What changed in this filing

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Item 1. Financial Statements

2023-02-02 compared with 2022-11-02 · 183 added, 155 removed, 485 unchanged (41% of the section changed)

4 unchanged sentences

(In millions, except per share amounts)

Three Months Ended

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

2022 2021 2022 2021

Revenues, other than interest on funds held

19 unchanged sentences

Diluted weighted average shares outstanding 416.2 422.0 416.6 422.9

(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.

(A) Professional Employer Organization (“PEO”) revenues are net of direct pass-through costs, primarily consisting of payroll wages and payroll taxes of $ 17,852.4 million and $ 16,774.0 million for the three months ended December 31, 2022 and 2021, respectively, and $ 33,386.6 million and $ 30,037.2 million for the six months ended December 31, 2022 and 2021, respectively.

See notes to the Consolidated Financial Statements.

3 unchanged sentences

(In millions)

Three Months Ended

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

2022 2021 2022 2021

Net earnings $ 813.1 $ 694.4 $ 1,592.2 $ 1,394.9

16 unchanged sentences

(In millions, except per share amounts)

September 30, June 30,

December 31, June 30,

Current assets:

39 unchanged sentences

authorized, 1,000.0 shares;

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

issued, 638.7 s hares at December 31, 2022 and June 30, 2022;

outstandi ng, 414.4 and 416.1 shares at December 31, 2022 and June 30, 2022, respectively

Capital in excess of par value 1,954.2 1,794.2

1 unchanged sentence

Treasury stock - at cost:

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

224.4 and 222.7 shares at December 31, 2022 and June 30, 2022, respectively

( 17,913.5 ) ( 17,335.4 )

2 unchanged sentences

Total liabilities and stockholders’ equity $ 54,453.0 $ 63,068.2

(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) .

(A ) 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)

Three Months Ended

September 30,

Six Months Ended

Cash Flows from Operating Activities:

9 unchanged sentences

Changes in operating assets and liabilities:

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

Increase in accounts receivable ( 1.1 ) ( 26.0 )

Increase in other assets ( 787.9 ) ( 668.6 )

7 unchanged sentences

Additions to intangibles ( 178.4 ) ( 180.7 )

Acquisitions of businesses, net of cash acquired ( 14.4 ) ( 11.7 )

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

6 unchanged sentences

Dividends paid ( 865.5 ) ( 787.0 )

Net proceeds related to reverse repurchase agreements 54.8 22.3

Net payments related to reverse repurchase agreements ( 132.8 ) ( 23.5 )

Net cash flows (used in)/provided by financing activities ( 9,624.3 ) 9,664.7

30 unchanged sentences

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022 (“fiscal 2022”).

Certain amounts from the prior year's financial statements have been reclassified in order to conform to the current year's presentation.

New Accounting Pronouncements

5 unchanged sentences

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

Three Months Ended

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

Types of Revenues 2022 2021 2022 2021

5 unchanged sentences

Total Revenues $ 4,391.0 $ 4,025.4 $ 8,606.6 $ 7,857.7

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

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

Types of Revenues Employer Services PEO Other Total

5 unchanged sentences

Total Segment Revenues $ 2,891.9 $ 1,503.3 $ ( 4.2 ) $ 4,391.0

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

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

Types of Revenues Employer Services PEO Other Total

5 unchanged sentences

Total Segment Revenues $ 2,671.3 $ 1,358.8 $ ( 4.7 ) $ 4,025.4

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

Types of Revenues Employer Services PEO Other Total

HCM $ 3,677.4 $ — $ ( 4.6 ) $ 3,672.8

HRO, excluding PEO zero-margin benefits pass-throughs 595.2 1,039.7 ( 3.7 ) 1,631.2

PEO zero-margin benefits pass-throughs — 1,890.0 — 1,890.0

Global 1,084.3 — — 1,084.3

Interest on funds held for clients 325.3 3.0 — 328.3

Total Segment Revenues $ 5,682.2 $ 2,932.7 $ ( 8.3 ) $ 8,606.6

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

Types of Revenues Employer Services PEO Other Total

HCM $ 3,414.7 $ — $ ( 4.3 ) $ 3,410.4

HRO, excluding PEO zero-margin benefits pass-throughs 524.1 917.6 ( 3.7 ) 1,438.0

PEO zero-margin benefits pass-throughs — 1,703.4 — 1,703.4

Global 1,098.8 — — 1,098.8

Interest on funds held for clients 205.2 1.9 — 207.1

Total Segment Revenues $ 5,242.8 $ 2,622.9 $ ( 8.0 ) $ 7,857.7

Contract Balances

1 unchanged sentence

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

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

Changes in short-term deferred revenues related to set up fees for the six months ended December 31, 2022 were as follows:

Contract Liability

3 unchanged sentences

Currency translation adjustments ( 8.9 )

Contract liability, September 30, 2022 $ 450.4

Contract liability, December 31, 2022 $ 454.6

Earnings per Share (“EPS”)

1 unchanged sentence

Shares Diluted

Three Months Ended September 30, 2022

Three Months Ended December 31, 2022

Net earnings $ 813.1 $ 813.1

1 unchanged sentence

EPS $ 1.96 $ 1.95

Three Months Ended September 30, 2021

Three Months Ended December 31, 2021

Net earnings $ 694.4 $ 694.4

1 unchanged sentence

EPS $ 1.65 $ 1.65

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.

Six Months Ended December 31, 2022

Net earnings $ 1,592.2 $ 1,592.2

Weighted average shares (in millions) 414.4 1.1 1.1 416.6

EPS $ 3.84 $ 3.82

Six Months Ended December 31, 2021

Net earnings $ 1,394.9 $ 1,394.9

Weighted average shares (in millions) 420.6 1.2 1.1 422.9

EPS $ 3.32 $ 3.30

For the three and six months ended December 31, 2022, there were no stock options excluded from the calculation of diluted earnings per share due to anti-dilution.

Stock Options to purchase 0.7 million and 0.5 million shares of common stock for the

three and six months ended December 31, 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

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

2022 2021 2022 2021

Interest income on corporate funds $ ( 28.9 ) $ ( 8.5 ) $ ( 58.6 ) $ ( 18.2 )

Realized losses/(gains) on available-for-sale securities, net 11.5 ( 0.4 ) 13.0 ( 0.5 )

Impairment of assets 0.3 —

Gain on sale of assets — — — ( 1.3 )

Impairment of assets — — 0.3 —

Non-service components of pension income, net (see Note 11) ( 13.1 ) ( 17.7 ) ( 24.7 ) ( 35.4 )

1 unchanged sentence

Corporate Investments and Funds Held for Clients

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

September 30, 2022

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

December 31, 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 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

The Company had no available-for-sale securities included in Level 1 or Level 3 at December 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 December 31, 2022, are as follows:

December 31, 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 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.

At December 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 from January 2023 through September 2032.

At December 31, 2022, asset-backed securities include AAA-rated senior tranches of securities with predomi nantly prime collateral of fixed-rate auto loan, credit card, equipment lease, and rate reduction receivables with fair values of $ 755.5 million, $ 496.7 million, $ 214.0 million, and $ 33.2 million, respectively.

These securities are collateralized by the cash flows of the

1 unchanged sentence

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 September 30, 2022.

At September 30, 2022, U.S.

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

At December 31, 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 $ 955.2 million and $ 468.6 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 November 2022 through March 2032.

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.

At December 31, 2022, U.S government agency commercial mortgage-backed securities of $ 702.2 million include those issued by Federal Home Loan Mortgage Corporation and Federal National Mortgage Association.

At December 31, 2022, other securities primarily include municipal bonds, diversified with a variety of issuers, with credit ratings of A and above with fair val ues of $ 527.3 million, AA-rated United Kingdom Gilt securities of $ 282.4 million, and AAA-rated supranational bonds of $ 206.1 million.

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

September 30, June 30,

December 31, June 30,

Corporate investments:

7 unchanged sentences

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

September 30, June 30,

December 31, 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 $ 35,471.7 million and $ 51,285.5 million at September 30, 2022 and June 30, 2022, respectively.

The Company has reported client funds obligations as a current liability on the Consolidated Balance Sheets totaling $ 43,061.8 million and $ 51,285.5 million at December 31, 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 September 30, 2022 and June 30, 2022, $ 30,130.7 million an d $ 46,201.2 million, respectively, are held in the grantor trust.

Of the Company’s funds held for clients at December 31, 2022 and June 30, 2022 , $ 37,371.5 million and $ 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.

3 unchanged sentences

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:

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

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

One year or less $ 3,310.7

7 unchanged sentences

The Company has entered into operating lease agreements for facilities and equipment.

The Company's leases have remaining lease terms of up to approximately ten years .

The Company's leases have remaining lease terms of up to approximately eleven years .

The components of operating lease expense were as follows:

Three Months Ended

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

2022 2021 2022 2021

Operating lease cost $ 32.1 $ 36.7 $ 67.8 $ 72.5

3 unchanged sentences

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

Three Months Ended

September 30,

Six Months Ended

Cash paid for operating lease liabilities $ 65.3 $ 64.5

1 unchanged sentence

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

September 30, June 30,

December 31, June 30,

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

1 unchanged sentence

Current operating lease liability $ 94.7 $ 95.1

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

Nine months ending June 30, 2023 $ 74.2

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

Six months ending June 30, 2023 $ 55.7

Twelve months ending June 30, 2024 91.6

7 unchanged sentences

Goodwill and Intangible Assets, net

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

Changes in goodwill for the six months ended December 31, 2022 are as follows:

Services Total

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

Additions and other adjustments 11.6 — 11.6

Currency translation adjustments 2.9 — 2.9

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

Balance at December 31, 2022 $ 2,310.2 $ 4.8 $ 2,315.0

Components of intangible assets, net, are as follows:

September 30, June 30,

December 31, 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 $ 92.3 million and $ 86.2 million for the three months ended September 30, 2022 and 2021, respectively.

Amortization of intangible assets was $ 93.7 million and $ 84.3 million for the three months ended December 31, 2022 and 2021, respectively, and $ 186.1 million and $ 170.5 million for the six months ended December 31, 2022 and 2021, respectively.

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

Nine months ending June 30, 2023 $ 329.8

Six months ending June 30, 2023 $ 227.0

Twelve months ending June 30, 2024 $ 345.8

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 interest rate applicable to committed borrowings under the 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 September 30, 2022 under the credit agreements.

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

The Company's U.S.

4 unchanged sentences

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

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

At December 31, 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

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

2022 2021 2022 2021

Average daily borrowings (in billions) $ 3.4 $ 1.9 $ 4.0 $ 1.9

Weighted average interest rates 3.5 % 0.1 % 2.8 % 0.1 %

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

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

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

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

Details of the reverse repurchase agreements are as follows:

Three Months Ended

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

2022 2021 2022 2021

Average outstanding balances $ 960.8 $ 228.4 $ 1,040.1 $ 211.7

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 September 30, 2022 and June 30, 2022, are as follows:

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

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

Debt instrument Effective Interest Rate December 31, 2022 June 30, 2022

Fixed-rate 3.375 % notes due September 15, 2025

9 unchanged sentences

Total long-term debt $ 2,988.1 $ 2,987.1

(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.

(a) - Current portion of long-term debt as of December 31, 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 September 30, 2022, the fair value of the Notes, based on Level 2 inputs, was $ 2,594.9 million.

As of December 31, 2022, the fair value of the Notes, based on Level 2 inputs, was $ 2,623.1 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.

2 unchanged sentences

Stock-based compensation consists of the following:

The Company's share-based compensation consists of stock options, time-based restricted stock, time-based restricted stock units, performance-based restricted stock, and performance-based restricted stock units.

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's share-based compensation consists of stock options, time-based restricted stock, time-based restricted stock

units, performance-based restricted stock, and performance-based restricted stock units.

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.

Other than the change described above, the methods and assumptions used in the determination of the fair value of stock-based awards are generally consistent with those described in the Company's Form 10-Q for the first quarter of fiscal 2023.

See the Company's Quarterly Report on Form 10-Q for the first quarter of fiscal 2023 for a detailed description of the Company's stock-based compensation awards and employee stock purchase plan.

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

The Company repurchase d 0.9 million and 2.0 million shares in the three months ended December 31, 2022 and 2021, respectively, and repurchased 2.3 million and 4.6 million shares in the six months ended December 31, 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 three months ended September 30, 2022 and 2021, respectively:

Three Months Ended

September 30,

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

Three Months Ended Six Months Ended

December 31, December 31,

2022 2021 2022 2021

Operating expenses $ 6.5 $ 5.2 $ 12.5 $ 9.9

2 unchanged sentences

Total stock-based compensation expense $ 58.4 $ 55.6 $ 109.0 $ 97.9

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

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

2022 2021 2022 2021

Service cost – benefits earned during the period $ 1.2 $ 1.4 $ 2.3 $ 2.8

4 unchanged sentences

Net pension (income)/expense $ ( 10.7 ) $ ( 15.8 ) $ ( 20.0 ) $ ( 31.6 )

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.

The effective tax rate for the three months ended December 31, 2022 and 2021 was 23.2 % and 23.7 %, respectively.

The decrease is primarily due to favorable adjustments to prior year tax liabilities partially offset by a decrease in the excess tax benefits on stock-based compensation in the three months ended December 31, 2022.

The effective tax rate for the six months ended December 31, 2022 and 2021 was 23.0 %.

The rate remained flat due to favorable adjustments to prior year tax liabilities in the six months ended December 31, 2022 offset by lower reserves for uncertain tax positions and a valuation allowance release in the six months ended December 31, 2021.

Commitments and Contingencies

15 unchanged sentences

Three Months Ended

September 30, 2022

December 31, 2022

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

Balance at June 30, 2022 $ 63.9 $ 1,794.2 $ 20,696.3 $ ( 17,335.4 ) $ ( 1,993.7 ) $ 3,225.3

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

Net earnings — 813.1 — 813.1

6 unchanged sentences

— — ( 519.1 ) — — ( 519.1 )

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

Balance at December 31, 2022 $ 63.9 $ 1,954.2 $ 21,333.0 $ ( 17,913.5 ) $ ( 2,450.9 ) $ 2,986.7

Three Months Ended

September 30, 2021

December 31, 2021

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

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

Net earnings — — 694.4 — — 694.4

Other comprehensive income — — — — ( 205.5 ) ( 205.5 )

Stock-based compensation expense — 47.6 — — — 47.6

Issuances relating to stock compensation plans — 38.0 — 20.4 — 58.4

Treasury stock acquired ( 2.0 million shares repurchased)

— — — ( 458.6 ) — ( 458.6 )

Dividends declared ($ 1.04 per share)

— — ( 437.4 ) — — ( 437.4 )

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

Six Months Ended

December 31, 2022

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

Balance at June 30, 2022 $ 63.9 $ 1,794.2 $ 20,696.3 $ ( 17,335.4 ) $ ( 1,993.7 ) $ 3,225.3

7 unchanged sentences

— — ( 955.5 ) — — ( 955.5 )

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

Balance at December 31, 2022 $ 63.9 $ 1,954.2 $ 21,333.0 $ ( 17,913.5 ) $ ( 2,450.9 ) $ 2,986.7

Six Months Ended

December 31, 2021

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

Balance at June 30, 2021 $ 63.9 $ 1,531.3 $ 19,451.1 $ ( 15,386.8 ) $ 10.6 $ 5,670.1

Net earnings — — 1,394.9 — — 1,394.9

Other comprehensive income — — — — ( 339.0 ) ( 339.0 )

Stock-based compensation expense — 87.0 — — — 87.0

Issuances relating to stock compensation plans — 46.4 — 80.4 — 126.8

Treasury stock acquired ( 4.6 million shares repurchased)

— — — ( 1,056.0 ) — ( 1,056.0 )

Dividends declared ($ 1.97 per share)

— — ( 834.2 ) — — ( 834.2 )

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

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

1 unchanged sentence

Three Months Ended

September 30, 2022

December 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 June 30, 2022 $ ( 354.2 ) $ ( 1,330.0 ) $ ( 26.6 ) $ ( 282.9 ) $ ( 1,993.7 )

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

Other comprehensive (loss)/income before reclassification adjustments 71.1 242.2 — — 313.3

2 unchanged sentences

Tax effect — ( 2.7 ) ( 0.2 ) ( 0.1 ) ( 3.0 )

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

Balance at December 31, 2022 $ ( 367.8 ) $ ( 1,778.3 ) $ ( 24.9 ) $ ( 279.9 ) $ ( 2,450.9 )

Three Months Ended

September 30, 2021

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

Other comprehensive (loss)/income before reclassification adjustments ( 16.4 ) ( 247.6 ) — — ( 264.0 )

Tax effect — 56.4 — — 56.4

Reclassification adjustments to net earnings — ( 0.4 ) (A) 1.1 (C) 1.9 (B) 2.6

Tax effect — 0.1 ( 0.3 ) ( 0.3 ) ( 0.5 )

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

Six Months Ended

December 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 June 30, 2022 $ ( 354.2 ) $ ( 1,330.0 ) $ ( 26.6 ) $ ( 282.9 ) $ ( 1,993.7 )

3 unchanged sentences

Tax effect — ( 2.9 ) ( 0.5 ) ( 0.6 ) ( 4.0 )

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

Balance at December 31, 2022 $ ( 367.8 ) $ ( 1,778.3 ) $ ( 24.9 ) $ ( 279.9 ) $ ( 2,450.9 )

Six Months Ended

December 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 June 30, 2021 $ ( 226.8 ) $ 390.9 $ ( 29.9 ) $ ( 123.6 ) $ 10.6

Other comprehensive (loss)/income before reclassification adjustments ( 51.5 ) ( 377.9 ) — — ( 429.4 )

Tax effect — 85.7 — — 85.7

Reclassification adjustments to net earnings — ( 0.5 ) (A) 2.2 (C) 4.0 (B) 5.7

Tax effect — 0.1 ( 0.6 ) ( 0.5 ) ( 1.0 )

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

(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

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

2022 2021 2022 2021

Employer Services $ 2,891.9 $ 2,671.3 $ 5,682.2 $ 5,242.8

3 unchanged sentences

Earnings before Income Taxes

Three Months Ended

September 30,

Three Months Ended Six Months Ended

December 31, December 31,

2022 2021 2022 2021

Employer Services $ 934.6 $ 817.3 $ 1,798.1 $ 1,601.3

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