Paychex (PAYX) 8-K Paychex, Inc. Reports Record Second Quarter Results

EXHIBIT 99.1

PRESS RELEASE OF PAYCHEX, INC. DATED DECEMBER 19, 2007

PAYCHEX, INC. REPORTS RECORD SECOND QUARTER RESULTS

Announces completion of the Company’s $1.0 billion stock repurchase program, totaling 23.7 million
shares of common stock

December 19, 2007

SECOND QUARTER FISCAL 2008 HIGHLIGHTS

• Diluted earnings per share increased 14% to $0.40 per share.

• Net income increased 11% to $147.1 million.

• Total revenue increased 12% to $507.8 million.

• Payroll service revenue increased 9% to $361.6 million

• Human Resource Services revenue increased 24% to $115.5 million.

• Operating income excluding interest on funds held for clients increased 17% to $178.7 million.

     ROCHESTER, NY, December 19, 2007 — Paychex, Inc. (“we,” “our,” or “us”) (NASDAQ:PAYX) today announced record net income of $147.1 million for the three months ended November 30, 2007 (the “second quarter”), an 11% increase over net income of $132.7 million for the same period last year. Diluted earnings per share were $0.40, an increase of 14% over $0.35 per share for the same period last year. Total revenue was $507.8 million, a 12% increase over $455.0 million for the same period last year.

     “Fiscal 2008 continues to meet our expectations and we experienced excellent margins, with operating income excluding interest on funds held for clients improving 17% over the same period last year,” commented Jonathan J. Judge, President and Chief Executive Officer of Paychex. “Our results for the second quarter were strong and included the acquisition of Hawthorne Benefit Technologies, Inc., whose BeneTrac, a web-based benefits management and administration system, contributed to the growth in Human Resource Services revenue.

     “We are also pleased to announce the completion of our $1.0 billion stock repurchase program on December 14, 2007, for a total of 23.7 million shares of common stock, with fiscal year 2008 weighted-average outstanding shares expected to be 370 million,” added Mr. Judge.

     Payroll service revenue increased 9% to $361.6 million for the second quarter from the same period last year. The increase was due to client base growth, higher check volume, and price increases.

     Human Resource Services revenue increased 24% to $115.5 million for the second quarter from the same period last year. This growth was generated from the following: retirement services client base increased 17% to 46,000 clients; comprehensive human resource outsourcing services client employees increased 22% to 401,000 client employees served; and the workers’ compensation insurance client base increased 19% to 67,000 clients. Additionally, the asset value of the retirement services client employees’ funds increased 24% to $8.9 billion.

     Total expenses increased 9% to $298.3 million for the second quarter from the same period last year as a result of increases in personnel and other costs related to selling and retaining clients, and promoting new services.

     For the second quarter, our operating income was $209.5 million, an increase of 15% over the same period last year. Operating income excluding interest on funds held for clients increased 17% to $178.7 million and improved as a percent of service revenues to 37% from 36% for the same period last year.

     For the second quarter, interest on funds held for clients increased 4% to $30.7 million attributable primarily to higher average investment balances. Corporate investment income decreased 25% to $7.5 million due to lower average investment balances resulting from the funding of the stock repurchase program, offset by higher average interest rates earned.

     Average investment balances and interest rates are summarized below:

	For the three months ended						For the six months ended
	November 30,						November 30,
$ in millions	2007			2006			2007			2006
Average investment balances:
Funds held for clients	$	3,065.4		$	2,894.2		$	3,080.0		$	2,931.7
Corporate investments	$	753.8		$	1,070.8		$	990.7		$	1,035.9
Average interest rates earned:
Funds held for clients		4.0	%		4.0	%		4.1	%		4.0	%
Corporate investments		3.9	%		3.7	%		4.0	%		3.7	%

YEAR-TO-DATE FISCAL 2008 HIGHLIGHTS

     The highlights for the six months ended November 30, 2007 are as follows:

• Record net income of $298.2 million, or $0.79 diluted earnings per share.

• Net income and diluted earnings per share increased 11% and 13%, respectively.

• Total revenue increased 11% to $1,014.9 million.

• Payroll service revenue increased 8% to $723.1 million.

• Human Resource Services revenue increased 22% to $228.8 million.

• Operating income increased 14% to $420.1 million, and operating income excluding interest on funds held for clients increased 15% to $357.0 million.

• Cash flow from operations was $358.2 million.

OUTLOOK

     Our current outlook for the full fiscal year ending May 31, 2008 has been revised to reflect slightly lower payroll service revenue growth and the decreases in the Federal Funds rate of 100 basis points since June 1, 2007. Our projections are based on current economic and interest rate conditions continuing with no significant changes. Projected revenue and net income growth are as follows:

Payroll service revenue	8	%	—	9	%
Human Resource Services revenue	20	%	—	23	%
Total service revenue	11	%	—	13	%
Interest on funds held for clients	(5	%)	—	0	%
Total revenue	9	%	—	11	%
Corporate investment income	(40	%)	—	(35	%)
Net income	11	%	—	13	%

     The effective income tax rate is expected to approximate 32%.

CONFERENCE CALL

     Interested parties may access the webcast of our Earnings Release Conference Call, scheduled for December 20, 2007 at 10:30 a.m. Eastern Time, at www.paychex.com on the Investor Relations page. The webcast will also be archived on the Investor Relations page for approximately one month. Our news releases, current financial information, SEC filings, and investor presentation are also accessible at www.paychex.com. For more information, contact:

Investor Relations:	John Morphy, CFO, or Terri Allen	585-383-3406
Media Inquiries:	Laura Saxby Lynch	585-383-3074

Page 2 of 5

ABOUT PAYCHEX

     Paychex, Inc. is a leading provider of payroll, human resource, and benefits outsourcing solutions for small- to medium-sized businesses. We offer comprehensive payroll services, including payroll processing, payroll tax administration, and employee pay services, including direct deposit, check signing, and Readychex^®. Human Resource Services include 401(k) plan recordkeeping, health insurance, workers’ compensation administration, section 125 plans, a professional employer organization, time and attendance solutions, and other administrative services for business. Paychex, Inc. was founded in 1971. With headquarters in Rochester, New York, the company has more than 100 offices and serves approximately 561,000 payroll clients nationwide. For more information about Paychex, Inc. and our products, visit www.paychex.com.

“SAFE HARBOR” STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

     Certain written and oral statements made by us may constitute “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Forward-looking statements are identified by such words and phrases as “we expect,” “expected to,” “estimates,” “estimated,” “current outlook,” “we look forward to,” “would equate to,” “projects,” “projections,” “projected to be,” “anticipates,” “anticipated,” “we believe,” “could be,” and other similar phrases. All statements addressing operating performance, events, or developments that we expect or anticipate will occur in the future, including statements relating to revenue growth, earnings, earnings-per-share growth, or similar projections, are forward-looking statements within the meaning of the Reform Act. Because they are forward-looking, they should be evaluated in light of important risk factors. These risk factors include, but are not limited to, those that are described in our filings with the Securities and Exchange Commission (“SEC”), including the most recent Annual Report on Form 10-K (“Form 10-K”) filed on July 20, 2007. Any of these factors could cause our actual results to differ materially from our anticipated results. The information provided in this document is based upon the facts and circumstances known at this time. We undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of issuance of this release, or to reflect occurrence of unanticipated events.

Page 3 of 5

PAYCHEX, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share amounts)

	For the three months ended							For the six months ended
	November 30,							November 30,
	2007		2006		% Change			2007		2006		% Change
Revenue:
Payroll service revenue	$	361,588	$	332,208		9	%	$	723,074	$	667,447		8	%
Human Resource Services revenue		115,451		93,038		24	%		228,780		187,342		22	%
Total service revenue		477,039		425,246		12	%		951,854		854,789		11	%
Interest on funds held for clients (1)		30,754		29,709		4	%		63,069		59,540		6	%
Total revenue		507,793		454,955		12	%		1,014,923		914,329		11	%
Expenses:
Operating expenses		162,452		150,870		8	%		321,767		298,954		8	%
Selling, general and administrative expenses		135,865		121,757		12	%		273,092		246,693		11	%
Total expenses		298,317		272,627		9	%		594,859		545,647		9	%
Operating income		209,476		182,328		15	%		420,064		368,682		14	%
Investment income, net(1)		7,503		9,941		(25	%)		19,740		19,357		2	%
Income before income taxes		216,979		192,269		13	%		439,804		388,039		13	%
Income taxes		69,867		59,603		17	%		141,617		120,292		18	%
Net income	$	147,112	$	132,666		11	%	$	298,187	$	267,747		11	%
Basic earnings per share	$	0.40	$	0.35		14	%	$	0.79	$	0.70		13	%
Diluted earnings per share	$	0.40	$	0.35		14	%	$	0.79	$	0.70		13	%
Weighted-average common shares outstanding		369,914		380,747					375,299		380,571
Weighted-average common shares outstanding, assuming dilution		371,404		382,433					376,903		382,172
Cash dividends per common share	$	0.30	$	0.21		43	%	$	0.60	$	0.37		62	%

⁽¹⁾ Further information on interest on funds held for clients and investment income, net, and the short- and long-term effects of changing interest rates can be found in our filings with the SEC, including our Form 10-K and Quarterly Reports on Form 10‑Q, as applicable, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and subheadings “Results of Operations” and “Market Risk Factors.” These filings are accessible at our website www.paychex.com.

Page 4 of 5

PAYCHEX, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amount)

	November 30,		May 31,
	2007		2007
	(unaudited)		(audited)
ASSETS
Cash and cash equivalents	$	52,926	$	79,353
Corporate investments(1)		414,028		511,772
Interest receivable		38,564		53,624
Accounts receivable, net of allowance for doubtful accounts		213,787		186,273
Deferred income taxes		—		23,840
Prepaid income taxes		14,272		8,845
Prepaid expenses and other current assets		24,307		24,515
Current assets before funds held for clients		757,884		888,222
Funds held for clients(1)		3,471,720		3,973,097
Total current assets		4,229,604		4,861,319
Long-term corporate investments(1)		9,117		633,086
Property and equipment, net of accumulated depreciation		264,902		256,087
Intangible assets, net of accumulated amortization		69,893		67,213
Goodwill		433,115		407,712
Deferred income taxes		14,143		15,209
Other long-term assets		5,581		5,893
Total assets	$	5,026,355	$	6,246,519
LIABILITIES
Accounts payable	$	63,359	$	46,961
Accrued compensation and related items		111,845		125,268
Deferred revenue		5,948		7,758
Deferred income taxes		2,119		—
Litigation reserve		23,522		32,515
Other current liabilities		47,080		42,638
Current liabilities before client fund deposits		253,873		255,140
Client fund deposits		3,457,867		3,982,330
Total current liabilities		3,711,740		4,237,470
Accrued income taxes(2)		14,620		—
Deferred income taxes		7,318		9,567
Other long-term liabilities		48,266		47,234
Total liabilities		3,781,944		4,294,271
STOCKHOLDERS’ EQUITY
Common stock, $.01 par value; Authorized: 600,000 shares; Issued and outstanding: 363,673 shares as of November 30, 2007, and 382,151 shares as of May 31, 2007, respectively		3,637		3,822
Additional paid-in capital		416,622		362,982
Retained earnings (2)		815,147		1,595,105
Accumulated other comprehensive income/(loss)		9,005		(9,661	)
Total stockholders’ equity		1,244,411		1,952,248
Total liabilities and stockholders’ equity	$	5,026,355	$	6,246,519

(1)

The available-for-sale securities within the funds held for clients and corporate investment portfolios reflected net unrealized gains of $13.9 million as of November 30, 2007, compared with net unrealized losses of $14.9 million as of May 31, 2007. During the first six months of fiscal 2008, the investment portfolios ranged from a net unrealized loss of $24.3 million to a net unrealized gain of $13.9 million. The net unrealized gain of our investment portfolios was approximately $15.1 million as of December 14, 2007.

(2)

Effective June 1, 2007, we adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109.”  Upon adoption, we recognized the cumulative effect of our uncertain tax positions of $8.4 million, with an offsetting decrease to opening retained earnings. Long-term liabilities on our Consolidated Balance Sheets include a reserve for uncertain tax positions as resolution of these matters is not expected within the next twelve months.

Page 5 of 5