Paychex 2012 Annual Report Download - page 43

In general, fluctuations in net funds held for clients and corporate investment activities primarily relate to
timing of purchases, sales, or maturities of investments. The amount of funds held for clients will vary based
upon the timing of collection of client funds, and the related remittance of funds to applicable tax or regulatory
agencies for payroll tax administration services and to employees of clients utilizing employee payment services.
Additional discussion of interest rates and related risks is included in the “Market Risk Factors” section,
contained in Item 7A of this Form 10-K.
Purchases of long-lived assets: To support our continued client and ancillary product growth, purchases
of property and equipment were made for data processing equipment and software, and for the expansion and
upgrade of various operating facilities. During fiscal years 2012, 2011, and 2010, we purchased approximately
$2.6 million, $5.7 million, and $3.2 million, respectively, of data processing equipment and software from EMC
Corporation. The Chairman, President, and Chief Executive Officer of EMC Corporation is a member of our
Board of Directors (the “Board”).
During fiscal 2012, we had an immaterial business acquisition. During fiscal 2011, we paid $126.4 million
for the acquisitions of SurePayroll and ePlan. During fiscal 2010, we received $13.1 million from the sale of
Stromberg, an immaterial component of the Company. The purchases of other assets were for customer lists.
Financing Cash Flow Activities
Year ended May 31,
In millions, except per share amounts 2012 2011 2010
Net change in client fund obligations ........................... $980.5 $ (34.9) $ 42.3
Dividends paid ............................................ (460.5) (448.8) (448.6)
Proceeds from exercise and excess tax benefit related to stock-based
awards ................................................. 7.5 12.6 8.2
Net cash provided by/(used in) financing activities ................ $527.5 $(471.1) $(398.1)
Cash dividends per common share ............................. $ 1.27 $ 1.24 $ 1.24
Net change in client fund obligations: The client fund obligations liability will vary based on the timing
of collecting client funds, and the related required remittance of funds to applicable tax or regulatory agencies for
payroll tax administration services and to employees of clients utilizing employee payment services. Collections
from clients are typically remitted from one to 30 days after receipt, with some items extending to 90 days.
The fluctuation in net change in client fund obligations for fiscal 2012 compared to fiscal 2011 is the result
of timing of collections and remittances as May 31, 2012 fell on a Thursday, a large collection day for direct pay
funds. These funds were then paid out on Friday, June 1, 2012. In 2011, May 31 fell on a Tuesday, and there
were fewer collections from clients on that day. In addition, overall client fund balances were 7% higher on
average for fiscal 2012 than for fiscal 2011.
The fluctuation in net change in client fund obligations for fiscal 2011 as compared to fiscal 2010 is the
result of timing of collections and remittances surrounding the Federal holiday on May 31, 2010, offset by an
increase in average client collections primarily due to higher state unemployment insurance rates. As May 31,
2010 was a Federal holiday, client fund obligations were higher as collections were made on Friday, May 28,
2010 that were not remitted to client employees and tax or regulatory agencies until June 2010. This resulted in a
positive cash flow impact for fiscal 2010. May 31, 2011 did not fall on a Federal holiday, so we did not have the
same level of client fund holdings at the end of fiscal 2011.
Dividends paid: In October 2011, the Board increased our quarterly dividend to stockholders by 3% to
$0.32 per share from $0.31 per share. A quarterly dividend of $0.31 per share was paid to stockholders of record
during the first quarter of fiscal 2012 and the fiscal years 2011 and 2010. The dividends paid as a percentage of
net income totaled 84%, 87%, and 94% for those respective fiscal years. The payment of future dividends is
dependent on our future earnings and cash flow and is subject to the discretion of our Board.
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