What changed in this filing

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Item 1. Financial Statements

2022-11-02 compared with 2022-04-29 · 162 added, 189 removed, 478 unchanged (42% of the section changed)

4 unchanged sentences

(In millions, except per share amounts)

Three Months Ended Nine Months Ended

March 31, March 31,

2022 2021 2022 2021

Three Months Ended

September 30,

Revenues, other than interest on funds held

19 unchanged sentences

Diluted weighted average shares outstanding 416.9 423.8

(A) Professional Employer Organization (“PEO”) revenues are net of direct pass-through costs, primarily consisting of payroll wages and payroll taxes of $ 16,826.6 million and $ 13,894.6 million for the three months ended March 31, 2022 and 2021, respectively, and $ 46,863.8 million a nd $ 38,259.5 million for the nine months ended March 31, 2022 and 2021, respectively.

(A) Professional Employer Organization (“PEO”) revenues are net of direct pass-through costs, primarily consisting of payroll wages and payroll taxes of $ 15,534.2 million and $ 13,263.2 million for the three months ended September 30, 2022 and 2021, respectively.

See notes to the Consolidated Financial Statements.

3 unchanged sentences

(In millions)

Three Months Ended Nine Months Ended

March 31, March 31,

2022 2021 2022 2021

Three Months Ended

September 30,

Net earnings $ 779.0 $ 700.5

3 unchanged sentences

Tax effect 185.8 29.3

Reclassification of net (gains)/losses on available-for-sale securities to net earnings 0.3 0.4 ( 0.2 ) ( 7.6 )

Tax effect ( 0.1 ) ( 0.1 ) — 1.7

Unrealized (losses)/gains on cash flow hedging activities — — — ( 3.3 )

Reclassification of net losses/(gains) on available-for-sale securities to net earnings 1.5 ( 0.1 )

Tax effect ( 0.3 ) —

10 unchanged sentences

(In millions, except per share amounts)

March 31, June 30,

September 30, June 30,

Current assets:

39 unchanged sentences

authorized, 1,000.0 shares;

issued, 638.7 shares at March 31, 2022 and June 30, 2021;

outstanding, 418.2 and 423.7 shares at March 31, 2022 and June 30, 2021, respectively

issued, 638.7 shares at September 30, 2022 and June 30, 2022;

outstanding, 415.2 and 416.1 shares at September 30, 2022 and June 30, 2022, respectively

Capital in excess of par value 1,893.1 1,794.2

1 unchanged sentence

Treasury stock - at cost:

220.5 and 215.0 shares at March 31, 2022 and June 30, 2021, respectively

223.6 and 222.7 shares at September 30, 2022 and June 30, 2022, respectively

( 17,695.4 ) ( 17,335.4 )

2 unchanged sentences

Total liabilities and stockholders’ equity $ 46,364.7 $ 63,068.2

(A ) As of June 30, 2021, $ 23.5 million of long-term marketable securities have been pledged as collateral under the Company's reverse repurchase agreements (see Note 9).

(A ) As of September 30, 2022, $ 167.0 million of long-term marketable securities and $ 0.6 million of cash and cash equivalents have been pledged as collateral under the Company's reverse repurchase agreements.

As of June 30, 2022, $ 14.3 million of short-term marketable securities and $ 122.1 million of long-term marketable securities have been pledged as collateral under the Company's reverse repurchase agreements (see Note 9) .

See notes to the Consolidated Financial Statements.

3 unchanged sentences

(In millions)

Nine Months Ended

Three Months Ended

September 30,

Cash Flows from Operating Activities:

9 unchanged sentences

Changes in operating assets and liabilities:

Increase in accounts receivable ( 533.6 ) ( 365.2 )

Decrease/(Increase) in accounts receivable 201.5 ( 51.8 )

Increase in other assets ( 504.0 ) ( 494.2 )

(Decrease)/Increase in accounts payable ( 41.3 ) 9.8

Increase in accrued expenses and other liabilities 103.7 321.1

Decrease in accounts payable ( 30.7 ) ( 61.9 )

Decrease in accrued expenses and other liabilities ( 194.7 ) ( 413.8 )

Net cash flows provided by operating activities 718.1 121.9

4 unchanged sentences

Additions to intangibles ( 86.3 ) ( 93.2 )

Acquisitions of businesses, net of cash acquired ( 11.7 ) —

Proceeds from sale of property, plant, and equipment and other assets — 26.2

1 unchanged sentence

Cash Flows from Financing Activities:

Net increase in client funds obligations 25,028.7 14,999.9

Net (decrease)/increase in client funds obligations ( 15,592.0 ) 12,100.6

Payments of debt ( 0.2 ) ( 0.2 )

Proceeds from the issuance of debt 7.3 991.1

Settlement of cash flow hedges — ( 43.6 )

Repurchases of common stock ( 333.3 ) ( 528.0 )

1 unchanged sentence

Dividends paid ( 432.9 ) ( 393.2 )

Net payments related to reverse repurchase agreements ( 23.5 ) ( 13.6 )

Net cash flows provided by financing activities 22,378.7 12,923.7

Net proceeds related to reverse repurchase agreements 54.8 22.3

Net cash flows (used in)/provided by financing activities ( 16,302.6 ) 11,184.8

Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents ( 44.9 ) ( 21.2 )

32 unchanged sentences

Recently Adopted Accounting Pronouncements

During the second quarter of fiscal 2022, the Company early adopted accounting standard update ("ASU") 2021-08, "Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers." ASU 2021-08 requires that an acquirer recognize and measure contract assets and liabilities acquired in a business combination in accordance with ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)".

The adoption of this guidance did not have a material impact on the Company's prior interim period consolidated results of operations, financial condition, or cash flows.

Recently Issued Accounting Pronouncements

3 unchanged sentences

The following tables provide details of revenue by our strategic pillars, and include a reconciliation to the Company’s reportable segments:

The Company made changes to certain allocation methodologies in both the current period and the prior period in the tables below which did not materially affect our reporting of revenues by strategic pillar:

Three Months Ended Nine Months Ended

March 31, March 31,

Three Months Ended

September 30,

Types of Revenues 2022 2021

5 unchanged sentences

Total Revenues $ 4,215.6 $ 3,832.3

Reconciliation of disaggregated revenue to our reportable segments for the three months ended March 31, 2022:

Types of Revenues Employer Services PEO Other Total

HCM $ 2,015.2 $ — $ ( 1.2 ) $ 2,014.0

HRO, excluding PEO zero-margin benefits pass-throughs 292.5 615.5 ( 1.6 ) 906.4

PEO zero-margin benefits pass-throughs — 897.2 — 897.2

Global 577.4 — — 577.4

Interest on funds held for clients 116.9 1.1 — 118.0

Total Segment Revenues $ 3,002.0 $ 1,513.8 $ ( 2.8 ) $ 4,513.0

Reconciliation of disaggregated revenue to our reportable segments for the three months ended March 31, 2021:

Types of Revenues Employer Services PEO Other Total

HCM $ 1,859.4 $ — $ ( 1.3 ) $ 1,858.1

HRO, excluding PEO zero-margin benefits pass-throughs 252.6 538.7 ( 0.8 ) 790.5

PEO zero-margin benefits pass-throughs — 784.7 — 784.7

Global 561.3 — — 561.3

Interest on funds held for clients 106.7 0.7 — 107.4

Total Segment Revenues $ 2,780.0 $ 1,324.1 $ ( 2.1 ) $ 4,102.0

Reconciliation of disaggregated revenue to our reportable segments for the nine months ended March 31, 2022:

Reconciliation of disaggregated revenue to our reportable segments for the three months ended September 30, 2022:

Types of Revenues Employer Services PEO Other Total

5 unchanged sentences

Total Segment Revenues $ 2,790.2 $ 1,429.4 $ ( 4.0 ) $ 4,215.6

Reconciliation of disaggregated revenue to our reportable segments for the nine months ended March 31, 2021:

Reconciliation of disaggregated revenue to our reportable segments for the three months ended September 30, 2021:

Types of Revenues Employer Services PEO Other Total

8 unchanged sentences

Therefore, the Company does not recognize a contract asset or liability resulting from the timing of revenue recognition and invoicing.

Changes in deferred revenue related to set up fees for the nine months ended March 31, 2022 were as follows:

Changes in short-term deferred revenues related to set up fees for the three months ended September 30, 2022 were as follows:

Contract Liability

3 unchanged sentences

Currency translation adjustments ( 12.1 )

Contract liability, March 31, 2022 $ 481.8

Contract liability, September 30, 2022 $ 450.4

Earnings per Share (“EPS”)

1 unchanged sentence

Shares Diluted

Three Months Ended March 31, 2022

Net earnings $ 928.5 $ 928.5

Weighted average shares (in millions) 418.1 1.0 1.1 420.2

EPS $ 2.22 $ 2.21

Three Months Ended March 31, 2021

Net earnings $ 810.7 $ 810.7

Weighted average shares (in millions) 425.8 0.8 1.1 427.7

EPS $ 1.90 $ 1.90

Nine Months Ended March 31, 2022

Three Months Ended September 30, 2022

Net earnings $ 779.0 $ 779.0

1 unchanged sentence

EPS $ 1.88 $ 1.87

Nine Months Ended March 31, 2021

Three Months Ended September 30, 2021

Net earnings $ 700.5 $ 700.5

1 unchanged sentence

EPS $ 1.66 $ 1.65

Stock Options to purchase 0.7 million and 0.4 million shares of common stock for the three months ended March 31, 2022 and 2021, respectively, and 0.5 million and 1.7 million shares of common stock for the nine months ended March 31, 2022 and

2021, respectively, were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.

Stock Options to purchase 0.3 million and 0.3 million shares of common stock for the three months ended September 30, 2022 and 2021, respectively, were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.

Other (Income)/Expense, Net

Three Months Ended Nine Months Ended

March 31, March 31,

2022 2021 2022 2021

Three Months Ended

September 30,

Interest income on corporate funds $ ( 29.7 ) $ ( 9.7 )

Realized (gains)/losses on available-for-sale securities, net 0.3 0.4 ( 0.2 ) ( 7.6 )

Realized losses/(gains) on available-for-sale securities, net 1.5 ( 0.1 )

Impairment of assets 0.3 —

3 unchanged sentences

Corporate Investments and Funds Held for Clients

Corporate investments and funds held for clients at March 31, 2022 and June 30, 2021 were as follows:

March 31, 2022

Corporate investments and funds held for clients at September 30, 2022 and June 30, 2022 were as follows:

September 30, 2022

Losses Fair Market Value (A)

35 unchanged sentences

The Company concurred with and did not adjust the prices obtained from the independent pricing service.

The Company had no available-for-sale securities included in Level 1 or Level 3 at March 31, 2022.

The unrealized losses and fair values of available-for-sale securities that have been in an unrealized loss position for a period of less than and greater than 12 months as of March 31, 2022, are as follows:

March 31, 2022

The Company had no available-for-sale securities included in Level 1 or Level 3 at September 30, 2022.

The unrealized losses and fair values of available-for-sale securities that have been in an unrealized loss position for a period of less than and greater than 12 months as of September 30, 2022, are as follows:

September 30, 2022

Securities in Unrealized Loss Position Less Than 12 Months Securities in Unrealized Loss Position Greater Than 12 Months Total

26 unchanged sentences

$ ( 1,305.8 ) $ 20,798.8 $ ( 425.3 ) $ 4,005.8 $ ( 1,731.1 ) $ 24,804.6

At March 31, 2022, Corporate bonds include investment-grade debt securities with a wide variety of issuers, industries, and sectors, primarily carry credit ratings of A and above, and have maturities ran g ing fr om April 2022 through March 2032.

At March 31, 2022, asset-backed securities include AAA-rated senior tranches of securities with predominantly prime collateral of fixed-rate auto loan, credit card, equipment lease, and rate reduction receivables with fair values of $ 1,011.9 million, $ 688.9 million, $ 233.4 million, and $ 50.9 million, respectively.

These securities are collateralized by the cash flows of the underlying pools of receivables.

At September 30, 2022, Corporate bonds include investment-grade debt securities with a wide variety of issuers, industries, and sectors, primarily carry credit ratings of A and above, and have maturities ran g ing fr om October 2022 through September 2032 .

At September 30, 2022, asset-backed securities include AAA-rated senior tranches of securities with predominantly prime collateral of fixed-rate auto loan, credit card, equipment lease, and rate reduction receivables with fair value s of $ 866.6 million, $ 511.6 million, $ 217.1 million, and $ 39.3 million, respectively.

These securities are collateralized by the cash flows of the

underlying pools of receivables.

The primary risk associated with these securities is the collection risk of the underlying receivables.

All collateral on such asset-backed securities has performed as expected through March 31, 2022.

At March 31, 2022, U.S.

government agency securities primarily include debt directly issued by Federal Farm Credit Banks and Federal Home Loan Banks with fair values of $ 1,026.0 million and $ 544.4 million, respectively.

government agency securities represent senior, unsecured, non-callable debt that primarily carry ratings of Aaa by Moody's, and AA+ by Standard & Poor's, with maturities ranging from April 2022 through March 2032.

At March 31, 2022, U.S government agency commercial mortgage-backed securities of $ 862.8 million include those issued by Federal Home Loan Mortgage Corporation and Federal National Mortgage Association.

At March 31, 2022, other securities primarily include municipal bonds, diversified with a variety of issuers, with credit ratings of A and above with fair values of $ 536.9 million and AA-rated United Kingdom Gilt securities of $ 274.9 million.

All collateral on such asset-backed securities has performed as expected through September 30, 2022.

At September 30, 2022, U.S.

government a gency securities primarily include debt directly issued by Federal Farm Credit Banks and Federal Home Loan Banks with fair values of $ 947.2 million and $ 493.7 million, respectively.

At September 30, 2022, U.S government agency commercial mortgage-backed securities of $ 753.8 million incl ude those issued by Federal Home Loan Mortgage Corporation and Federal National Mortgage Association.

At September 30, 2022, other securities primarily include municipal bonds, diversified with a variety of issuers, with credit ratings of A and above with fair values of $ 518.8 million , AA-rated United Kingdom Gilt securities of $ 252.6 million, and AAA-rated supranational bonds of $ 230.2 million.

Classification of corporate investments on the Consolidated Balance Sheets is as follows:

March 31, June 30,

September 30, June 30,

Corporate investments:

7 unchanged sentences

Funds held for clients have been invested in the following categories:

March 31, June 30,

September 30, June 30,

Funds held for clients:

5 unchanged sentences

The client funds obligations represent liabilities that will be repaid within one year of the balance sheet date.

The Company has reported client funds obligations as a current liability on the Consolidated Balance Sheets totaling $ 59,387.9 million and $ 34,403.8 million at March 31, 2022 and June 30, 2021, respectively.

The Company has reported client funds obligations as a current liability on the Consolidated Balance Sheets totaling $ 35,471.7 million and $ 51,285.5 million at September 30, 2022 and June 30, 2022, respectively.

The Company has classified funds held for clients as a current asset since these funds are held solely for the purpose of satisfying the client funds obligations.

Of the Company’s funds held for clients at March 31, 2022 and June 30, 2021, $ 53,200.8 million an d $ 31,092.3 million, respectively, are held in the grantor trust.

Of the Company’s funds held for clients at September 30, 2022 and June 30, 2022, $ 30,130.7 million an d $ 46,201.2 million, respectively, are held in the grantor trust.

The liabilities held within the trust are intercompany liabilities to other Company subsidiaries and are eliminated in consolidation.

1 unchanged sentence

The Company has reported the cash and cash equivalents related to client funds investments with original maturities of ninety days or less , within the beginning and ending balances of cash, cash equivalents, restricted cash, and restricted cash equivalents.

The Company has reported the cash flows related to the cash received from and paid on behalf of clients on a net basis within net increase / (decrease) in client funds obligations in the financing activities section of the Statements of Consolidated Cash Flows.

All available-for-sale securities were rated as investment grade at March 31, 2022.

Expected maturities of available-for-sale securities at March 31, 2022 are as follows:

The Company has reported the cash flows related to the

cash received from and paid on behalf of clients on a net basis within net increase / (decrease) in client funds obligations in the financing activities section of the Statements of Consolidated Cash Flows.

All available-for-sale securities were rated as investment grade at September 30, 2022.

Expected maturities of available-for-sale securities at September 30, 2022 are as follows:

One year or less $ 3,353.5

9 unchanged sentences

The components of operating lease expense were as follows:

Three Months Ended Nine Months Ended

March 31, March 31,

2022 2021 2022 2021

Three Months Ended

September 30,

Operating lease cost $ 35.6 $ 35.9

3 unchanged sentences

The following table provides supplemental cash flow information related to the Company's leases:

Nine Months Ended

Three Months Ended

September 30,

Cash paid for operating lease liabilities $ 33.5 $ 33.1

1 unchanged sentence

Other information related to our operating lease liabilities is as follows:

March 31, June 30,

September 30, June 30,

Weighted-average remaining lease term (in years) 6 6

1 unchanged sentence

Current operating lease liability $ 88.8 $ 95.1

As of March 31, 2022, maturities of operating lease liabilities are as follows:

Three months ending June 30, 2022 $ 28.0

As of September 30, 2022, maturities of operating lease liabilities are as follows:

Nine months ending June 30, 2023 $ 74.2

Twelve months ending June 30, 2024 90.6

7 unchanged sentences

Goodwill and Intangible Assets, net

Changes in goodwill for the nine months ended March 31, 2022 are as follows:

Changes in goodwill for the three months ended September 30, 2022 are as follows:

Services Total

Balance at June 30, 2022 $ 2,295.7 $ 4.8 $ 2,300.5

Additions and other adjustments 11.1 — 11.1

Currency translation adjustments ( 27.1 ) — ( 27.1 )

Balance at March 31, 2022 $ 2,319.3 $ 4.8 $ 2,324.1

Balance at September 30, 2022 $ 2,268.6 $ 4.8 $ 2,273.4

Components of intangible assets, net, are as follows:

March 31, June 30,

September 30, June 30,

Intangible assets:

12 unchanged sentences

The weighted average remaining useful life of the intangible assets is 5 years ( 6 years for software and software licenses, 3 years for customer contracts and lists, and 2 years for other intangibles).

Amortization of intangible assets was $ 86.1 million and $ 81.0 million for the three months ended March 31, 2022 and 2021, respectively, and $ 256.7 million and $ 245.9 million for the nine months ended March 31, 2022 and 2021, respectively.

Amortization of intangible assets was $ 92.3 million and $ 86.2 million for the three months ended September 30, 2022 and 2021, respectively.

Estimated future amortization expenses of the Company's existing intangible assets are as follows:

Three months ending June 30, 2022 $ 114.4

Nine months ending June 30, 2023 $ 329.8

Twelve months ending June 30, 2024 $ 309.3

5 unchanged sentences

The Company has a $ 3.75 billion, 364 -day credit agreement that matures in June 2023 with a one year term-out option.

The interest rate applicable to committed borrowings under each agreement is tied to SOFR, the effective funds rate, or the prime rate depending on the notification provided by the Company to the syndicated financial institutions prior to borrowing.

The Company also has a $ 2.75 billion five year credit facility that matures in June 2024 that contains an accordion feature under which the aggregate commitment can be increased by $ 500 million, subject to the availability of additional commitments.

3 unchanged sentences

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

The Company had no borrowings through March 31, 2022 under the credit agreements.

The Company had no borrowings through September 30, 2022 under the credit agreements.

The Company's U.S.

short-term funding requirements related to client funds are sometimes obtained on an unsecured basis through the issuance of commercial paper, rather than liquidating previously-collected client funds that have already been invested in available-for-sale securities.

short-term funding requirements primarily related to client funds are sometimes obtained on an unsecured basis through the issuance of commercial paper, rather than liquidating previously-collected client funds that have already been invested in available-for-sale securities.

This commercial paper program provides for the issuance of up to $ 9.7 billion in aggregate maturity value.

2 unchanged sentences

Maturities of commercial paper can range from overnight to up to 364 days.

At March 31, 2022 and June 30, 2021, the Company had no commercial paper borrowing outstanding.

At September 30, 2022 and June 30, 2022, the Company had no commercial paper borrowing outstanding.

Details of the borrowings under the commercial paper program are as follows:

Three Months Ended Nine Months Ended

March 31, March 31,

2022 2021 2022 2021

Three Months Ended

September 30,

Average daily borrowings (in billions) $ 4.6 $ 2.0

Weighted average interest rates 2.3 % 0.1 %

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

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

The Company’s 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.

At March 31, 2022 there were no outstanding obligations related to reverse repurchase agreements.

At June 30, 2021, the Company had $ 23.5 million of outstanding obligations related to the reverse repurchase agreements.

At September 30, 2022 and June 30, 2022, the Company had $ 167.6 million and $ 136.4 million, respectively, of outstanding obligations related to reverse repurchase agreements.

Details of the reverse repurchase agreements are as follows:

Three Months Ended Nine Months Ended

March 31, March 31,

2022 2021 2022 2021

Three Months Ended

September 30,

Average outstanding balances $ 1,119.4 $ 195.1

2 unchanged sentences

The Notes are senior unsecured obligations, and interest is payable in arrears, semi-annually.

The principal amounts and associated effective interest rates of the Notes and other debt as of March 31, 2022 and June 30, 2021, are as follows:

Debt instrument Effective Interest Rate March 31, 2022 June 30, 2021

The principal amounts and associated effective interest rates of the Notes and other debt as of September 30, 2022 and June 30, 2022, are as follows:

Debt instrument Effective Interest Rate September 30, 2022 June 30, 2022

Fixed-rate 3.375 % notes due September 15, 2025

9 unchanged sentences

Total long-term debt $ 2,987.6 $ 2,987.1

(a) - Current portion of long-term debt as of March 31, 2022 is included within Accrued expenses and other current liabilities on the Consolidated Balance Sheets.

(a) - Current portion of long-term debt as of September 30, 2022 is included within Accrued expenses and other current liabilities on the Consolidated Balance Sheets.

The effective interest rates for the Notes include the interest on the Notes and amortization of the discount and debt issuance costs.

As of March 31, 2022, the fair value of the Notes, based on Level 2 inputs, was $ 2,819.1 million .

As of September 30, 2022, the fair value of the Notes, based on Level 2 inputs, was $ 2,594.9 million.

For a description of the fair value hierarchy and the Company's fair value methodologies, including the use of an independent third-party pricing service, see Note 1 “Summary of Significant Accounting Policies” in the Company's Annual Report on Form 10-K for fiscal 2022.

4 unchanged sentences

The Company also offers an employee stock purchase plan for eligible employees .

Beginning in September 2022, the Company discontinued granting stock options, time-based restricted stock and performance-based restricted stock.

Any such future awards will be grants of time-based restricted stock units and/or performance-based restricted stock units, depending on employee eligibility.

Time-based restricted stock unit awards and performance-based restricted stock unit awards granted to employees with a home country of the United States are settled in stock, and for awards granted to employees with a home country outside the United States are generally settled in cash.

• Restricted Stock.

• Time-Based Restricted Stock Units.

Time-based restricted stock units generally vest ratably over 3 years.

Awards are generally forfeited if the employee ceases to be employed by the Company prior to vesting.

Time-based restricted stock unit awards granted to employees with a home country of the United States are settled in stock and cannot be transferred during the vesting period.

Time-based restricted stock unit awards granted to employees with a home country outside the United States are generally settled in cash and cannot be transferred during the vesting period.

Compensation expense relating to the issuance of share-settled units is measured based on the fair value of the award on the grant date and recognized on a straight-line basis over the vesting period.

Compensation expense relating to the issuance of cash-settled units is recorded over the vesting period and is initially based on the fair value of the award on the grant date and is subsequently

remeasured at each reporting date during the vesting period based on the change in the ADP stock price.

Dividend cash equivalents are paid on share-settled units, and dividend cash equivalents are not paid on cash-settled units.

• Performance-Based Restricted Stock Units.

Performance-based restricted stock units generally vest over a one to three year performance period and a subsequent service period of up to 38 months.

Under these programs, the Company communicates “target awards” at the beginning of the performance period with possible payouts at the end of the performance period ranging from 0 % to 200 % of the “target awards.” Awards are generally forfeited if the employee ceases to be employed by the Company prior to vesting.

Performance-based restricted stock units cannot be transferred and are settled in either cash or stock, depending on the employee's home country.

Compensation expense relating to the issuance of performance-based restricted stock units settled in cash is recognized over the vesting period initially based on the fair value of the award on the grant date with subsequent adjustments to the number of units awarded during the performance period based on probable and actual performance against targets.

In addition, compensation expense is remeasured at each reporting period during the vesting period based on the change in the ADP stock price.

Compensation expense relating to the issuance of performance-based restricted stock units settled in stock is recorded over the vesting period based on the fair value of the award on the grant date with subsequent adjustments to the number of units awarded based on the probable and actual performance against targets.

Dividend equivalents are paid on awards under the performance-based restricted stock unit program.

• Employee Stock Purchase Plan.

The Company offers an employee stock purchase plan that allows eligible employees to purchase shares of common stock at a price equal to 95 % of the market value for the Company's common stock on the last day of the offering period.

This plan has been deemed non-compensatory and, therefore, no compensation expense has been recorded.

The Company currently utilizes treasury stock to satisfy stock option exercises, issuances under the Company's employee stock purchase plan, and restricted stock awards.

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

The Company repurchased 2.3 million and 2.5 million shares in the three months ended March 31, 2022 and 2021, respectively, and repurchased 7.0 million and 5.7 million shares in the nine months ended March 31, 2022 and 2021, respectively.

The Company repurchased 1.4 million and 2.6 million shares in the three months ended September 30, 2022 and 2021, respectively.

The Company considers several factors in determining when to execute share repurchases, including, among other things, actual and potential acquisition activity, cash balances and cash flows, issuances due to employee benefit plan activity, and market conditions.

The following table represents pre-tax stock-based compensation expense for the three and nine months ended March 31, 2022 and 2021, respectively:

Three Months Ended Nine Months Ended

March 31, March 31,

2022 2021 2022 2021

The following table represents pre-tax stock-based compensation expense for the three and three months ended September 30, 2022 and 2021, respectively:

Three Months Ended

September 30,

Operating expenses $ 6.0 $ 4.8

2 unchanged sentences

Total stock-based compensation expense $ 50.6 $ 42.3

During the three months ended September 30, 2022, the following activity occurred under the Company’s existing plans.

Stock Options:

(in thousands) Weighted

Average Price

Options outstanding at July 1, 2022 3,474 $ 152

Options granted — $ —

Options exercised ( 438 ) $ 141

Options forfeited/cancelled ( 6 ) $ 169

Options outstanding at September 30, 2022 3,030 $ 152

Time-Based Restricted Stock and Time-Based Restricted Stock Units:

Number of Shares

(in thousands) Number of Units

(in thousands)

Restricted shares/units outstanding at July 1, 2022 1,021 173

Restricted shares/units granted 3 649

Restricted shares/units vested ( 457 ) ( 81 )

Restricted shares/units forfeited ( 13 ) ( 4 )

Restricted shares/units outstanding at September 30, 2022 554 737

Performance-Based Restricted Stock and Performance-Based Restricted Stock Units:

Number of Shares

(in thousands) Number of Units

(in thousands)

Restricted shares/units outstanding at July 1, 2022 222 757

Restricted shares/units granted 95 321

Restricted shares/units vested ( 106 ) ( 250 )

Restricted shares/units forfeited ( 6 ) ( 6 )

Restricted shares/units outstanding at September 30, 2022 205 822

The fair value for stock options granted was estimated at the date of grant using the following assumptions:

Three Months Ended

September 30,

Risk-free interest rate N/A — %

Dividend yield N/A 1.8 %

Weighted average volatility factor N/A 22.7 %

Weighted average expected life (in years) N/A 4.9

Weighted average fair value (in dollars) N/A $ 33.03

Pension Plans

The components of net pension income were as follows:

Three Months Ended Nine Months Ended

March 31, March 31,

2022 2021 2022 2021

Three Months Ended

September 30,

Service cost – benefits earned during the period $ 1.2 $ 1.4

4 unchanged sentences

Net pension (income)/expense $ ( 9.3 ) $ ( 15.8 )

The effective tax rate for the three months ended March 31, 2022 and 2021 was 22.0 % and 24.0 %, respectively.

The decrease in the effective tax rate is primarily due to an intercompany transfer of certain assets, a lower state income tax rate and a favorable earnings mix in the three months ended March 31, 2022.

The effective tax rate for the nine months ended March 31, 2022 and 2021 was 22.6 % and 22.7 %, respectively.

The decrease in th e effective tax rate is primarily due to a favorable earnings mix, an increase in the excess tax benefits on stock-based compensation and an intercompany transfer of certain assets in the nine months ended March 31, 2022, partially offset by combined benefits from adjustments to prior year tax liabilities and a foreign tax election in the nine months ended March 31, 2021.

The effective tax rate for the three months ended September 30, 2022 and 2021 was 22.9 % and 22.2 %, respectively.

The increase in the effective tax rate is primarily due to lower reserves for uncertain tax positions and a valuation allowance release in the three months ended September 30, 2021.

Commitments and Contingencies

15 unchanged sentences

Three Months Ended

March 31, 2022

Common Stock Capital in Excess of Par Value Retained Earnings Treasury Stock AOCI Total

Balance at December 31, 2021 $ 63.9 $ 1,664.7 $ 20,011.8 $ ( 16,362.4 ) $ ( 328.4 ) $ 5,049.6

Net earnings — 928.5 — 928.5

Other comprehensive income — — ( 933.9 ) ( 933.9 )

Stock-based compensation expense — 42.7 — — 42.7

Issuances relating to stock compensation plans — 29.4 — 10.3 — 39.7

Treasury stock acquired ( 2.3 million shares repurchased)

— — ( 497.9 ) — ( 497.9 )

Dividends declared ($ 1.04 per share)

— — ( 435.8 ) — — ( 435.8 )

Balance at March 31, 2022 $ 63.9 $ 1,736.8 $ 20,504.5 $ ( 16,850.0 ) $ ( 1,262.3 ) $ 4,192.9

Three Months Ended

March 31, 2021

Common Stock Capital in Excess of Par Value Retained Earnings Treasury Stock AOCI Total

Balance at December 31, 2020 $ 63.9 $ 1,407.6 $ 18,893.6 $ ( 14,505.4 ) $ 40.3 $ 5,900.0

Net earnings — — 810.7 — — 810.7

Other comprehensive income — — — — ( 298.0 ) ( 298.0 )

Stock-based compensation expense — 38.8 — — — 38.8

Issuances relating to stock compensation plans — 33.4 — 19.7 — 53.1

Treasury stock acquired ( 2.5 million shares repurchased)

— — — ( 433.9 ) — ( 433.9 )

Dividends declared ($ 0.93 per share)

— — ( 396.8 ) — — ( 396.8 )

Balance at March 31, 2021 $ 63.9 $ 1,479.8 $ 19,307.5 $ ( 14,919.6 ) $ ( 257.7 ) $ 5,673.9

Nine Months Ended

March 31, 2022

September 30, 2022

Common Stock Capital in Excess of Par Value Retained Earnings Treasury Stock AOCI Total

8 unchanged sentences

— — ( 436.3 ) — — ( 436.3 )

Balance at March 31, 2022 $ 63.9 $ 1,736.8 $ 20,504.5 $ ( 16,850.0 ) $ ( 1,262.3 ) $ 4,192.9

Nine Months Ended

March 31, 2021

Balance at September 30, 2022 $ 63.9 $ 1,893.1 $ 21,039.0 $ ( 17,695.4 ) $ ( 2,724.1 ) $ 2,576.5

Three Months Ended

September 30, 2021

Common Stock Capital in Excess of Par Value Retained Earnings Treasury Stock AOCI Total

8 unchanged sentences

— — ( 396.8 ) — — ( 396.8 )

Balance at March 31, 2021 $ 63.9 $ 1,479.8 $ 19,307.5 $ ( 14,919.6 ) $ ( 257.7 ) $ 5,673.9

Balance at September 30, 2021 $ 63.9 $ 1,579.1 $ 19,754.8 $ ( 15,924.2 ) $ ( 122.9 ) $ 5,350.7

Reclassifications out of Accumulated Other Comprehensive Income (“AOCI”)

1 unchanged sentence

Three Months Ended

March 31, 2022

Currency Translation Adjustment Net Gains/Losses on Available-for-sale Securities Cash Flow Hedging Activities Pension Liability Accumulated Other Comprehensive (Loss) /Income

Balance at December 31, 2021 $ ( 278.3 ) $ 98.3 $ ( 28.3 ) $ ( 120.1 ) $ ( 328.4 )

Other comprehensive (loss)/income before reclassification adjustments ( 14.2 ) ( 1,192.5 ) — — ( 1,206.7 )

Tax effect — 270.3 — — 270.3

Reclassification adjustments to net earnings — 0.3 (A) 1.1 (C) 1.9 (B) 3.3

Tax effect — ( 0.1 ) ( 0.3 ) ( 0.4 ) ( 0.8 )

Balance at March 31, 2022 $ ( 292.5 ) $ ( 823.7 ) $ ( 27.5 ) $ ( 118.6 ) $ ( 1,262.3 )

Three Months Ended

March 31, 2021

Currency Translation Adjustment Net Gains/Losses on Available-for-sale Securities Cash Flow Hedging Activities Pension Liability Accumulated Other Comprehensive (Loss) /Income

Balance at December 31, 2020 $ ( 209.9 ) $ 621.0 $ ( 31.5 ) $ ( 339.3 ) $ 40.3

Other comprehensive (loss)/income before reclassification adjustments ( 27.5 ) ( 352.5 ) — — ( 380.0 )

Tax effect — 79.2 — — 79.2

Reclassification adjustments to net earnings — 0.4 (A) 1.1 (C) 2.8 (B) 4.3

Tax effect — ( 0.1 ) ( 0.3 ) ( 1.1 ) ( 1.5 )

Balance at March 31, 2021 $ ( 237.4 ) $ 348.0 $ ( 30.7 ) $ ( 337.6 ) $ ( 257.7 )

Nine Months Ended

March 31, 2022

September 30, 2022

Currency Translation Adjustment Net Gains/Losses on Available-for-sale Securities Cash Flow Hedging Activities Pension Liability Accumulated Other Comprehensive (Loss) /Income

4 unchanged sentences

Tax effect — ( 0.3 ) ( 0.3 ) ( 0.5 ) ( 1.1 )

Balance at March 31, 2022 $ ( 292.5 ) $ ( 823.7 ) $ ( 27.5 ) $ ( 118.6 ) $ ( 1,262.3 )

Nine Months Ended

March 31, 2021

Balance at September 30, 2022 $ ( 438.9 ) $ ( 1,978.1 ) $ ( 25.8 ) $ ( 281.3 ) $ ( 2,724.1 )

Three Months Ended

September 30, 2021

Currency Translation Adjustment Net Gains/Losses on Available-for-sale Securities Cash Flow Hedging Activities Pension Liability Accumulated Other Comprehensive (Loss) /Income

4 unchanged sentences

Tax effect — — ( 0.3 ) ( 0.3 ) ( 0.6 )

Balance at March 31, 2021 $ ( 237.4 ) $ 348.0 $ ( 30.7 ) $ ( 337.6 ) $ ( 257.7 )

Balance at September 30, 2021 $ ( 261.9 ) $ 289.8 $ ( 29.1 ) $ ( 121.7 ) $ ( 122.9 )

(A) Reclassification adjustments out of AOCI are included within Other (income)/expense, net, on the Statements of Consolidated Earnings.

8 unchanged sentences

Segment Results:

Three Months Ended Nine Months Ended

March 31, March 31,

2022 2021 2022 2021

Three Months Ended

September 30,

Employer Services $ 2,790.2 $ 2,571.5

3 unchanged sentences

Earnings before Income Taxes

Three Months Ended Nine Months Ended

March 31, March 31,

2022 2021 2022 2021

Three Months Ended

September 30,

Employer Services $ 863.5 $ 784.0

3 unchanged sentences

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-Q

Item 1. Financial Statements