Paychex 2010 Annual Report Download - page 40

portfolio of funds held for clients and corporate investments is detailed in Note D of the Notes to Consolidated
Financial Statements, contained in Item 8 of this Form 10-K.
The fluctuations in the net change in funds held for clients and corporate investment activities reflect the
changing mix of investments. As a result of volatility in the financial markets, in September 2008 we divested of any
VRDN securities held and began to utilize U.S. agency discount notes as our primary short-term investment vehicle.
U.S. agency discount notes are cash equivalents. VRDNs, although priced and traded as short-term securities, are
classified as available-for-sale securities and the cash paid and proceeds received for these securities are included in
investing activities. As a result of the divestiture, the proceeds from sales of available-for-sale securities exceeded
the purchases of available-for-sale securities in fiscal 2009. Much of these proceeds were held as cash equivalents in
the funds held for clients portfolio. In November 2009, we began to again invest in select A-1/P-1-rated VRDNs,
although at considerably lower levels than in the prior year. We utilized some of our cash equivalents to purchase
these VRDNs, and in fiscal 2010 these purchases of available-for-sale securities were in excess of funds received
from any sales of available-for-sale securities. Also in fiscal 2010, more corporate funds have been invested in
longer-term municipal bonds. There is a significant decline in net cash received from changes in funds held for
clients and corporate investment activities in fiscal 2009 compared to fiscal 2008 related to proceeds from sales of
available-for-sale securities in fiscal 2008 that were not reinvested as part of the funding of the $1.0 billion stock
repurchase program completed in December 2007.
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 collecting 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 2010, fiscal 2009, and fiscal 2008, we purchased approximately
$3.2 million, $4.5 million, and $4.4 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 2010, we received $13.1 million from the sale of Stromberg, an immaterial component of the
Company. During fiscal 2009 and fiscal 2008, we paid $6.4 million and $32.9 million, respectively, related to
acquisitions of businesses. The acquisitions in fiscal 2008 related mainly to employee benefits products. The
purchases of other assets were for customer lists.
Financing Cash Flow Activities
In millions, except per share amounts 2010 2009 2008
Year ended May 31,
Net change in client fund obligations ...................... $ 42.3 $(346.0) $ (198.7)
Repurchases of common stock ........................... — — (1,000.0)
Dividends paid ....................................... (448.6) (447.7) (442.1)
Proceeds from and excess tax benefit related to exercise of stock
options ........................................... 8.2 9.0 67.8
Net cash used in financing activities ....................... $(398.1) $(784.7) $(1,573.0)
Cash dividends per common share......................... $ 1.24 $ 1.24 $ 1.20
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. As a
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