FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1996
-------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------- ----------------
For Quarter Ended August 31, 1996 Commission file number 0-11330
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PAYCHEX, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 16-1124166
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
911 PANORAMA TRAIL SOUTH, ROCHESTER, NEW YORK 14625-0397
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (716)385-6666
------------
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(Former name, former address and former fiscal year, if
changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES x . NO .
----- -----
CLASS OUTSTANDING AT AUGUST 31,1996
- ------------------------------ -----------------------------------
(Common Stock, $.01 Par Value) (71,674,863 Shares)
<PAGE>
PAYCHEX, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION PAGE
- ------------------------------ ----
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED BALANCE SHEETS - AUGUST 31, 1996 AND
MAY 31, 1996 3
CONSOLIDATED STATEMENTS OF INCOME - THREE MONTHS
ENDED AUGUST 31, 1996 AND AUGUST 31, 1995 5
CONSOLIDATED STATEMENTS OF CASH FLOWS - THREE MONTHS
ENDED AUGUST 31, 1996 AND AUGUST 31, 1995 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -
AUGUST 31, 1996 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10
PART II. OTHER INFORMATION
- --------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13
SIGNATURES 14
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<PAGE>
PART I. FINANCIAL INFORMATION
PAYCHEX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31, MAY 31,
1996 1996
----------- -------
ASSETS (UNAUDITED)
(in thousands)
<S> <C> <C>
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 18,920 $ 19,999
INVESTMENTS 121,208 102,967
INTEREST RECEIVABLE 7,098 7,385
TRADE ACCOUNTS RECEIVABLE 42,470 42,076
PREPAID EXPENSES AND OTHER
CURRENT ASSETS 2,161 1,903
DEFERRED INCOME TAXES 1,825 1,419
-------- ---------
TOTAL CURRENT ASSETS 193,682 175,749
PROPERTY AND EQUIPMENT
LAND AND IMPROVEMENTS 2,787 2,787
BUILDINGS 24,244 24,145
DATA PROCESSING EQUIPMENT 44,480 43,439
FURNITURE, FIXTURES AND EQUIPMENT 39,469 37,921
LEASEHOLD IMPROVEMENTS 2,809 2,718
-------- ---------
113,789 111,010
LESS ALLOWANCE FOR DEPRECIATION
AND AMORTIZATION 62,431 60,355
-------- ---------
NET PROPERTY AND EQUIPMENT 51,358 50,655
OTHER ASSETS 5,548 4,945
-------- ---------
TOTAL ASSETS $250,588 $ 231,349
======== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
PAYCHEX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, CONT'D.
<TABLE>
<CAPTION>
AUGUST 31, MAY 31,
1996 1996
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(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands)
<S> <C> <C>
CURRENT LIABILITIES
TRADE ACCOUNTS PAYABLE $ 3,429 $ 4,183
ACCRUED COMPENSATION AND
RELATED ITEMS 18,917 19,120
RESERVE FOR WORKERS' COMPENSATION 1,269 1,235
ACCRUED INCOME TAXES 7,386 573
OTHER ACCRUED EXPENSES 7,207 5,941
DEFERRED REVENUE 4,053 4,934
---------- ----------
TOTAL CURRENT LIABILITIES 42,261 35,986
OTHER LIABILITIES
DEFERRED INCOME TAXES 249 416
RESERVE FOR WORKERS' COMPENSATION 865 865
CUSTOMER DEPOSITS 1,155 1,038
OTHER LONG-TERM LIABILITIES 1,096 848
---------- ----------
TOTAL LIABILITIES 45,626 39,153
STOCKHOLDERS' EQUITY
COMMON STOCK, $.01 PAR VALUE,
AUTHORIZED 150,000,000 SHARES:
ISSUED 71,674,863 AT AUGUST
31, 1996 AND 71,632,456 AT
MAY 31, 1996 717 716
ADDITIONAL CAPITAL 30,354 30,112
RETAINED EARNINGS 173,891 161,368
--------- ----------
204,962 192,196
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $250,588 $ 231,349
========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
PAYCHEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
AUGUST 31,
---------------------
1996 1995
---- ----
(in thousands, except per share amounts)
<S> <C> <C>
PAYROLL REVENUE $ 88,927 $ 76,173
PEO REVENUE 77,115 47,314
-------- --------
TOTAL REVENUE $166,042 $123,487
-------- --------
PEO DIRECT COSTS 74,769 45,628
OPERATING COSTS 26,564 23,375
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 42,612 38,201
-------- --------
OPERATING INCOME 22,097 16,283
OTHER INCOME 1,485 1,386
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INCOME BEFORE INCOME
TAXES 23,582 17,669
INCOME TAXES 6,509 4,888
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NET INCOME $17,073 $12,781
======= =======
EARNINGS PER SHARE $ .24 $ .18
======= =======
CASH DIVIDENDS PER
SHARE $ .06 $ .04
======= =======
WEIGHTED AVERAGE SHARES
OUTSTANDING 71,653 71,003
======= =======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
PAYCHEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED AUGUST 31,
-----------------------------
1996 1995
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(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
NET INCOME $17,073 $ 12,781
ADJUSTMENTS TO RECONCILE NET INCOME
TO CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 3,651 3,550
NET CHANGE IN DEFERRED INCOME TAXES (649) 161
PROVISION FOR BAD DEBTS 368 316
NET REALIZED GAIN ON SALES OF
AVAILABLE-FOR-SALE SECURITIES (29) (251)
CHANGES IN OPERATING ASSETS AND
LIABILITIES:
TRADE ACCOUNTS RECEIVABLE (762) (1,864)
ACCRUED INTEREST RECEIVABLE 287 480
PREPAID EXPENSES AND OTHER
CURRENT ASSETS (258) (746)
TRADE ACCOUNTS PAYABLE AND OTHER
CURRENT LIABILITIES 7,122 4,382
DEFERRED REVENUE (881) (729)
RESERVE FOR WORKERS' COMPENSATION 34 317
CUSTOMER DEPOSITS 117 97
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 26,073 18,494
INVESTING ACTIVITIES
INVESTMENT PURCHASES OF AVAILABLE-
FOR-SALE SECURITIES (25,340) (30,853)
PROCEEDS FROM SALES OF AVAILABLE-
FOR-SALE SECURITIES 7,297 18,457
PROCEEDS FROM MATURITIES OF AVAILABLE-
FOR-SALE SECURITIES -0- 2,250
ADDITIONS TO PROPERTY AND EQUIPMENT,
NET OF DISPOSALS (4,178) (4,998)
NET CHANGE IN OTHER ASSETS (780) (526)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (23,001) (15,670)
<PAGE>
FINANCING ACTIVITIES
PROCEEDS AND TAX BENEFIT FROM EXERCISE
OF STOCK OPTIONS 244 334
DIVIDENDS PAID (4,643) (2,756)
OTHER 248 12
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NET CASH USED IN FINANCING ACTIVITIES (4,151) (2,410)
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INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (1,079) 414
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 19,999 14,812
CASH OBTAINED FROM PAY-FONE ACQUISITION -0- 805
---------- --------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 18,920 $ 16,031
========== ========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
PAYCHEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
AUGUST 31, 1996
A) THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF PAYCHEX, INC. AND
ITS WHOLLY-OWNED SUBSIDIARIES HAVE BEEN PREPARED IN ACCORDANCE WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES FOR INTERIM FINANCIAL
INFORMATION AND WITH THE INSTRUCTIONS TO FORM 10-Q AND ARTICLE 10 OF
REGULATION S-X. ACCORDINGLY, THE CONSOLIDATED FINANCIAL STATEMENTS DO
NOT INCLUDE ALL OF THE INFORMATION AND FOOTNOTES REQUIRED BY GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES FOR COMPLETE FINANCIAL STATEMENTS. IN
THE OPINION OF MANAGEMENT, ALL ADJUSTMENTS CONSIDERED NECESSARY FOR A
FAIR PRESENTATION HAVE BEEN INCLUDED. THE ACCOMPANYING FINANCIAL
STATEMENTS SHOULD BE READ IN CONJUNCTION WITH THE NOTES TO FINANCIAL
STATEMENTS PRESENTED IN THE COMPANY'S FORM 10-K AND ANNUAL REPORT FOR
THE YEAR ENDED MAY 31, 1996.
B) DURING THE THREE-MONTH PERIOD ENDING AUGUST 31, 1996, 42,407
SHARES OF STOCK WERE ISSUED UPON EXERCISE OF STOCK OPTIONS.
C) ON AUGUST 26, 1996, THE COMPANY COMPLETED ITS MERGER WITH NATIONAL
BUSINESS SOLUTIONS, INC. (NBS), NOW PAYCHEX BUSINESS SOLUTIONS, INC.
(PBS) A PROFESSIONAL EMPLOYER ORGANIZATION, HEADQUARTERED IN ST.
PETERSBURG, FLORIDA. THE OUTSTANDING COMMON STOCK OF NBS WAS EXCHANGED
FOR 2,934,496 SHARES OF PAYCHEX COMMON STOCK, VALUED AT $140,000,000.
THE TRANSACTION WAS ACCOUNTED FOR AS A POOLING OF INTERESTS; THEREFORE,
PRIOR PERIOD FINANCIAL STATEMENTS HAVE BEEN RESTATED TO REFLECT THIS
MERGER.
PBS IS A LEADING PROFESSIONAL EMPLOYER ORGANIZATION ("PEO"), WHICH
PROVIDES SMALL AND MEDIUM-SIZED BUSINESSES WITH AN OUTSOURCING SOLUTION
TO THE COMPLEXITIES AND COSTS RELATED TO EMPLOYMENT AND HUMAN RESOURCES.
D) ON AUGUST 29, 1996, THE COMPANY ACQUIRED ALL OF THE OUTSTANDING STOCK
OF THE PAYROLL SERVICE, INC., IN EXCHANGE FOR APPROXIMATELY 55,000
SHARES OF PAYCHEX COMMON STOCK IN A BUSINESS COMBINATION ACCOUNTED FOR
AS A POOLING OF INTERESTS. RESULTS OF OPERATIONS PRIOR TO THE MERGER
HAVE NOT BEEN RESTATED AS THE EFFECTS WOULD BE IMMATERIAL.
E) CERTAIN AMOUNTS FROM THE PRIOR YEAR ARE RECLASSIFIED TO CONFORM TO
FISCAL 1997 PRESENTATIONS.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), CONT'D.
NOTE F - SEGMENT INFORMATION
THE COMPANY OPERATES IN TWO MAJOR SEGMENTS, PAYROLL AND PROFESSIONAL EMPLOYER
ORGANIZATION (PEO). THE PAYROLL SEGMENT IS ENGAGED IN THE PREPARATION OF
PAYROLL CHECKS, INTERNAL ACCOUNTING RECORDS AND ALL FEDERAL, STATE AND LOCAL
PAYROLL TAX RETURNS FOR SMALL TO MEDIUM-SIZED BUSINESSES. THE PEO SEGMENT
SPECIALIZES IN PROVIDING SMALL AND MEDIUM-SIZED BUSINESSES WITH COST-EFFECTIVE
OUTSOURCING SOLUTIONS FOR THEIR EMPLOYEE BENEFITS. AS AN OUTSOURCING
SOLUTION, THE PEO RELIEVES THE BUSINESS OWNER OF HUMAN RESOURCES
ADMINISTRATION, EMPLOYMENT REGULATORY COMPLIANCE, WORKERS' COMPENSATION
COVERAGE, HEALTH CARE AND OTHER EMPLOYEE RELATED RESPONSIBILITIES. CONSISTENT
WITH PEO INDUSTRY PRACTICE, REVENUE INCLUDES ALL AMOUNTS BE BILLED TO CLIENTS
FOR THE SERVICES PROVIDED BY THE PEO.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED AUGUST 31, 1996 1995
(in thousands, except per share amounts)
- ------------------------------------------------------------------------------------
<S>
REVENUE <C> <C>
PAYROLL $ 88,927 $ 76,173
PEO 77,115 47,314
-------------------------
TOTAL REVENUE 166,042 123,487
PEO DIRECT COSTS 74,769 45,628
-------------------------
REVENUE, LESS PEO DIRECT COSTS 91,273 77,859
OPERATING COSTS
PAYROLL 25,256 22,384
PEO 1,308 991
-------------------------
TOTAL OPERATING COSTS 26,564 23,375
SELLING, GENERAL AND ADMIN
PAYROLL 40,879 36,705
PEO 237 171
-------------------------
TOTAL SELLING, GENERAL AND ADMIN 41,116 36,876
OPERATING INCOME
PAYROLL 22,792 17,084
PEO 801 524
-------------------------
TOTAL OPERATING INCOME 23,593 17,608
GENERAL CORPORATE EXPENSES 1,496 1,325
OTHER INCOME - NET 1,485 1,386
-------------------------
INCOME BEFORE TAXES $ 23,582 $ 17,669
=========================
</TABLE>
<PAGE>
PAYCHEX, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis reviews the Company's operating results
for the quarter ended August 31, 1996 and 1995, and its financial condition
at August 31, 1996. The focus of this review is on the underlying business
reasons for significant changes and trends affecting revenues, net income,
and financial condition. This review should be read in conjunction with the
May 31, 1996 Consolidated Financial Statements, and the related Notes to
Consolidated Financial Statements, as well as Form 8-K filed on July 9, 1996
which contained audited financial statements of National Business Solutions,
Inc., discussed below. Forward-looking statements in this management's
discussion and analysis are qualified by the cautionary statement at the end
of this discussion.
Results of operations for 1995 and 1996 have been restated to reflect
Paychex' August 26, 1996 merger with National Business Solutions, Inc. (NBS)
now Paychex Business Solutions, Inc. (PBS), a Professional Employer
Organization (PEO) headquartered in St. Petersburg, Florida. The transaction
was accounted for as a pooling of interests.
Results of Operations
_____________________
Paychex earned a record consolidated net income of $17.1 million or $.24 per
share for the first quarter ended August 31, 1996, up 34% over consolidated
net income of $12.8 million or $.18 per share for the same quarter last year.
Consolidated revenue reached $166.0 million, an increase of 34% over $123.5
million for the same period last year. First quarter results included
approximately $0.5 million of merger costs associated with the acquisition of
NBS.
Payroll Segment
_______________
Payroll service revenue for the first quarter ended August 31, 1996 rose 17%
to a record $88.9 million, up from $76.2 million for the same quarter last
year. The gain resulted primarily from clients utilizing the basic payroll
service as well as clients using Taxpay and Direct Deposit products. Strong
revenue gains were also achieved from the Human Resource Services Division.
During the quarter the percentage of the client base using Taxpay increased
from 56% to 59% as the Company began to benefit from the Federal mandate
requiring small businesses to file payroll taxes electronically as of July 1,
1997.
Paychex currently serves almost 240,000 payroll clients, with approximately
141,500 utilizing Taxpay and approximately 56,000 clients taking advantage of
Direct Deposit for their employees. The Company expects continued increases
in revenue for all products and services throughout the year.
Operating costs were 28% of revenue for the first quarter, down from 29% for
the same period last year. Most of the decrease resulted from lower costs,
as a percentage of revenue, associated with delivery, forms and supplies and
equipment maintenance. Full year operating costs, as a percentage of
revenue, are expected to be slightly lower than last year.
<PAGE>
Selling, general and administrative expenses were 46% of revenue at August
31, 1996, down from 48% in last year's first quarter. As a percentage of
revenue, administrative payroll and sales wages were lower in the current
quarter versus the same period last year. Selling, general and
administrative expenses, as a percentage of revenue, have been decreasing
over the past few years, and the Company expects this trend to continue in
fiscal 1997.
PEO Segment
___________
PBS, a professional employer organization, specializes in providing small and
medium-sized businesses with cost-effective outsourcing solutions for their
employee benefits. As an outsourcing solution, PBS relieves the business
owner of human resources administration, employment regulatory compliance,
workers' compensation coverage, health care, 401(k) administration and other
employee related responsibilities.
For the quarter ended August 31, 1996, PBS gross revenue rose 63% to a record
$77.1 million from $47.3 million in the same quarter last year. Operating
income from the PEO business increased 53% to $0.8 million from $0.5 million
in the same quarter last year. Growth in revenues and operating income
resulted from strong increases in the number of clients and worksite
employees.
PBS has started to offer the PEO services to Paychex payroll clients in
Florida and plans to expand to other select locations.
PBS currently serves over 230 clients, representing in excess of 9,600 work
site employees. The client base and worksite employees are expected to
continue to grow as PBS expands the offering of its PEO services to existing
payroll clients.
Liquidity and Capital Resources
_______________________________
Net cash provided by consolidated operating activities totaled $26.1 million
for the first quarter of 1997 as compared to $18.5 million in 1996. Net
income for the current quarter contributed a record $17.1 million,
representing a 34% gain over net income of $12.8 million achieved the same
quarter last year.
Company owned investments and investments of client funds held for Taxpay and
Direct Deposit consist of municipal securities issued by various governmental
agencies and short-term money market securities. At August 31, 1996, the
total Taxpay and Direct Deposit funds held by the Company were $606.3
million. The Company continues to control credit and market risks by
investing primarily in AAA and AA rated municipal securities, limiting
amounts that can be invested in any single instrument, and investing in
short-to intermediate-term instruments which limit sensitivity to interest
rate changes.
Proceeds from sales of securities during the current quarter were
significantly lower than the comparable period last year when the Company
managed its investment portfolio to realize gains and minimize risk
associated with market interest rates that were declining at that time.
<PAGE>
Capital expenditures for the first quarter totalled $4.7 million. In
addition, the Company began its planned upgrade of laser printing equipment
in branch offices through five year operating leases. Capital expenditures
for the remainder of the year are estimated to range between $11 million to
$17 million.
Projected cash flows are expected to be adequate to support normal business
operations, planned capital expenditures and dividend payments. Furthermore,
the Company has $200 million of unsecured bank lines of credit available for
its use. As of August 31, 1996, there were no outstanding borrowings under
these lines of credit.
Other
_____
In an effort to give investors a well-rounded view of the Company's current
condition and future opportunities, this Form 10-Q includes comments by the
Company's management about future performance and results. Because they are
forward-looking, these forecasts involve uncertainties. They include risks
of general market conditions, including demand for the Company's products and
services, competition, and price levels; changes in the laws regulating
collection and payment of payroll taxes and employee benefits, including
401(k) plans and Section 125 plans; delays in the development and marketing
of new products and services; the possibility of catastrophic events that
could impact the Company's operating facilities, computer technology, and
communication systems; changes in short-and long-term interest rates and the
credit rating of municipal securities held in the Company's investment
portfolios.
<PAGE>
PART II. OTHER INFORMATION
PAYCHEX, INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
THERE WERE NO EXHIBITS APPLICABLE FOR THE THREE MONTH PERIOD ENDED
AUGUST 31, 1996.
(B) REPORTS ON FORM 8-K:
ON JULY 9, 1996, THE COMPANY FILED A FORM 8-K ANNOUNCING THAT ON JUNE 25,
1996, THE COMPANY REACHED AN AGREEMENT TO MERGE WITH NATIONAL BUSINESS
SOLUTIONS, INC. (NBS), HEADQUARTERED IN ST. PETERSBURG, FLORIDA. THE
MERGER WAS ACCOUNTED FOR AS A POOLING OF INTERESTS AND WAS CONSUMATED ON
AUGUST 26, 1996. SEE FOOTNOTE (C) ON PAGE 8 FOR FURTHER DETAILS.
<PAGE>
SIGNATURES
----------
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
PAYCHEX, INC. AND SUBSIDIARIES
DATE: OCTOBER 14, 1996 /s/ B. THOMAS GOLISANO
----------------------
B. THOMAS GOLISANO
CHAIRMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
DATE: OCTOBER 14, 1996 /s/ JOHN M. MORPHY
----------------------
JOHN MORPHY
VICE PRESIDENT OF FINANCE
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUGUST
31, 1996 FINANCIAL STATEMENTS OF PAYCHEX, INC. AND SUBSIDIARIES AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000723531
<NAME> PAYCHEX, INC.
<MULTIPLIER> 1,000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-1-1996
<PERIOD-END> AUG-31-1996
<EXCHANGE-RATE> 1
<CASH> 18,920
<SECURITIES> 121,208
<RECEIVABLES> 42,470
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 193,682
<PP&E> 113,789
<DEPRECIATION> 62,431
<TOTAL-ASSETS> 250,588
<CURRENT-LIABILITIES> 42,261
<BONDS> 0
0
0
<COMMON> 717
<OTHER-SE> 204,245
<TOTAL-LIABILITY-AND-EQUITY> 250,588
<SALES> 166,042
<TOTAL-REVENUES> 166,042
<CGS> 0
<TOTAL-COSTS> 143,945
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30
<INCOME-PRETAX> 23,582
<INCOME-TAX> 6,509
<INCOME-CONTINUING> 17,073
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,073
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
