What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-08-03 compared with 2021-08-04 · 147 added, 164 removed, 287 unchanged (52% of the section changed)

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Statements that are not historical in nature and which may be identified by the use of words like “expects,” “assumes,” “projects,” “anticipates,” “estimates,” “we believe,” “could” “is designed to” and other words of similar meaning, are forward-looking statements.

These statements are based on

management’s expectations and assumptions and depend upon or refer to future events or conditions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed.

These statements are based on management’s expectations and assumptions and depend upon or refer to future events or conditions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed.

Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements or that could contribute to such difference include:

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changes in technology;

availability of skilled technical associates;

availability of skilled associates;

the impact of new acquisitions and divestitures;

the adequacy, effectiveness and success of our business transformation initiatives;

and the impact of any uncertainties related to major natural disasters or catastrophic events, including the coronaviru s ( “ COVID-19 ” ) pandemic.

the impact of any uncertainties related to major natural disasters or catastrophic events, including the coronaviru s ( “ COVID-19 ” ) pandemic;

and supply-chain disruptions.

ADP disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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$1.7B Dividends | $2.0B Share Repurchases

We are a leading global provider of cloud-based Human Capital Management (“HCM”) technology solutions to employers around the world.

The global COVID-19 pandemic has had a significant impact on the global business environment and on our clients, but our priority has been and continues to be the safety of our associates and the needs of our clients.

We have continued to provide HCM services, including the processing of payroll and tax obligations, to our clients during this time.

ADP's efforts have also been focused on providing information and tools to help clients understand and navigate the governmental relief that has been adopted globally.

In addition, we released a Return to Workplace solution that assists our clients in bringing their employees back to work safely through a comprehensive set of tools designed to streamline the entire process.

During the fiscal year, we continued to advance our market-leading solutions and achieved some new milestones.

Earlier this year, our next-gen payroll solution earned ADP its 6th consecutive “Top HR Product Award” at the annual HR Technology Conference.

This solution features a highly scalable, policy-based framework that enables easy self-service and powerful transparency.

In February, we announced the launch of Roll, a new mobile-first payroll and tax filing product aimed at small businesses, which combines an AI-driven chat-based interface with the power and scale of our payroll and tax filing expertise.

We continued to add to our robust DataCloud platform by introducing the Diversity, Equity and Inclusion (DEI) Dashboard which can help businesses analyze their diversity landscape through a simple Q&A format and user interface that allows them to better set, track and expand their DEI goals.

For our RUN platform, which is a leading solution in the market with approximately 750,000 clients, we began to roll out a new user experience and launched TimeKeeping Plus, an entirely new, native workforce management solution.

This year, we reached 100,000 clients across our workforce management solutions for the first time, as the pandemic reinforced the need for robust workforce management solutions for our clients while they navigate the new norm of increasingly flexible schedules and work arrangements.

Our suite of HRO solutions also continued to deliver steady growth this year, despite the dynamic economic environment.

Within PEO, the average worksite employee count grew 12% in the fourth quarter resulting in annual growth of 2%.

We also have over 2 million worksite employees on our other HRO solutions within our Employer Services segment, as clients look for ways to outsource parts of the HR function to a best-in-class provider like ADP.

We are the leading provider of cloud-based HCM technology solutions to employers around the world.

Through our extensive suite of products, coupled with industry and compliance expertise, we help our clients navigate a highly dynamic world of work in order to give them peace-of-mind and reduce the time and effort they allocate to non-core tasks.

This, in turn, allows our clients to better focus on what matters most to them – running their businesses.

Over the decades since pioneering our industry, we have reshaped HCM time and again by continuously innovating across our technology platforms and service solutions.

Our commitment to innovation is continuous amid challenging business and operating environments – whether it be a global recession or bull market, an international conflict or global pandemic.

We believe businesses, our clients, serve as a force for progress, and we remain committed to rethinking a better, more personalized world at work to help our clients and their workers achieve their full potential.

That commitment underpins our drive to innovate across our portfolio in order to deliver sustainable, profitable growth.

During the fiscal year, we made significant progress on the roll-out of a new unified user experience ("UX") across our strategic products and solutions.

We transitioned hundreds of thousands of clients across our RUN, iHCM, and next-gen HCM client bases over to the new UX, generating positive feedback from this transition to even more intuitive HCM workflows.

We continue to advance all of our key platforms, with Workforce Now being especially critical to our differentiation and growth.

Workforce Now continues building traction in the lower end of the U.S.

enterprise market and was instrumental to

ADP being rated an overall "Customer's Choice" provider for the first time in Gartner's annual "Voice of the Customer" study.

In addition to beginning the roll-out of the new UX, this year we continued to make progress on the roll-out of our next-gen payroll solution to a growing portion of our new Workforce Now clients, and we believe these two major enhancements will help keep Workforce Now at the forefront of the industry.

We also made exciting enhancements to other solutions during the fourth quarter.

We started offering self-enrollment with full digital wallet capabilities within the Wisely program, allowing for a more frictionless experience for workers that enables them to more easily transition to our digital payment offering.

We expanded our Earned Wage Access solution by offering a seamless, one-application solution for Wisely members, which enables employees to receive portions of their earned wages prior to paydate at no cost.

We will also be launching "Voice of the Employee", a new employee survey and listening tool, which will help our clients seamlessly capture employee feedback and sentiments across various HR categories during the employee lifecycle, which is critical in a labor market where listening to their employees can help our clients differentiate themselves and better compete in the marketplace.

We continue to drive innovation by anticipating our clients' evolving needs and always designing for people as the world of work changes.

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We further enable these solutions by supplementing them with organic, differentiated investments such as the ADP Datacloud and ADP Marketplace, and through our compliance expertise.

For fiscal 2021, we drove solid revenue growth of 3% for the year, continued to invest for sustainable growth despite market conditions, and managed any non-essential spend prudently.

Employer Services New Business Bookings was up 23% for fiscal 2021.

In addition, the Employer Services client revenue retention rate for fiscal 2021 improved 170 basis points to 92.2% as compared to our rate for fiscal 2020.

For fiscal 2022, we delivered strong revenue growth of 10%.

In addition, Employer Services achieved record New Business Bookings and near-record-level retention of 92.1%.

The PEO average number of Worksite Employees increased 15% for fiscal 2022.

Our pays per control metric, which represents the number of employees on ADP clients' payrolls in the United States when measured on a same-store-sales basis for a subset of clients ranging from small to large businesses, turned positive in the fourth quarter resulting in annual growth of negative 3% for fiscal 2021.

We have a strong business model, a highly cash generative business with low capital intensity, and offer a suite of products that provide critical support to our clients’ HCM functions.

We generate sufficient free cash flow to satisfy our cash dividend and our modest debt obligations, which enables us to absorb the impact of downturns and remain steadfast in our reinvestments, our longer term strategy, and our commitments to shareholder friendly actions.

We have a strong business model, generating significant cash flows with low capital intensity, and offer a suite of products that provide critical support to our clients’ HCM functions.

We generate sufficient free cash flow to satisfy our cash dividend and modest debt obligations, which enables us to absorb the impact of downturns and remain steadfast in our re-investments, our long term strategy, and our commitments to shareholder friendly actions.

We are committed to building upon our past successes by investing in our business through enhancements in research and development and by driving meaningful transformation in the way we operate.

ADP was named one of Fortune’s Most Admired Companies for the 16th year in a row, which highlights our culture of continuous improvement, our consistency, and our focus on being a true partner to our clients as the world of work continues to change.

Our financial condition remains solid at June 30, 2022 and we remain well positioned to support our associates and our clients.

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For the year ended June 30, respectively:

Total Revenues

10% YoY Growth

10% YoY Growth, Organic Constant Currency

Revenues for fiscal 2021 increased due to strong retention, new business started from New Business Bookings, an increase in zero-margin benefits pass-throughs and one percentage point of favorability from foreign currency.

This increase is partially offset by a one percentage point of pressure from our interest earned on funds held for clients discussed below .

Refer to “Analysis of Reportable Segments” for additional discus sion of the increases in revenue for both of our reportable segments, Employer Services and Professional Employer Organization (“PEO”) Services.

Revenues in fiscal 2022 increased due to new business started from New Business Bookings, an increase in zero-margin benefits pass-throughs, an increase in our pays per control, and continued strong client retention.

Refer to “Analysis of Reportable Segments” for additional discussion of the changes in revenue for each of our reportable segments, Employer Services and Professional Employer Organization (“PEO”) Services.

Total revenues in fiscal 2022 include interest on funds held for clients of $451.8 million, as compared to $422.4 million in fiscal 2021.

The decrease in the consolidated interest earned on funds held for clients resulted from the decrease in our average interest rate earned to 1.5% in fiscal 2021, as compared to 2.1% in fiscal 2020.

The decrease is partially offset by an increase in our average client funds balances of 5.2% to $27.4 billion in fiscal 2021 as compared to fiscal 2020.

The increase in interest earned on funds held for clients resulted from an increase in our average client funds balances of 18.7% to $32.5 billion in fiscal 2022 as compared to fiscal 2021, partially offset by the decrease in our average interest rate earned to 1.4% in fiscal 2022, as compared to 1.5% in fiscal 2021.

Total Expenses

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Total expenses $ 12,777.0 $ 11,740.5 9 %

For the year ended June 30, 2021, operating expenses increased due to the increase in our PEO Services zero-margin benefits pass-through costs to $3,092.0 million from $2,907.7 million for the year ended June 30, 2021 and 2020, respectively, the impact of foreign currency, and an increase in incentive compensation costs due to decreases in the prior year.

These increases were partially offset by reduced costs as a result of our broad-based transformation initiatives and excess capacity headcount actions in the prior year, a change of $52.5 million in our estimated losses related to ADP Indemnity compared to prior year, reduced travel expenses and decreased pension costs as a result of U.S.

pension service costs that were eliminated with the July 1, 2020 cessation of U.S.

participants accruing any future service benefits (“U.S.

pension freeze”).

Systems development and programming costs increased fo r fiscal 2021 due to increased investments and costs to develop, support, and maintain our products, partially offset by capitalization of costs related to our strategic projects, including our next gen platforms.

Depreciation and amortization expe nse increased relat ed to the amortization of our acquisitions of intangibles and internally developed software.

Selling, general and administrative expenses increased for the year ended June 30, 2021 due to an increase in

incentive compensation costs, investments in our sales organization, and the impact of foreign currency, partially offset by a decrease in charges related to transformation initiatives, reduced costs as a result of our broad-based transformation initiatives and excess capacity headcount actions in the prior year for non-sales associates, capitalization of costs to obtain a contract under ASC 606, reduced travel expenses, legal settlements, and a decrease in bad debt expense.

Interest expense decreased for the year ended June 30, 2021 primarily due to a decrease in average interest rates for commercial paper borrowings to 0.1% for the year ended June 30, 2021, as compared to 1.6% for the year ended June 30, 2020.

This was coupled with a decrease in average daily borrowings under our commercial paper program to $1.6 billion for the year ended June 30, 2021, as compared to $2.7 billion for the year ended June 30, 2020.

For the year ended June 30:

Operating expenses increased due to the increase in our PEO Services zero-margin benefits pass-through costs to $3,514.4 million from $3,092.0 million for the year ended June 30, 2022 and 2021, respectively.

Additionally, operating expenses increased due to increased costs to service our client base in support of our growing revenue, partially offset by a net reduction of $28.8 million in our estimated losses related to ADP Traditional Incorporated Cell, formerly known as ADP Indemnity, Inc.

("ADP Indemnity") and the impact of foreign currency.

Systems development and programming costs increased for fiscal 2022 due to increased investments and costs to develop, support, and maintain our new and existing products.

Selling, general and administrative expenses increased due to increased selling expenses as a result of investments in our sales organization, increased marketing expenses and increased travel expenses, partially offset by a decrease in our allowance for doubtful accounts of $26.0 million as a result of a decrease in estimated credit losses related to the impact of COVID-19 on our clients ("the decrease in our allowance for doubtful accounts").

Interest expense increased primarily due to the issuance of 7-year fixed-rate notes totaling $1.0 billion issued in the fourth quarter of fiscal 2021, as compared to the year ended June 30, 2021.

Additionally, there was an increase in average interest rates for commercial paper borrowings to 0.4% for the year ended June 30, 2022, as compared to 0.1% for the year ended June 30, 2021.

This was coupled with an increase in average daily borrowings under our commercial paper program to $2.0 billion for the year ended June 30, 2022, as compared to $1.6 billion for the year ended June 30, 2021.

Other (Income)/Expense, net

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Interest income on corporate funds $ (41.0) $ (36.5) $ 4.5

Realized (gains)/losses on available-for-sale securities, net (11.3) (12.9) (1.6)

Realized losses/(gains) on available-for-sale securities, net 4.4 (11.3) (15.7)

Impairment of assets 23.0 19.9 (3.1)

Gain on sale of assets (7.5) (9.8) (2.3)

Gain on sale of investment (1.7) (0.2) 1.5

Non-service components of pension income, net (61.7) (58.6) 3.1

Other (income)/expense, net $ (82.8) $ (96.3) $ (13.5)

Other (income)/expense, net, decreased $51.7 million in fiscal 2021 , as compared to fiscal 2020 as a result of a decrease in interest income on corporate funds due to lower interest rates earned and the change in non-service components of pension income, net, and the items described below.

See Note 10 of our Consolidated Financial Statements for further details on non-service components of pension income, net.

In fiscal 2021, the Company recorded impairment charges of $19.9 million which is comprised of a write down of $10.5 million related to internally developed software which was determined to have no future use, impairment charges of $9.4 million related to operating right-of-use assets and certain related fixed assets associated with vacating certain leased locations early, and recognizing certain owned facilities at fair value given intent to sell and accordingly classified as held for sale.

In fiscal 2020, the Company recorded impairment charges of $29.9 million, which is comprised of $25.3 million as a result of recognizing certain owned facilities at fair value given intent to sell and accordingly classified as held for sale and vacating certain leased locations early and recorded total impairment charges of $4.6 million related to operating right-of-use assets and certain related fixed assets associated with the vacated locations.

Other (income)/expense, net, decreased $13.5 million in fiscal 2022 , as compared to fiscal 2021 primarily as a result of losses on available-for-sale securities, net, in the current year, compared to gains in the prior year, and the items described below, partially offset by the change in non-service components of pension income, net.

Se e Note 10 of our Consolidated Financial Statements for further details on non-service components of pension income, net.

In fiscal 2022, the Company recorded impairment charges of $23.0 million which is comprised of a write down of $12.1 million related to software and customer lists which were determined to have no future use and impairment charges of $10.9 million related to operating right-of-use assets associated with exiting certain leases early.

In fiscal 2021, the Company recorded impairment charges of $19.9 million, which is comprised of $10.5 million related to internally developed software which was determined to have no future use, impairment charges of $9.4 million related to operating right-of-use assets and certain related fixed assets associated with exiting certain leased locations early, and recognizing certain owned facilities at fair value given intent to sell and accordingly classified as held for sale.

Earnings Before Income Taxes

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á 70 bps YoY Growth

Earnings before income taxes increased in fiscal 2021 due to the increases in revenues partially offset by the increases in expenses discussed above.

Overall margin increased in fiscal 2021 as a result of operational efficiencies, coupled with a decrease in charges related to transformation initiatives, legal settlements, reduced costs as a result of our broad-based transformation initiatives and excess capacity headcount actions in the prior year, a change of $52.5 million in our estimated losses related to ADP Indemnity compared to prior year, decreased selling expense, and decreased interest expense.

These were partially offset by an increase in incentive compensation costs, a decrease in interest earned on funds held for clients, and incremental pressure from growth in our zero-margin benefits pass-throughs.

Earnings before income taxes increased due to the increases in revenues partially offset by the increases in expenses discussed above.

Overall margin increased due to increases in revenues discussed above, operational efficiencies, the decrease of $26.0 million in our allowance for doubtful accounts, and a net reduction of $28.8 million in our estimated losses related to ADP Indemnity, partially offset by incremental pressure from growth in our zero-margin benefits pass-throughs.

Adjusted Earnings before certain Interest and Taxes ("Adjusted EBIT")

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á 90 bps YoY Growth

Adjusted EBIT and Adjusted EBIT margin exclude certain interest amount s, legal settlements, gain on sale of assets, net charges related to our broad-based transformation initiatives and the impact of the net severance charges as applicable in the respective periods.

Adjusted EBIT and Adjusted EBIT margin exclude interest income and interest expense that are not related to our client funds

extended investment strategy, and net charges, including gain on sale of assets related to our broad-based transformation

initiatives and the impact of net severance charges, as applicable, in the respective periods.

Provision for Income Taxes

The effective tax rate in fiscal 2022 and 2021 was 22.5% and 22.7%, respectively.

The increase in the effective tax rate is primarily due to combined benefits from a valuation allowance release related to foreign tax credit carryforwards and a foreign tax law change during fiscal 2020 as well as a decrease in the excess tax benefit on stock-based compensation, partially offset by favorable adjustments to prior year tax liabilities during fiscal 2021.

The decrease in t he effective tax rate is primarily due to a favorable earnings mix, lower reserves for uncertain tax positions, and an intercompany transfer of certain assets in fiscal 2022, partially offset by favorable adjustments to prior year tax liabilities and a foreign tax election in fiscal 2021.

Refer t o Note 11, Income Taxes, within the Notes to the Consolidated Financial Statements for further discussion.

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á 15% YoY Growth

For fiscal 2021, adjusted net earnings and adjusted diluted EPS reflect the changes in components described above.

For fiscal 2021, diluted EPS increased as a result of the impact of fewer shares outstanding resulting from the repurchase of approximately 8.2 million shares during fiscal 2021 and 6.2 million shares during fiscal 2020, partially offset by the issuances of shares under our employee benefit plans.

Adjusted net earnings and adjusted diluted EPS reflect the changes in components described above.

Diluted EPS increased as a result of the increase in net earnings and the impact of fewer shares outstanding resulting from the repurchase of approximately 9.2 million shares during fiscal 2022 and 8.2 million shares during fiscal 2021, partially offset by the issuances of shares under our employee benefit plans.

Adjusted Net Earnings and Adjusted Diluted Earnings per Share

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Employer Services

Revenues increased in fiscal 2021 due to strong retention, business started from New Business Bookings and one percentage point of favorability from foreign currency.

Employer Services client revenue retention rate for fiscal 2021 improved 170 basis points to 92.2% as compared to our rate for fiscal 2020.

Increases in revenues were partially offset by a decrease in interest earned on funds held for clients.

Revenues increased due to new business started from New Business Bookings, an increase in our pays per control of 7%, continued strong retention, and an increase in interest earned on funds held for clients.

Earnings before Income Taxes

Employer Services’ earnings before income taxes was flat in fiscal 2021 due to increased revenues discussed above offset by increases in expenses.

The increases in expenses were due to an increase in incentive compensation costs, investments in our sales organization, an increase in amortization expense, and the impact of foreign currency.

The increases in expenses were offset by reduced costs as a result of our broad-based transformation initiatives and excess capacity headcount actions for non-sales associates, reduced travel expenses, and a decrease in bad debt expense.

Employer Services' earnings before income taxes increased in fiscal 2022 due to increased revenues discussed above, partially offset by increases in expenses.

The increases in expenses were due to increased costs to service our client base in support of our growing revenue, increases in selling expenses, and investments and costs to develop, support, and maintain our new and existing products, partially offset by the decrease of $26.0 million in our allowance for doubtful accounts.

For the year ended June 30, respectively:

110 bps YoY Growth

Employer Services' overall margin decreased for fiscal 2021 due to an increase in incentive compensation costs, a decrease in interest earned on funds held for clients, and an increase in amortization expense.

This decrease was partially offset by reduced costs as a result of our broad-based transformation initiatives and excess capacity headcount actions in the prior year, and a decrease in bad debt expense.

Employer Services' margin increased due to increases in revenues discussed above, operational efficiencies, and the decrease of $26.0 million in our allowance for doubtful accounts, partially offset by an increase in costs to service our client base in support of our growing revenue.

Years Ended Change

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PEO Services' revenues excluding zero-margin benefits pass-throughs $ 2,031.3 $ 1,726.3 $ 305.0 18 %

PEO Services' revenues increased 7% and PEO Services' revenues excluding zero-margin benefits pass-through costs increased 8% in fiscal 2021.

PEO Services' revenues increased due to a 2% increase in the average number of Worksite Employees in fiscal 2021 driven by an increase in the number of new PEO Services clients, partially offset by a modest decline in pays per control.

PEO Services' revenues increased 15% for fiscal 2022 due to increases in average worksite employees of 15% for fiscal 2022, as compared to fiscal 2021, and due to an increase in zero-margin benefits pass-throughs.

Earnings before Income Taxes

PEO Services’ earnings before income taxes increased 18% in fiscal 2021 due to increased revenues discussed above, partially offset by increases in expenses.

The increases in expenses were due to the increase in zero-margin benefits pass-through costs of $184.3 million described above, partially offset by a change of $52.5 million in our estimated losses related to ADP Indemnity compared to the prior year, and a decrease in selling expenses.

PEO Services’ earnings before income taxes increased 21% in fiscal 2022, due to increased revenues discussed above and a net reduction of $28.8 million in our estimated losses related to ADP Indemnity, partially offset by the increases in zero-margin benefits pass-throughs of $422.4 million for fiscal 2022.

For the year ended June 30, respectively:

á 80 bps YoY Growth

PEO Services' overall margin increased for fiscal 2021 due to an increase in revenues as discussed above, a change in our estimated losses related to ADP Indemnity compared to the prior year, and a decrease in selling expenses.

PEO Services' overall margin increased for fiscal 2022 due to an increase in revenues discussed above and a net reduction of $28.8 million in our estimated losses related to ADP Indemnity, partially offset by by incremental pressure from growth in our zero-margin benefits pass-throughs.

ADP Indemnity provides workers’ compensation and employer’s liability deductible reimbursement insurance protection for PEO Services’ worksite employees up to $1 million per occurrence.

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During fiscal 2022, ADP Indemnity paid a premium of $260 million to enter into a reinsurance arrangement with Chubb to cover substantially all losses incurred by ADP Indemnity for the fiscal 2022 policy year up to $1 million per occurrence.

ADP Indemnity recorded a pre-tax benefit of approximately $32 million in fiscal 2021 and a pre-tax loss of approximately $20 million in fiscal 2020, which were primarily a result of changes in our estimated actuarial losses.

ADP Indemnity recorded a pre-tax benefit of approximately $61 million in fiscal 2022 and a pre-tax benefit of approximately $32 million in fiscal 2021, which were primarily a result of changes in our estimated actuarial losses.

ADP Indemnity paid a premium of $284 million in July 2022, to enter into a reinsurance agreement with Chubb to cover substantially all losses incurred by ADP Indemnity for fiscal 2023 policy year on terms substantially similar to the fiscal 2022 reinsurance policy.

The primary components of “Other” are certain corporate overhead charges and expenses that have not been allocated to the reportable segments, including corporate functions, costs related to our transformation office, legal settlements, severance costs, non-recurring gains and losses, the elimination of intercompany transactions, and other interest expense.

The primary components of “Other” are certain corporate overhead charges and expenses that have not been allocated to the reportable segments, including corporate functions, costs related to our transformation office, severance costs, non-recurring gains and losses, the elimination of intercompany transactions, and all other interest income and expense.

Non-GAAP Financial Measures

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Organic constant currency Revenues

We believe that the exclusion of the identified items helps us reflect the fundamentals of our underlying business model and analyze results against our expectations and against prior period, and to plan for future periods by focusing on our underlying operations.

We believe that the exclusion of the identified items helps us reflect the fundamentals of our underlying business model and analyze results against our expectations and against prior periods, and to plan for future periods by focusing on our underlying operations.

We believe that the adjusted results provide relevant and useful information for investors because it allows investors to view performance in a manner similar to the method used by management and improves their ability to understand and assess our operating performance.

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All other interest income (a) (7.1) (6.5)

Gain on sale of assets — (0.2)

Transformation initiatives (b) 3.5 —

Excess capacity severance charges (c) 2.9 25.4

Legal settlements (d) (30.7) 25.0

Excess capacity severance charges — 2.9

Legal settlements — (30.7)

Adjusted EBIT $ 3,871.8 $ 3,384.2 14 %

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Provision for income taxes $ 855.2 $ 762.7 12 %

Gain on sale of assets (e) — (0.1)

Transformation initiatives (e) — 19.2

Excess capacity severance charges (e) 0.5 6.3

Legal settlements (e) (7.5) 6.2

Transformation initiatives (c) 0.8 —

Excess capacity severance charges — 0.5

Legal settlements — (7.5)

Adjusted provision for income taxes $ 856.0 $ 755.7 13 %

Adjusted effective tax rate (f) 22.7 % 22.6 %

Adjusted effective tax rate (d) 22.5 % 22.7 %

Net earnings $ 2,948.9 $ 2,598.5 13 %

Gain on sale of assets — (0.2)

Income tax provision on gain on sale of assets (e) — 0.1

Transformation initiatives (b) 3.5 —

Income tax benefit for transformation initiatives (e) — (19.2)

Excess capacity severance charges (c) 2.9 25.4

Income tax benefit for excess capacity severance charges (e) (0.5) (6.3)

Legal settlements (d) (30.7) 25.0

Income tax provision/ (benefit) for legal settlements (e) 7.5 (6.2)

Income tax benefit for transformation initiatives (c) (0.8) —

Excess capacity severance charges — 2.9

Income tax benefit for excess capacity severance charges — (0.5)

Legal settlements — (30.7)

Income tax provision/ (benefit) for legal settlements — 7.5

Adjusted net earnings $ 2,951.6 $ 2,577.7 15 %

Diluted EPS $ 7.00 $ 6.07 15 %

Gain on sale of assets (e) — —

Transformation initiatives (b) (e) — 0.13

Excess capacity severance charges (c) (e) 0.01 0.04

Legal settlements (d) (e) (0.05) 0.04

Transformation initiatives (b) (c) 0.01 —

Excess capacity severance charges — 0.01

Legal settlements — (0.05)

Adjusted diluted EPS $ 7.01 $ 6.02 16 %

(a) We include the interest income earned on investments associated with our client funds extended investment strategy and interest expense on borrowings related to our client funds extended investment strategy as we believe these amounts to be fundamental to the underlying operations of our business model.

(a) In adjusted EBIT we include the interest income earned on investments associated with our client funds extended investment strategy and interest expense on borrowings related to our client funds extended investment strategy as we believe these amounts to be fundamental to the underlying operations of our business model.

The adjustments in the table above represent the interest income and interest expense that are not related to our client funds extended investment strategy and are labeled as “All other interest expense” and “All other interest income.”

(b) In fiscal 2021, transformation initiatives include impairment charges as a result of recognizing certain owned facilities at fair value given intent to sell and accordingly classified as held for sale and lease asset impairment charges, offset by gain on sale of assets and net reversals of charges related to other transformation initiatives, including severance.

(b) In fiscal 2022, the charges include consulting costs relating to our company wide transformation initiatives, partially offset by net reversals relating to severance, and gain on sale of assets.

Unlike other severance charges which are not included as an adjustment to get to adjusted results, these specific charges relate to actions taken as part of our broad-based, company-wide transformation initiative.

Unlike certain other severance charges in prior periods that are not

included as an adjustment to get to adjusted results, these specific charges relate to actions that are part of our broad-based,

company-wide initiatives to address excess capacity across our business and functions, including charges in fiscal 2020 due to the COVID-19 pandemic.

(d) Represents legal settlements including an insurance recovery in fiscal 2021.

(e) The income tax provision/(benefit) was calculated based on the marginal rate in effect for the year ended June 30, 2021.

(f) The Adjusted effective tax rate is calculated as our Adjusted provision for income taxes divided by the sum of our Adjusted net earnings plus our Adjusted provision for income taxes.

(c) The income tax provision/(benefit) was calculated based on the marginal rate in effect for the year ended June 30, 2022.

(d) The Adjusted effective tax rate is calculated as our Adjusted provision for income taxes divided by the sum of our Adjusted net earnings plus our Adjusted provision for income taxes.

The following table reconciles our reported growth rates to the non-GAAP measure of organic constant currency, which excludes the impact of acquisitions, the impact of dispositions, and the impact of foreign currency.

The impact of acquisitions and dispositions is calculated by excluding the current year revenues of acquisitions until the one-year anniversary of the transaction and by excluding the prior year revenues of divestitures for the one-year period preceding the transaction.

The impact of foreign currency is determined by calculating the current year result using foreign exchange rates consistent with the prior year.

The impact of acquisitions

and dispositions is calculated by excluding the current year revenues of acquisitions until the one-year anniversary of the transaction and by excluding the prior year revenues of divestitures for the one-year period preceding the transaction.

The impact of foreign currency is determined by calculating the current year results using foreign exchange rates consistent with the prior year.

The PEO segment is not impacted by acquisitions, dispositions or foreign currency.

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As of June 30, 2022, cash and cash equivalent s were $1.4 billion, which were primarily invested in time deposits and money market funds.

For corporate liquidity, we expect existing cash, cash equivalents, long-term marketable securities, cash flow from operations together with our $9.7 billion of co mmitted credit facilities and our ability to access both long-term and short-term debt financing from the capital markets will be adequate to meet our operating, investing, and financing activities such as regular quarterly dividends, share repurchases, and capital expenditures for the foreseeable future.

Our financial condition remains solid at June 30, 2021 and we have sufficient liquidity as noted above;

how ever, given the uncertainty in the rapidly changing market and economic conditions related to the COVID-19 pandemic, we will continue to evaluate the nature and extent of the impact to our financial condition and liquidity.

For corporate liquidity, we expect existing cash, cash equivalents, short-term marketable securities, cash flow from operations together with our $9.7 billion of committed credit facilities and our ability to access both long-term and short-term debt financing from the capital markets will be adequate to meet our operating, investing, and financing activities such as regular quarterly dividends, share repurchases, and capital expenditures for the foreseeable future.

Our financial condition remains solid at June 30, 2022 and we have sufficient liquidity.

For client funds liquidity, we have the ability to borrow through our financing arrangements under our U.S.

short-term commercial paper program and our U.S., Canadian and United Kingdom short-term reverse repurchase agreements, together with our $9.7 billion of committed credit facilities and our ability to use corporate liquidity when necessary to meet short-term funding requirements related to client funds obligations.

Please see “Quantitative and Qualitative Disclosures about Market Risk” for a further discussion of the risks, including with respect to the COVID-19 pandemic, related to our client funds extended investment strategy.

short-term commercial paper program and our U.S., Canadian and United Kingdom short-term reverse repurchase agreements, together with our $9.7 billion of comm itted credit facilities and our ability to use corporate liquidity when necessary to meet short-term funding requirements related to client funds obligations.

Please see “Quantitative and Qualitative Disclosures about Market Risk” for a further discussion of the risks related to our client funds extended investment strategy.

See Note 8 of our Consolidated Financial Statements for a description of our short-term financing including commercial paper.

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Net change in cash, cash equivalents, restricted cash, and restricted cash equivalents $ 9,639.8 $ 6,089.6 $ 3,550.2

Net cash flows provided by operating activities increase d due to a net favorable change in the components of operating assets and liabilities as compared to the year ended June 30, 2020.

Net cash flows from investing activities changed due to the timing of proceeds and purchases of corporate and client funds marketable securities of $6,771.2 million.

Net cash flows from financing activities changed due to a net increase in the cash flow from client funds obligations of $11,549.4 million, which is due to the timing of impounds from our clients and payments to our clients' employees and other payees, and proceeds fro m debt issuances.

These were partially offset by payments of debt, more cash returned to shareholders via share repurchases and dividends, and settlement of cash flow hedges in fiscal 2021.

We purchased approximately 8.2 million shares of our common stock at an average price per share of $170.04 during fis cal 2021, as compared to purchases of 6.2 million shares at an average price per share of $160.61 during fiscal 2020.

Net cash flows provided by operating activities was flat compared to prior year and includes a net unfavorable change in the components of operating assets and liabilities, due to timing on collections of accounts receivable and an increase in incentive compensation payments, offset by the growth in our underlying business (net income adjusted for non-cash adjustments), as compared to the year ended June 30, 2021 .

Net cash flows used in investing activities changed due to the timing of proceeds and purchases of corporate and client funds marketable securities of $3,455.6 million, and higher payments related to acquisitions of intangibles and a business, offset by proceeds from the sale of property, plant, and equipment.

Net cash flows provided by financing activities changed due to a net increase in the cash flow from client funds obligations of $8,721.7 million, which is due to the timing of impounds from our clients and payments to our clients' employees and other payees, an increase in reverse repurchase agreements borrowing, and the settlement of cash flow hedges in the year ended June 30, 2021.

These were partially offset by the issuance of debt in the year ended June 30, 2021 and repurchases of common stock and dividends paid in fiscal 2022.

We purchased approximately 9.2 million shares of our common stock at an average price per share o f $214.40 du ring fis cal 2022, as compared to purchases of 8.2 million shares at an average price per share of $170.04 during fiscal 2021.

From time to time, the Company may repurchase shares of its common stock under its authorized share repurchase program.

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We have $3.0 billion of senior unsecured notes with maturity dates in 2025, 2028, and 2030.

We may from time to time revisit the long-term debt market to refinance existing debt, finance investments including acquisitions for our growth, and maintain the appropriate capital structure.

We may from time to time revisit the long-t erm debt market to refinance existing debt, finance investments including acquisitions for our growth, and maintain the appropriate capital structure.

However, there can be no assurance that volatility in the global capital and credit markets would not impair our ability to access these markets on terms acceptable to us, or at all.

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Weighted average interest rates 0.4 % 0.1 %

Weighted average maturity (approximately in days) 1 day 2 days

government and government agency securities, rather than liquidating previously-collected client funds that have already been invested in available-for-sale securities.

Weighted average maturity (approximately in days) 1 day 1 day

Our U.S., Canadian, and United Kingdom short-term funding requirements related to client funds obligations are sometimes obtained on a secured basis through the use of reverse repurchase agreements, which are collateralized principally by government and government agency securities, rather than liquidating previously-collected client funds that have already been invested in available-for-sale securities.

These agreements generally have terms ranging from overnight to up to five business days.

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We vary the maturities of our committed credit facilities to limit the refinancing risk of any one facility.

We have a $3.75 billion, 364-day credit agreement that matures in June 2022 with a one year term-out option.

In addition, we have a five-year $2.75 billion credit facility and a five-year $3.2 billion credit facility maturing in June 2024 and June 2026, respectively, each with an accordion feature under which the aggregate commitment can be increased by $500 million, subject to the availability of additional commitments.

We had a $3.75 billion, 364-day credit agree ment that was amended in June 2022 and matured in July 2022.

On July 1, 2022, the company entered into a new $3.75 billion 364-day credit agreement that matures in June 2023 with a one year term-out option to replace the maturing facility.

In addition, we have a five-year $2.75 billion credit facility and a five-year $3.2 billion credit facility maturing in June 2024 and June 2026, respectively, each with an accordion feature under which the aggregate com mitment can be increased by $500 million, subject to the availability of additional commitments.

The primary uses of the credit facilities are to provide liquidity to the commercial paper program and funding for general corporate purposes, if necessary.

We ha d no borrowings thr ough June 30, 2021 under the credit facilities.

We believe that we currently meet all conditions set forth in the revolving credit agreements to borrow thereunder, and we are not aware of any conditions that would prevent us from borrowing part or all of the $9.7 billion available to us under the revolving credit agreements.

We had no borrowings through June 30, 2022 under the credit facilities.

We believe that we currently meet all conditions set forth in the revolving credit agreements to borrow thereunder, and we are not aware of any conditions that would prevent us from borrowing part or all of the $9.7 billion a vailable to us under the revolving credit agreements.

See Note 8 of our Consolidated Financial Statements for a description of our short-term financing including credit facilities.

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Contractual Obligations

The following table provides a summary of our contractual obligations at June 30, 2021:

(In millions) Payments due by period

Contractual Obligations Less than

years More than

5 years Unknown Total

Debt Obligations (1) $ 64.2 $ 128.5 $ 1,111.8 $ 2,092.1 $ — $ 3,396.6

Operating Lease Obligations (2) $ 103.2 $ 160.7 $ 102.5 $ 100.9 $ — $ 467.3

Purchase Obligations (3) $ 448.5 $ 184.8 $ 25.3 $ — $ — $ 658.6

Obligations Related to Unrecognized

Tax Benefits (4) $ 14.8 $ — $ — $ — $ 85.1 $ 99.9

Other Long-Term Liabilities Reflected

on our Consolidated Balance Sheets:

Compensation and Benefits (5) $ 49.0 $ 64.9 $ 57.4 $ 267.2 $ 33.9 $ 472.4

Total $ 679.7 $ 538.9 $ 1,297.0 $ 2,460.2 $ 119.0 $ 5,094.8

(1) These amounts represent the principal and interest payments of our debt.

(2) Included in these amounts are various facilities and equipment leases.

We enter into operating leases in the normal course of business relating to facilities and equipment.

The majority of our lease agreements have fixed payment terms based on the passage of time.

Certain facility and equipment leases require payment of maintenance and real estate taxes and contain escalation provisions based on future adjustments in price indices.

Our future operating lease obligations could change if we exit certain contracts or if we enter into additional operating lease agreements.

(3) Purchase obligations are comprised of a $260 million reinsurance premium with Chubb for the fiscal 2022 policy year, as well as obligations related to software subscription licenses and purchase and maintenance agreements on our software, equipment, and other assets.

(4) Based on current estimates, we expect to make cash payments up to $14.8 million in the next twelve months for obligations related to unrecognized tax benefits across various jurisdictions and tax periods.

For $85.1 million of obligations related to unrecognized tax benefits we are unable to make reasonably reliable estimates as to the period in which cash payments are expected to be paid.

(5) Compensation and benefits primarily relates to amounts associated with our employee benefit plans and other compensation arrangements.

These amounts exclude the estimated contributions to our defined benefit plans, which are expected to be $10.0 million in fiscal 2022.

In addition to the obligations quantified in the table above, we had obligations for the remittance of funds relating to our payroll and payroll tax filing services.

Our contractual obligations at June 30, 2022 relate primarily to operating leases (Note 6) and other arrangements recorded in our balance sheet or disclosed in the notes to our financial statements, including benefit plan obligations (Note 10), liabilities for uncertain tax positions (Note 11), purchase obligations (Note 12), debt obligations (Note 9) and $309.5 million of interest payments of our debt, of which $63.3 million is expected to be paid within one year.

In addition to the obligations described above, we had obligations for the remittance of funds relating to our payroll and payroll tax filing services.

As of June 30, 2022, the obligations relating to these matters, which are expected to be paid in fiscal 2023, total $51,285.5 million and were recorded in client funds obligations on our Consolidated Balance Sheets.

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At June 30, 2022, ADP Indemnity had total assets of $612.0 million to satisfy the actuarially estimated unpaid losses of $533.9 million for the policy years since July 1, 2003.

ADP Indemnity paid claims of $3.3 million and $4.4 million, net of insurance recoveries, in fiscal 2021 and 2020, respectively.

ADP Indemnity paid claims of $1.8 million and $3.3 million, net of insurance recoveries, in fiscal 2022 and 2021,

respectively.

Refer to the “Analysis of Reportable Segments - PEO Services” above for additional information regarding ADP Indemnity.

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In circumstances where we experience a reduction in employment levels due to a slowdown in the economy, we may make tactical decisions to sell certain securities in order to reduce the size of the funds held for clients to correspond to client funds obligations.

We minimize the risk of not having funds collected from a client available at the time such client’s obligation becomes due by impounding, in virtually all instances, the client’s funds in advance of the timing of payment of such client’s

As a result of this practice, we have consistently maintained the required level of client funds assets to satisfy all of our obligations.

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However, our investments are made with the safety of principal, liquidity, and diversification as the primary goals to minimize the risk of not having sufficient funds to satisfy all of our client funds obligations.

We also believe we have significantly reduced the risk of not having sufficient funds to satisfy our client funds obligations by consistently maintaining access to other sources of liquidity, including our corporate cash balances, available borrowings under our $9.7 billion commercial paper program (rated A-1+ by Standard and Poor’s, P-1 by Moody’s, and F1+ by Fitch, the highest possible short-term credit ratings), and our ability to engage in reverse repurchase agreement transactions and available borrowings under our $9.7 billion committed credit facilities.

The reduced availability of financing during periods of economic turmoil, including the COVID-19 pandemic, even to borrowers with the highest credit ratings, may limit our ability to access short-term debt markets to meet the liquidity needs of our business.

We also believe we have significantly reduced the risk of not having sufficient funds to satisfy our client funds obligations by consistently maintaining access to other sources of liquidity, including our corporate cash balances, available borrowings under o ur $9.7 billion commercial paper program (rated A-1+ by Standard and Poor’s, P-1 by Moody’s, and F1+ by Fitch, the highest possible short-term credit ratings), our ability to engage in reverse repurchase agreement transactions and available borrowings under our $9.7 billion committe d credit facilities.

The reduced availability of financing during periods of economic turmoil, even to borrowers with the highest credit ratings, may limit our ability to access short-term debt markets to meet the liquidity needs of our business.

In addition to liquidity risk, our investments are subject to interest rate risk and credit risk, as discussed below.

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The minimum allowed credit rating at time of purchase for corporate, Canadian government agency and Canadian provincial bonds is BBB, for asset-backed securities is AAA, and for municipal bonds is A.

The maximum maturity at time of purchase for BBB-rated securities is 5 years, for single A rated securities is 10 years, and for AA-rated and AAA-rated securities is 10 years.

The maximum maturity at time of purchase for BBB-rated securities is 5 years, and for single A rated, AA-rated and AAA-rated securities it is 10 years.

Time deposits and commercial paper must be rated A-1 and/or P-1.

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Average interest rates earned exclusive of realized

(gains)/losses on:

losses/(gains) on:

Corporate investments 1.0 % 1.0 %

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Total 1.3 % 1.5 %

Net realized (gains)/losses on available-for-sale securities $ (11.3) $ (12.9)

Net realized losses/(gains) on available-for-sale securities 4.4 (11.3)

As of June 30:

Net unrealized pre-tax gains on available-for-sale securities $ 502.2 $ 876.8

Net unrealized pre-tax (losses)/gains on available-for-sale securities $ (1,721.4) $ 502.2

Total available-for-sale securities at fair value $ 28,391.6 $ 24,371.7

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The annualized interest rate earned on our entire portfolio decreased from 1.5% for fiscal 2021 to 1.3% for fiscal 2022.

A hypothetical change in both short-term interest rates (e.g., overnight interest rates or the federal funds rate) and intermediate-term interest rates of 25 basis points applied to the estimated average investment balances and any related short-term borrowings would result in approximately a $22 million impact to earnings before income taxes over the ensuing twelve-month period ending June 30, 2022.

A hypothetical change in only short-term interest rates of 25 basis points applied to the estimated average short-term investment balances and any related short-term borrowings would result in approximately an $10 million impact to earnings before income taxes over the ensuing twelve-month period ending June 30, 2022.

A hy pothetical change in both short-term interest rates (e.g., overnight interest rates or the federal funds rate) and intermediate-term interest rate s of 25 basis points appl ied to the estimated average investment balances and any related short-term borrowings would result in approx imately an $18 million i mpact to earnings before income taxes over the ensuing twelve-month period ending June 30, 2023.

A hypothetical change in only short-term interest rates of 25 basis points applied to the estimated average short-term investment balances and any related short-term borrowings would result in approximately an $8 million im pact to earnings before income taxes over the ensuing twelve-month period ending June 30, 2023.

We are exposed to credit risk in connection with our available-for-sale securities through the possible inability of the borrowers to meet the terms of the securities.

We limit credit risk by investing in investment-grade securities, primarily AAA-rated and AA- rated securities, as rated by Moody’s, Standard & Poor’s, DBRS for Canadian dollar denominated securities, and Fitch for asset-backed and commercial-mortgage-backed securities.

Approxi mately 72% of our a vailable-for-sale securities held a AAA-rating or AA-rating at June 30, 2021.

In addition, we limit amounts that can be invested in any security other than U.S.

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See Note 1, Recently Issued Accounting Pronouncements, of Notes to the Consolidated Financial Statements for a discussion of recent accounting pronouncements.

CRITICAL ACCOUNTING POLICIES

CRITICAL ACCOUNTING ESTIMATES

Our Consolidated Financial Statements and accompanying notes have been prepared in accordance with U.S.

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We continually evaluate the accounting policies and estimates used to prepare the Consolidated Financial Statements.

See Note 1 - Summary of Significant Accounting Policies for additional information.

The estimates are based on historical experience and assumptions believed to be reasonable under current facts and circumstances.

Actual amounts and results could differ from these estimates made by management.

In addition, as the duration and severity of COVID-19 pandemic are uncertain, certain of our estimates could require further judgment or modification and therefore carry a higher degree of variability and volatility.

As events continue to evolve, our estimates may change materially in future periods.

Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position are Revenue Recognition (including Deferred Costs), Goodwill and Income Taxes.

Refer to Note 1, Summary of Significant Accounting Policies, of Notes to the Consolidated Financial Statements for discussion of our policies for Revenue Recognition (including Deferred Costs), Goodwill and Income Taxes.

These estimates require levels of subjectivity and judgment, which could result in actual results differing from our estimates.

The Company believes the following are its critical accounting estimates:

Deferred Costs - Assets Recognized from the Costs to Obtain and Fulfill Contracts

Incremental costs of obtaining a contract (e.g., sales commissions) and cost incurred to implement clients on our solutions (e.g., direct labor) that are expected to be recovered are capitalized and amortized on a straight-line basis over the client retention period, depending on the business unit.

Judgments and Uncertainties

The Company has estimated the amortization periods for deferred costs by using its historical retention rates by business unit to estimate the pattern during which the service transfers.

The expected client relationship period ranges from three to eight years.

Sensitivity of Estimate to Change

As the assumptions used to estimate the amortization period of the deferred costs could have a material impact on timing of recognition, we assess the amortization periods annually using historical retention rates.

Actual retention rates were not materially different than those used in our calculation to determine the amortization period.

We regularly review our deferred costs for impairment.

There were no impairment losses incurred during the fiscal years ended June 30, 2022, June 30, 2021, or June 30, 2020.

Goodwill represents the excess of purchase price over the value assigned to the net tangible and identifiable intangible assets of businesses acquired.

Goodwill is tested annually for impairment or more frequently when an event or circumstance indicates that goodwill might be impaired.

Judgments and Uncertainties

The Company’s annual goodwill impairment assessment as of June 30, 2022 was performed for all reporting units using a quantitative approach by comparing the fair value of each reporting unit to its carrying value.

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Several of these assumptions including projected revenue growth rates and profitability projections are dependent on our ability to upgrade, enhance, and expand our technology and services to meet client needs and preferences.

As such, the determination of fair value requires management to make significant estimates and assumptions related to forecasts of future revenue and operating margins.

Based upon the quantitative assessment, the Company has concluded that goodwill is not impaired.

As the assumptions used in the income approach and market approach can have a material impact on the fair value determinations, we performed a sensitivity analysis and determined that a one percentage point increase in the weighted-average cost of capital would not result in an impairment of goodwill for all reporting units and their fair values substantially exceeded their carrying values.

Sensitivity of Estimate to Change

Some of the inherent estimates and assumptions used in determining the fair value of the reporting units are outside the control of management including the weighted-average cost of capital, tax rates, market comparisons, and terminal growth rates.

While we believe we have made reasonable estimates and assumptions to calculate the fair value of the reporting units, it is possible a material change could occur.

If our actual results are not consistent with our estimates and assumptions used to calculate fair value, it could result in material impairments of our goodwill.

The assumptions used to assess impairment consider historical trends, macroeconomic conditions, and projections consistent with the Company’s operating strategy.

Changes in these estimates can have a significant impact on the assessment of fair value which could result in material impairment losses.

We completed our annual assessment of goodwill as of June 30, 2022 and determined that there was no impairment of goodwill.

We performed a sensitivity analysis and determined that a one percentage point increase in the weighted-average cost of capital would not result in an impairment of goodwill for all reporting units and their fair values substantially exceeded their carrying values.

Judgment is required in addressing the future tax consequences of events that have been recognized in our Consolidated Financial Statements or tax returns (e.g., realization of deferred tax assets, changes in tax laws or interpretations thereof).

A change in the assessment of the outcomes of such matters could materially impact our Consolidated Financial Statements.

Judgments and Uncertainties

The Company computes its provision for income taxes based on the statutory tax rates in the various jurisdictions in which it operates.

Assumptions, judgment, and the use of estimates are required in determining if the “more likely than not” standard has been met when computing the provision for income taxes, deferred tax assets and liabilities, and uncertain tax positions.

Sensitivity of Estimate to Change

While the Company considers all of its tax positions fully supportable, the Company is occasionally challenged by various tax authorities regarding the amount of taxes due.

If certain pending tax matters settle within the next twelve months, the total amount of unrecognized tax benefits may increase or decrease for all open tax years and jurisdictions.

As of June 30, 2022 and 2021, the Company's liabilities for unrecognized tax benefits, which include interest and penalties, were $98.1 million and $99.9 million, respectively.

Quantitative and Qualitative Disclosures About Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis