ADP 2008 Annual Report Download - page 25

Other
The primary components of “Other” are miscellaneous processing services, and corporate allocations and expenses, including stock-based
compensation expense reported in net earnings from continuing operations of $123.6 million, $130.5 million and $142.7 million in fiscal 2008,
2007 and 2006, respectively. Additionally, certain non-recurring gains and losses, including a gain on the sale of a building of $16.0 million in
fiscal 2008 and a gain of $38.6 million on the sale of a minority interest investment in fiscal 2007, are included in “Other.”
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Our financial condition and balance sheet remain strong. At June 30, 2008, cash and marketable securities were $1,660.3 million. The ratio
of long-term debt-to-equity was 1.0% at June 30, 2008. At June 30, 2008, working capital from continuing operations before funds held for
clients and client funds obligations was $1,343.1 million, as compared to $1,534.8 million at June 30, 2007. This fluctuation is due to a
decrease in cash and short-term marketable securities of $232.7 million.
Our principal sources of liquidity are derived from cash generated through operations and through cash and marketable securities on hand.
We also have the ability to generate cash through our financing arrangements under our U.S. short-term commercial paper program and our
U.S. and Canadian short-term repurchase agreements. In addition, we have three unsecured revolving credit agreements that allow us to borrow
up to $6.0 billion in the aggregate. Our short-term commercial paper program and repurchase agreements are utilized as the primary
instruments to meet short-term funding requirements related to client funds obligations. Our revolving credit agreements are in place to provide
additional liquidity, if needed. We have never had borrowings under the revolving credit agreements. The Company believes that the internally
generated cash flows and financing arrangements are adequate to support business operations and capital expenditures.
On March 30, 2007, we completed the tax free spin-off of our former Brokerage Services Group business, comprised of our former
Brokerage Services and Securities Clearing and Outsourcing Services segments, into an independent publicly traded company called
Broadridge Financial Solutions, Inc (“Broadridge”). As a result of the spin-off, ADP stockholders of record on March 23, 2007 (the “record
date”) received one share of Broadridge common stock with a par value $0.01 per share, for every four shares of ADP common stock held by
them on the record date and cash for any fractional shares of Broadridge common stock. We have classified the results of operations of the
spun-off business as discontinued operations for all periods presented. Additionally, on March 30, 2007, we recorded a decrease to retained
earnings of $1,125.2 million for the non-cash reduction in net assets of the Brokerage Services Group business related to the spin-off, offset by
an increase to retained earnings of $690.0 million related to the cash dividend received from Broadridge as part of the spin-off.
In February 2007, we notified holders of our zero coupon convertible subordinated notes that we would redeem all the notes that were
outstanding as of the end of the business day on March 19, 2007 (the “redemption date”). Prior to the redemption date, notes with a face value
of approximately $39 million were converted into approximately one million shares of the Company’ s common stock. We subsequently
redeemed the remaining 352 notes outstanding as of the redemption date at a redemption price of $775 for each note, representing the accrued
value of each note at the time of the redemption.
Net cash flows provided by operating activities were $1,772.2 million in fiscal 2008, as compared to $1,298.0 million in fiscal 2007. The
increase was due to a $97.0 million increase in net earnings compared to the prior year. In addition, the increase was due to a $132.5 million
increase in accrued expenses and other liabilities due to an increase in payroll and payroll-related accruals due to the timing of payments and a
$289.8 million decrease in accounts receivable due to improvement in the collections of our accounts receivable and the collection in fiscal
2008 of a large direct debit receivable that was outstanding at June 30, 2007. The increases in cash provided were offset by a $31.2 million
increase in our pension plan contributions.
Net cash flows provided by investing activities in fiscal 2008 totaled $2,613.9 million, as compared to $276.9 million used in fiscal 2007.
This increase to funds provided was due to a net decrease in restricted cash and cash equivalents and other restricted assets held to satisfy client
funds obligations of $4,717.6 million, a decrease in cash paid for intangibles of $53.4 million and a decrease in net cash paid for acquisitions of
$349.6 million. Additionally, proceeds received from the sale of businesses increased by $95.2 million. These increases in cash provided were
partially offset by the change in net purchases/proceeds from our marketable securities of $1,657.5 million, the $38.6 million of proceeds from
the sale of a minority investment during fiscal 2007 and the $660.1 million of net dividends received from Broadridge during fiscal 2007.
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