienced ever.

Yes. And Tien-Tsin, we had a very strong retention quarter in the fourth quarter, I think it was up 1.3. So got 1.6, 1.7. So you're going to have a difficult compare in the fourth quarter. And retention is a little bit -- just like balances, you don't want to put the cart up in front of the horse. Even though we're optimistic, I'm not sure I want to forecast purely based on it feels good right now. So we are being appropriately cautious there to make sure that we don't put the cart in front of the horse. Tien-Tsin Huang: It's prudent. I asked that because obviously it's an important driver for revenue and earnings.

We get it. Tien-Tsin Huang: Gary, you were pretty cautious about the first half of the year last quarter, especially on the investment side. SO I'm curious what drove the over performance this quarter. I mean I heard all the details and we saw the guidance raise, but I guess what I'm trying to get at is how much of the improvement here is real versus perhaps ADP being too conservative in the outlook before?

I think it's all of the above. I mean, we like to make the forecast that we make. So I'm going to be appropriately cautious. You wouldn't want me to be otherwise, I don't think. Our stepped-up rates and improved retention certainly helped. Strong sales in the fourth quarter helped as well. And the retention was up again. To reiterate, we're really big in terms of that piece. And typically in our business, as goes the first quarter, goes the year. So we're appropriately more optimistic now than we would have three months ago.

I'd tell you in addition, the trend, as proud as we were of the inflection points in the fourth quarter, one quarter doesn't make the trend. Now it seems those metrics continue to improve into the first quarter. I would say in addition, when you're planning, we plan for certain level of revenue growth. And the revenue growth in the first quarter exceeded our expectations. So the revenue showed up and that influences our thinking as we go forward. So I think it's a combination of all those things.

Your next question is from David Grossman with Stifel, Nicholas.

When we talked about the international growth, Gary, will GlobalView be the primary driver of growth internationally? Or if there are other data points we should focus on, what are those data points?

Well, GlobalView is our platform of choice for multinational companies. We'll continue with the best-of-breed products where you're selling country-specific implementation. So GlobalView won't be the domestic payroll product for China or the domestic payroll product for France. And so that's really where we're focused on. The difficulty with GlobalView is that this is big deals, you get big deal-itis for the ups and downs of when you close them. And in tight terms, those decisions tend to get protracted. The good news about GlobalView is that we virtually have no losses and the clients, in my view, are going to stay 15 to 20 years because of the size of the investment that we've made and that they've made. But clearly, it's our multinational platform of choice.

We do see good growth in the best-of-breed as we call it or the in-country payroll. And on the GlobalView side, the only thing that I would add is that it's GlobalView in my mind has kind of morphed to being the payroll provider for multinationals worldwide whether they have 50 people in the country, 3,000 people in the country or a combination thereof. And so there's different solution sets to being that single provider. And quite frankly a multinational doesn't necessarily care what platform that you're supporting them on, it's the ubiquitous information and getting that information using our templates, so can have best-of-breed performing the function in one country and GlobalView in another. And as long as we're able to knit that together and provide the information in total worldwide, that's what they're looking for. So GlobalView is more than just a product serving the couple of thousand employees in a country. It's kind of an overall solution to a multinational.

Switching gears to the margins. What assumptions underlie the positive margin comparisons in the second half of the year? I mean is it contingent on growth? Or do you have pretty good visibility that on the expansion once we get into the last two quarters of the fiscal year?

If you remember the way we invested last year, we began investing in some areas in the January timeframe, so our third quarter. And if you think about our fourth quarter was where we ramped up some additional investments as well. And so the compare is a lot easier for us in the second half of the year because of that grow-over issues. So on top of that, you have the merit increase issue that occurred in the fourth quarter of last year. So the headcount increases, the merit increases, the benefit cost increases, all of those things on a compare versus the first quarter or the second quarter last year are difficult and have become easier to compare in the second half of the year.

Your next question is from Mark Marcon with RW Baird.

I'm just wondering with regards to -- can you talk a little bit about beyond payroll's broadly speaking? Just what percentage of total ES does beyond payroll now compose? And what percentage of the new sales is that comprising?

I think it's about half and half is what we've said in the past.

In terms of the sales. A little more than half is on the payroll side. On the revenue mix, it's about 70-30, 70% being the payroll.

And then within beyond payroll. What would the growth have been if we'd stripped out Workscape?

I think we've said it was 2% of that growth was Workscape.

So it sounds like got beyond payroll continues to do extremely well. GlobalView is doing well. Can you talk about some of the other areas? And also what are your expectations with regards to with the new healthcare legislation coming along, your benefits platform. How big can that become? How important? Are there any threats from the healthcare legislation? Any way that that could be a negative?

Let me take the first part of that question which is I think asking where else we saw growth beyond payroll. And we did see obviously growth in the payroll portion, but in the beyond payroll area, some of the other areas of note were the ASO, our HR BPO offering in the small businesses, significant growth in that area. Retirement services was up as well. Tax credit service was up as well as was insurance marked a small base. But nice growth in all of those areas.

In terms of healthcare, Mark, I mean the regs are still being written, and we are involved along with some other folks in trying to be sure that they get drafted in such a way that we can do a good job of complying with them. I think the healthcare legislation as it's written is going to be a benefit to ADP over time because, a, it's going to be more complex. Reporting is going to be much more detailed. Enforcement by the IRS and others is going to be much more than what it is today. And the heart and soul of that database is all in payroll and HR kind of record keeping. So I think it's going to be good for the PEO, I think it's going to good for ASO, and good for the general employer services business across the industry. We think our acquisition of employees that we made a few years back, coupled with the acquisition of Workscape and the bundling in of employees into our Workforce Now product, which is at the thousand, to call it 3,000-person level, is going to clearly drive acceleration in our Benefits business. And we clearly see that the Benefits business can be well beyond $0.5 billion business for us in the planning horizon. So we're pretty excited about what's happening in Benefits, and the complexity is swelling out of Washington. I hated it at a personal level, but from the business level, it's pretty good.

Can you talk on two separate topics? One would be just how should we think about the PEO margins long term? Obviously, there's some pass-throughs that we're going through right now. But longer term, how should we think about that scaling? And then last question would be on the float yield, how should we think about that as we go beyond this current year liquid? How much is going to be coming off per year? Chris, you've done some great updates on that. Just what's the latest thinking there in terms of where we're rolling off and where it would be currently reinvested given the current future's curves?

Let me take the portfolio item. But the portfolio, it's a little bit early to tell because how we're impacted next year, and we'll obviously give you some insights on that as we go forward in the year, but a lot of it has to do with the balance growth this year and what you would expect to see balance growth next year. It has a lot to do with the interest rate expectations whether the forward-yield curve plays out or whether those interest rates stay exactly where they are. I think we'll know more about that as we progress through the year. And so it's a little premature to guess that far into the future, and so more to come on that. But as you can see, we've been able to overcome some of that drag this year, and so we'll continue to focus on that. The first question was around the PEO, I guess. And the PEO, obviously, the margins are on the pressure as you grow benefit pass-throughs significantly like we have. And it's also under some pressure from the standpoint that aren't normal increases in that area when benefits are going up significantly, it's kind of a total cost. And so you don't want to hurt your retention by increasing the pricing. So it's not a competitive pricing issue per se, it's just they're experiencing significant increases in the benefits and unemployment and everything else. What is helpful in that business is that our pricing tends to be around the total payroll. So as pays per control come back, as you start adding employees as you start giving merit increases, there's a natural lift in that business that should help margins going forward. I know that I've talked about this in the past, but if you strip out those pass-throughs and look out how much we make on the bottom line versus the pricing revenue excluding those benefit pass-throughs, those margins are very, very healthy margins. And they are certainly under pressure from the standpoint of the increase in benefit pass-throughs.

So the underlying incremental margins, just on the pure processing side, continue to trend in the positive direction so we should, longer term, continue to see some improvement there, right?

Yes. But to the extent, Mark, healthcare cost increases outstrip just on normal price increase, you'll see a permanent drag on the margin in our PEO. But the real way to think about it is if you take that out and look at the repetitive processing revenue.

[Operator Instructions] Your next question is from Michael Baker with Raymond James.

First, I was wondering if you could give some color in terms of what you're seeing on the hiring front within the different segments, that being small business, mid- and large. I know you already commented on international so no need to repeat that.

When you say hiring, you mean?

Well, kind of like pace type figure broken down just a little bit more in terms of, like, size employer rough sense or some of the dynamics. So it leads on a relative basis we can get a sense for how those companies might be responding given the economy.

The metric that we report on is from our AutoPay product, which is kind of in the middle there's some overlap below 50% as well on the high-end of the market it, but that's kind of the core metric that we look at. We did see some positive uplifts in our National Accounts business this quarter as well, which was also negative in the fourth quarter. So there was some movement in there as well. And Small Business just continues to kind of bump along with a slight positive, as I recall.

The one thing I didn't hear you kind of talk about in healthcare that it could be platform for growth and just wondering if you'd be willing to comment specifically as are there plans to kind of leverage your processing capabilities to provide some of the exchange dynamics that are needed in the marketplace?

That market is still developing to some degree. And our main thrust there is to make sure that we are included as an option on the exchange. But we don't have a major thrust to become the exchange, if that's your question.

Yes, that is. Because I saw one of your competitors win some business as it related to the exchange and, I was just wondering whether or not you plan to become the exchange, so to speak.

No, no current plans to do that. So let me kind of close this up. We appreciate everybody attending today. I think you can tell by the tone of the conversation that we're much more optimistic than we were three months ago. I think my comments around as goes the first quarter goes the year is a great way to think about it. Our product position remains quite strong and the sales force is in good shape. And we're optimistic about the future. So we appreciate you coming today. And we look forward to talking to you next quarter.

This concludes today's conference call. You may now disconnect your line.