ADP 2010 Annual Report Download - page 33

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2010, cash and marketable securities were $1,775.5 million, stockholders
’ equity was $5,478.9 million and the ratio of long -
term debt - to - equity was 0.7%. Working capital before funds held for clients and client funds obligations was $1,568.6 million, as
compared to $1,515.5 million at June 30, 2009. This increase is due to cash generated from operations, partially offset by the use of
cash to repurchase common stock, the use of cash for dividend payments and the use of cash for acquisitions.
Our principal sources of liquidity for operations are derived from cash generated through operations and through corporate cash and
marketable securities on hand. We continued to generate positive cash flows from operations during fiscal 2010, and we held
approximately $1.8 billion of cash and marketable securities at June 30, 2010. 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 to meet short
- term funding requirements related to client funds obligations.
Net cash flows provided by operating activities were $1,682.1 million in fiscal 2010, as compared to $1,562.6 million in fiscal 2009. The
increase in net cash flows provided by operating activities was due to a $158.7 million tax refund received by a Canadian subsidiary
of the Company in fiscal 2010, an increase in cash flows due to lower cash bonuses paid to our employees and an increase in cash
flows related to collections from our clients. Such increases in net cash flows provided by operating activities were partially offset by
an increase in pension plan contributions as compared to fiscal 2009, which decreased cash flows by $106.0 million. Lastly, there was
a $77.1 million decrease due to income taxes paid in fiscal 2010 as a result of the agreement reached during fiscal 2009 with the IRS
regarding all outstanding audit issues with the IRS for the tax years 1998 through 2006.
Net cash flows used in investing activities were $2,379.5 million in fiscal 2010, as compared to $644.1 million in fiscal 2009. The
increase in net cash flows used in investing activities was due to the timing of purchases of and proceeds from the sales or
maturities of marketable securities, which resulted in a net decrease to cash flows of $1,023.7 million and the timing of receipts and
payments of cash and cash equivalents held to satisfy client funds obligations that resulted in a decrease to cash flows of $907.7
million. Such decreases to cash flows were partially offset by a reclassification, in fiscal 2009, from cash and cash equivalents to
short
- term marketable securities of $211.1 million related to the Reserve Fund discussed below. The proceeds received related to the
Reserve Fund have been included in proceeds from the sales and maturities of corporate and client funds marketable securities.
Net cash flows provided by financing activities were $89.0 million in fiscal 2010 as compared to $468.4 in fiscal 2009. The decrease
was due to a $1,460.0 million change in cash due to the repayment in fiscal 2010 of a $730.0 million commercial paper borrowing that
was outstanding at June 30, 2009. In addition, there was a $186.0 million decrease in cash flows provided by financing activities due
to an increase in cash used for repurchases of common stock. We purchased approximately 18.2 million shares of our common stock
at an average price per share of $42.02 during fiscal 2010 as compared to purchases of 13.8 million shares of our common stock at an
average price per share of $39.72 during fiscal 2009. Such decreases in cash flows of financing activities were partially offset by the
net change in the client funds obligations of $1,135.2 million as a result of timing of cash received and payments made related to
client funds obligations and an increase of $158.4 million in the proceeds from stock purchase plan purchases and exercises of stock
options.
Our U.S. short
- term funding requirements related to client funds are sometimes obtained through a short - term commercial paper
program, which provides for the issuance of up to $6.0 billion in aggregate maturity value of commercial paper. In August 2010, the
Company increased the U.S. short
- term commercial paper program to provide for the issuance of up to $6.25 billion in aggregate
maturity value. Our commercial paper program is rated A
- 1+ by Standard and Poor ’ s and Prime - 1 by Moody ’ s. 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, 2010, there was no commercial paper outstanding. At June 30, 2009, we had $730.0 million in commercial paper outstanding. Such
amount was repaid on July 1, 2009. In fiscal 2010 and 2009, our average borrowings were $1.6 billion and $1.9 billion, respectively, at a
weighted average interest rate of 0.2% and 1.0%, respectively. The weighted average maturity of our commercial paper was less than
two days in both fiscal 2010 and fiscal 2009. Throughout fiscal 2010, we had full access to our U.S. short
- term funding requirements
related to client funds obligations.
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