AUTOMATIC DATA PROCESSING, INC. The following section discusses our year endedJune 30, 2022 ("fiscal 2022"), as compared to year endedJune 30, 2021 ("fiscal 2021"). A detailed review of our fiscal 2021 performance compared to our fiscal 2020 performance is set forth in Part II, Item 7 of our Form 10-K for the fiscal year endedJune 30, 2021 .
FORWARD-LOOKING STATEMENTS
This document and other written or oral statements made from time to time by ADP
may contain "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. 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. 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: ADP's success in obtaining and retaining clients, and
selling additional services to clients; the pricing of products and services;
the success of our new solutions; compliance with existing or new legislation or
regulations; changes in, or interpretations of, existing legislation or
regulations; overall market, political and economic conditions, including
interest rate and foreign currency trends and inflation; competitive conditions;
our ability to maintain our current credit ratings and the impact on our funding
costs and profitability; security or cyber breaches, fraudulent acts, and system
interruptions and failures;
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employment and wage levels; changes in technology; availability of skilled
associates; the impact of new acquisitions and divestitures; the adequacy,
effectiveness and success of our business transformation initiatives; the impact
of any uncertainties related to major natural disasters or catastrophic events,
including the coronavirus ("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. These risks and uncertainties, along with the risk factors discussed
under "Item 1A. Risk Factors," and in other written or oral statements made from
time to time by ADP, should be considered in evaluating any forward-looking
statements contained herein.
NON-GAAP FINANCIAL MEASURES
In addition to ourU.S. GAAP results, we use adjusted results and other non-GAAP metrics to evaluate our operating performance in the absence of certain items and for planning and forecasting of future periods. Adjusted EBIT, adjusted EBIT margin, adjusted net earnings, adjusted diluted earnings per share, adjusted effective tax rate and organic constant currency are all non-GAAP financial measures. Please refer to the accompanying financial tables in the "Non-GAAP Financial Measures" section for a discussion of why ADP believes these measures are important and for a reconciliation of non-GAAP financial measures to their comparable GAAP financial measures.
EXECUTIVE OVERVIEW
Highlights from the year ended
10% 70 basis points 15%
Revenue Growth Earnings Before Income Taxes Margin Diluted EPS Growth
Expansion
10% 90 basis points 16%
Organic Constant Currency Adjusted EBIT Margin Expansion Adjusted Diluted EPS
Revenue Growth Growth
15% Employer Services 15% PEO Services
New Business Bookings Growth Average Worksite Employee Growth
$3.6B Cash Returned via Shareholder Friendly Actions
$1.7B Dividends | $2.0B Share Repurchases
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
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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. We lead the HCM
industry by driving growth through our strategic, cloud-based HCM solutions and
developing innovations like our next-gen platforms. 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 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, grew 7% for fiscal 2022.
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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--------------------------------------------------------------------------------RESULTS AND ANALYSIS OF CONSOLIDATED OPERATIONS
Total Revenues
For the year ended
Total Revenues
10% YoY Growth
10% YoY Growth, Organic Constant Currency
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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
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Total Expenses
Years Ended
June 30,
%
2022 2021 Change
Costs of revenues:
Operating expenses $ 8,252.6 $ 7,520.7 10 %
Systems development and programming costs 798.6 716.6 11 %
Depreciation and amortization 410.7 403.0 2 %
Total costs of revenues 9,461.9 8,640.3 10 %
Selling, general and administrative expenses 3,233.2 3,040.5 6 %
Interest expense 81.9 59.7 37 %
Total expenses $ 12,777.0 $ 11,740.5 9 %
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 endedJune 30, 2021 . Additionally, there was an increase in average interest rates for commercial paper borrowings to 0.4% for the year endedJune 30, 2022 , as compared to 0.1% for the year endedJune 30, 2021 . This was coupled with an increase in average daily borrowings under our commercial paper program to$2.0 billion for the year endedJune 30, 2022 , as compared to$1.6 billion for the year endedJune 30, 2021 . Other (Income)/Expense, net (In millions) Years ended June 30, 2022 2021 $ Change Interest income on corporate funds $
(41.0)
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) 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$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. See Note 10 of our Consolidated Financial Statements for further details on non-service components of pension income, net. 29 -------------------------------------------------------------------------------- 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
For the year ended
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á 13% YoY Growth á 70 bps YoY Growth
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. 30
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Adjusted Earnings before certain Interest and Taxes ("Adjusted EBIT")
For the year ended
á 14% YoY Growth á 90 bps YoY Growth
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 decrease in the 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 to Note 11, Income Taxes, within the Notes to the Consolidated Financial Statements for further discussion.
Adjusted Provision for Income Taxes
The adjusted effective tax rate in fiscal 2022 and 2021 was 22.5% and 22.7%,
respectively. The drivers of the adjusted effective tax rate are the same as the
drivers of the effective tax rate discussed above.
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Net Earnings and Diluted Earnings per Share
For the year ended
á 13% YoY Growth á 15% YoY Growth
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
For the year ended
á 15% YoY Growth á 16% YoY Growth
For fiscal 2022, adjusted net earnings and adjusted diluted EPS reflect the changes in components described above.
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--------------------------------------------------------------------------------ANALYSIS OF REPORTABLE SEGMENTS
Revenues
Years Ended
June 30, % Change
Organic
Constant
2022 2021 As Reported Currency
Employer Services $ 10,967.7 $ 10,195.2 8 % 8 %
PEO Services 5,545.7 4,818.3 15 % 15 %
Other (15.1) (8.1) n/m n/m
$ 16,498.3 $ 15,005.4 10 % 10 %
Earnings before Income Taxes
Years Ended
June 30, % Change
2022 2021 As Reported
Employer Services $ 3,406.3 $ 3,052.1 12 %
PEO Services 871.2 718.8 21 %
Other (473.4) (409.7) n/m
$ 3,804.1 $ 3,361.2 13 %
n/m - not meaningful
Employer Services
Revenues
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 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. 33
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For the year ended
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á 110 bps YoY Growth
Employer Services' margin increased due to increases in revenues discussed
above, operational efficiencies, and the decrease of
PEO Services
Revenues
PEO Revenues
Years Ended
June 30, Change
2022 2021 $ %
PEO Services' revenues $ 5,545.7 $ 4,818.3 $ 727.4 15 %
Less: PEO zero-margin benefits pass-throughs 3,514.4 3,092.0 422.4 14 %
PEO Services' revenues excluding zero-margin benefits
pass-throughs $ 2,031.3 $ 1,726.3 $ 305.0 18 %
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 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. 34
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For the year ended
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á 80 bps YoY Growth
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. PEO Services has secured a workers' compensation and
employer's liability insurance policy that caps the exposure for each claim at
$1 million per occurrence and has also secured aggregate stop loss insurance
that caps aggregate losses at a certain level in fiscal years 2012 and prior
from an admitted and licensed insurance company of AIG. We utilize historical
loss experience and actuarial judgment to determine the estimated claim
liability, and changes in estimated ultimate incurred losses are included in the
PEO segment.
Additionally, starting in fiscal year 2013, ADP Indemnity paid premiums to enter
into reinsurance arrangements with ACE American Insurance Company , a
wholly-owned subsidiary of Chubb Limited ("Chubb"), to cover substantially all
losses incurred by the Company up to the $1 million per occurrence related to
the workers' compensation and employer's liability deductible reimbursement
insurance protection for PEO Services' worksite employees. Each of these
reinsurance arrangements limits our overall exposure incurred up to a certain
limit. The Company believes the likelihood of ultimate losses exceeding this
limit is remote. 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 $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.
Other
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.
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--------------------------------------------------------------------------------Non-GAAP Financial Measures
In addition to our GAAP results, we use the adjusted results and other non-GAAP
metrics set forth in the table below to evaluate our operating performance in
the absence of certain items and for planning and forecasting of future periods:
Adjusted Financial Measures U.S. GAAP Measures
Adjusted EBIT Net earnings
Adjusted provision for income taxes Provision for income taxes Adjusted net earnings
Net earnings
Adjusted diluted earnings per share Diluted earnings per share
Adjusted effective tax rate Effective tax rate
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 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. The nature of these exclusions is for specific items that are not
fundamental to our underlying business operations. Since these adjusted
financial measures and other non-GAAP metrics are not measures of performance
calculated in accordance with U.S. GAAP, they should not be considered in
isolation from, as a substitute for, or superior to their corresponding U.S.
GAAP measures, and they may not be comparable to similarly titled measures at
other companies.
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Years Ended
June 30, % Change
2022 2021 As Reported
Net earnings $ 2,948.9 $ 2,598.5 13 %
Adjustments:
Provision for income taxes 855.2 762.7
All other interest expense (a) 71.3 57.3
All other interest income (a) (7.1) (6.5)
Transformation initiatives (b) 3.5 -
Excess capacity severance charges - 2.9
Legal settlements - (30.7)
Adjusted EBIT $ 3,871.8 $ 3,384.2 14 %
Adjusted EBIT Margin 23.5 % 22.6 %
Provision for income taxes $ 855.2 $ 762.7 12 %
Adjustments:
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 (d) 22.5 % 22.7 %
Net earnings $ 2,948.9 $ 2,598.5 13 %
Adjustments:
Transformation initiatives (b) 3.5 -
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 %
Adjustments:
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) 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 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.
(c) The income tax provision/(benefit) was calculated based on the marginal rate
in effect for the year ended
(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
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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.
Year Ended
June 30,
2022
Consolidated revenue growth as reported 10 %
Adjustments:
Impact of acquisitions - %
Impact of foreign currency - %
Consolidated revenue growth, organic constant currency 10 %
Employer Services revenue growth as reported 8 % Adjustments: Impact of acquisitions - % Impact of foreign currency - % Employer Services revenue growth, organic constant currency
8 %
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
As of
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 atJune 30, 2022 and we have sufficient liquidity. For client funds liquidity, we have the ability to borrow through our financing arrangements under ourU.S. short-term commercial paper program and ourU.S. , Canadian andUnited 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 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. 38
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Operating, Investing and Financing Cash Flows
Our cash flows from operating, investing, and financing activities, as reflected in the Statements of Consolidated Cash Flows are summarized as follows:
Years ended June 30,
2022 2021 $ Change
Cash provided by (used in):
Operating activities $ 3,099.5 $ 3,093.3 $ 6.2
Investing activities (7,014.4) (3,515.0) (3,499.4)
Financing activities 13,653.4 6,437.5 7,215.9
Effect of exchange rate changes on cash, cash
equivalents, restricted cash, and restricted cash
equivalents (98.7) 73.8 (172.5)
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 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 of $214.40 during fiscal 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. 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.
Capital Resources and Client Fund Obligations
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. 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.
See Note 9 of our Consolidated Financial Statements for a description of our
notes.
Our 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. This commercial paper program
provides for the issuance of up to $9.7 billion in aggregate maturity value. Our
commercial paper program is rated A-1+ by Standard and Poor's, Prime-1 ("P-1")
by Moody's and F1+ by Fitch. These ratings denote the highest quality commercial
paper securities. Maturities of commercial paper can range from overnight to up
to 364 days. At June 30, 2022 and 2021, we had no commercial paper borrowing
outstanding. Details of the borrowings under the commercial paper program are as
follows:
Years ended June 30, 2022 2021
Average daily borrowings (in billions)$ 2.0 $ 1.6 Weighted average interest rates 0.4 % 0.1 % Weighted average maturity (approximately in days) 1 day 1 day 39
-------------------------------------------------------------------------------- OurU.S. , Canadian, andUnited 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. We have successfully borrowed through the use of reverse repurchase agreements on an as-needed basis to meet short-term funding requirements related to client funds obligations. AtJune 30, 2022 and 2021, there were$136.4 million and$23.5 million , respectively, of outstanding obligations related to the reverse repurchase agreements. Details of the reverse repurchase agreements are as follows: Years ended June 30, 2022 2021 Average outstanding balances$ 299.6 $ 136.7 Weighted average interest rates 0.7 % 0.2 % We vary the maturities of our committed credit facilities to limit the refinancing risk of any one facility. We had a$3.75 billion , 364-day credit agreement that was amended inJune 2022 and matured inJuly 2022 . OnJuly 1, 2022 , the company entered into a new$3.75 billion 364-day credit agreement that matures inJune 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 inJune 2024 andJune 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. 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 had no borrowings throughJune 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 available 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. Our investment portfolio does not contain any asset-backed securities with underlying collateral of sub-prime mortgages, alternative-A mortgages, sub-prime auto loans or sub-prime home equity loans, collateralized debt obligations, collateralized loan obligations, credit default swaps, derivatives, auction rate securities, structured investment vehicles or non-investment grade fixed-income securities. We own AAA-rated senior tranches of primarily fixed rate auto loan, credit card, equipment lease, and rate reduction receivables, secured predominantly by prime collateral. All collateral on asset-backed securities is performing as expected throughJune 30, 2022 . In addition, we ownU.S. government securities which primarily include debt directly issued by Federal Farm Credit Banks and Federal Home Loan Banks. Our client funds investment strategy is structured to allow us to average our way through an interest rate cycle by laddering the maturities of our investments out to five years (in the case of the extended portfolio) and out to ten years (in the case of the long portfolio). This investment strategy is supported by our short-term financing arrangements necessary to satisfy short-term funding requirements relating to client funds obligations. See Note 4 of our Consolidated Financial Statements for a description of our corporate investments and funds held for clients. Capital expenditures for fiscal 2022 were$177.1 million , as compared to$178.3 million for fiscal 2021. We expect capital expenditures in fiscal 2023 to be between$175 million and$200 million .
Contractual Obligations
Our contractual obligations atJune 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 ofJune 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. We had$49,569.2 million of cash and cash equivalents and marketable securities that were impounded from our clients to satisfy such obligations recorded in funds held for clients on our Consolidated Balance Sheets as ofJune 30, 2022 . Separately, ADP Indemnity paid a premium of$284 million inJuly 2022 to enter into a reinsurance agreement with Chubb to cover substantially all losses incurred by ADP Indemnity for the fiscal 2023 policy year. AtJune 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 sinceJuly 1, 2003 . ADP Indemnity paid claims of$1.8 million and$3.3 million , net of insurance recoveries, in fiscal 2022 and 2021, 40 --------------------------------------------------------------------------------
respectively. Refer to the "Analysis of Reportable Segments - PEO Services" above for additional information regarding ADP Indemnity.
In the normal course of business, we also enter into contracts in which we make representations and warranties that relate to the performance of our services and products. We do not expect any material losses related to such representations and warranties.
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