Cash Flow Statement

The cash flow statement provides information about a company cash receipts and cash payments during an accounting period, showing how these cash flows link the ending cash balance to the beginning balance shown on the company balance sheet.

The cash flow statement consists of three parts: cash flows provided by (used in) operating activities, cash flows provided by (used in) investing activities, and cash flows provided by (used in) financing activities.

Automatic Data Processing Inc., consolidated cash flow statement

US$ in thousands

12 months ended:	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016
Net earnings	2,598,500)	2,466,500)	2,292,800)	1,620,800)	1,733,400)	1,492,500)
Depreciation and amortization	510,700)	480,000)	409,000)	377,600)	316,100)	288,600)
Amortization of deferred contract costs	935,300)	915,000)	874,000)	—)	—)	—)
Deferred income taxes	(251,100)	26,000)	9,300)	500)	10,000)	700)
Stock-based compensation expense	175,300)	130,800)	167,300)	175,400)	138,900)	137,600)
Excess tax benefit related to exercise of stock options and restricted stock	—)	—)	—)	—)	—)	(37,400)
Net pension (income) expense	(52,800)	(11,600)	55,400)	330,400)	24,200)	17,700)
Net amortization of premiums and accretion of discounts on available-for-sale securities	69,500)	50,200)	50,100)	71,500)	85,900)	94,100)
Impairment of assets	19,900)	29,900)	12,100)	—)	—)	—)
Gain on sale of assets	(9,800)	(6,000)	(19,800)	(400)	—)	(13,900)
Gain on sale of divested businesses, net of tax	—)	—)	—)	—)	(121,400)	(21,800)
Other	35,200)	65,400)	43,900)	31,900)	37,100)	30,700)
(Increase) decrease in accounts receivable	(339,800)	(113,800)	(473,900)	(291,800)	23,400)	(224,600)
(Increase) decrease in other assets	(1,029,400)	(910,400)	(987,200)	93,500)	(269,100)	(108,900)
Increase (decrease) in accounts payable	36,900)	(18,300)	(10,700)	(1,900)	(11,600)	(15,900)
Increase (decrease) in accrued expenses and other liabilities	394,900)	(77,500)	266,000)	107,700)	159,000)	220,500)
Changes in operating assets and liabilities	(937,400)	(1,120,000)	(1,205,800)	(92,500)	(98,300)	(128,900)
Adjustments to reconcile net earnings to cash flows provided by operating activities	494,800)	559,700)	395,500)	894,400)	392,500)	367,400)
Net cash flows provided by operating activities	3,093,300)	3,026,200)	2,688,300)	2,515,200)	2,125,900)	1,859,900)
Purchases of corporate and client funds marketable securities	(9,266,300)	(3,905,100)	(4,422,600)	(4,876,800)	(4,382,800)	(5,876,300)
Proceeds from the sales and maturities of corporate and client funds marketable securities	6,238,400)	7,648,400)	2,909,000)	3,455,000)	3,593,600)	5,215,400)
Net (increase) decrease in restricted cash and cash equivalents held to satisfy client funds obligations	—)	—)	—)	—)	6,843,600)	(8,218,200)
Capital expenditures	(178,600)	(172,700)	(162,000)	(206,100)	(240,200)	(168,500)
Additions to intangibles	(327,300)	(443,700)	(404,500)	(264,700)	(230,400)	(217,500)
Acquisitions of businesses, net of cash acquired	—)	—)	(125,500)	(612,400)	(87,400)	—)
Proceeds from the sale of property, plant, and equipment and other assets	18,800)	29,400)	7,900)	400)	—)	15,700)
Proceeds from the sale of divested businesses	—)	—)	—)	—)	234,000)	162,200)
Net cash flows (used in) provided by investing activities	(3,515,000)	3,156,300)	(2,197,700)	(2,504,600)	5,730,400)	(9,087,200)
Net increase (decrease) in client funds obligations	8,336,200)	(3,213,200)	1,696,000)	340,400)	(6,120,600)	8,803,300)
Payments of debt	(1,001,800)	(2,200)	(2,100)	(7,300)	(2,000)	(1,500)
Proceeds from the issuance of debt	1,981,500)	—)	—)	—)	—)	1,998,300)
Settlement of cash flow hedges	(44,600)	—)	—)	—)	—)	—)
Repurchases of common stock	(1,372,300)	(1,006,300)	(937,700)	(989,300)	(1,259,600)	(1,155,700)
Net proceeds from stock purchase plan and stock-based compensation plans	104,100)	50,000)	72,900)	69,300)	95,700)	75,300)
Excess tax benefit related to exercise of stock options and restricted stock	—)	—)	—)	—)	—)	37,400)
Dividends paid	(1,575,500)	(1,470,500)	(1,293,000)	(1,063,700)	(995,200)	(943,600)
Net proceeds (payments) related to reverse repurchase agreements	9,900)	(248,400)	262,000)	—)	—)	—)
Other	—)	—)	(5,800)	(5,300)	—)	(23,400)
Net cash flows provided by (used in) financing activities	6,437,500)	(5,890,600)	(207,700)	(1,655,900)	(8,281,700)	8,790,100)
Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents	73,800)	(34,500)	(28,800)	5,800)	14,700)	(11,000)
Net change in cash, cash equivalents, restricted cash, and restricted cash equivalents	6,089,600)	257,400)	254,100)	(1,639,500)	(410,700)	1,551,800)
Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of year	7,053,600)	6,796,200)	6,542,100)	8,181,600)	3,191,100)	1,639,300)
Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of year	13,143,200)	7,053,600)	6,796,200)	6,542,100)	2,780,400)	3,191,100)

Based on: 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30).

Net earnings: Over the six-year period ending in June 2021, net earnings displayed an overall upward trend. After a slight dip in 2018, earnings increased significantly in 2019 and maintained growth through 2021, reaching a peak of approximately $2.6 billion.
Depreciation and amortization: Depreciation and amortization expenses showed a steady increase each year from 2016 to 2021, indicating ongoing investment in capital assets and intangible assets, rising from about $289 million to over $510 million.
Amortization of deferred contract costs: This expense was reported starting in 2019 and exhibited consistent growth through 2021, reflecting increasing recognition of deferred contract-related costs between $874 million and $935 million.
Deferred income taxes: Deferred income taxes fluctuated with no clear trend, showing minor positive balances initially, a sharp increase in 2020, and a substantial negative balance in 2021, possibly due to changes in tax regulations or adjustments.
Stock-based compensation expense: Stock-based compensation costs remained relatively stable with mild fluctuations but experienced a notable decrease in 2020 before rising again in 2021.
Net pension (income) expense: The net pension expense varied considerably, starting positive and increasing sharply in 2018, then reversing into net income (negative expense) by 2020 and 2021, suggesting changes in pension fund performance or actuarial assumptions.
Net amortization of premiums and accretion of discounts on available-for-sale securities: This item consistently declined from 2016 through 2019, followed by a slight uptick in 2021, indicating reduced premiums and discounts related to securities held.
Impairment of assets: Asset impairments appeared only from 2019 onwards, peaking in 2020, then declining in 2021, which may reflect asset revaluations or disposals.
Gains on sales: Gains on sale of assets and divested businesses showed irregular negative figures with no consistent trend, indicating sporadic dispositions with either small losses or gains.
Working capital changes: Significant fluctuations occurred in accounts receivable and other assets, generally representing large outflows or decreases in working capital, particularly in receivables and other assets in 2019-2021. Accounts payable and accrued liabilities showed moderate variability.
Cash flows from operating activities: Net cash provided by operating activities consistently increased over the period, growing from approximately $1.86 billion to over $3 billion, matching the upward trend in net earnings and reflecting strong operational cash generation.
Purchases and sales of marketable securities: There were substantial purchases of marketable securities each year, notably peaking in 2021. Proceeds from sales and maturities varied, with a significant increase in 2020, indicating active portfolio management and rebalancing of securities holdings.
Restricted cash related to client funds obligations: This item showed a large net increase in 2016 and 2017 but no data for subsequent years, limiting trend analysis.
Capital expenditures: Capital expenditures remained relatively stable, ranging between $163 million and $240 million annually, indicating consistent investment in physical assets.
Additions to intangibles: Additions to intangible assets showed an increasing trend from 2016 to 2020, peaking at $444 million, then decreased in 2021, signifying a focus on expanding intangible assets which slowed somewhat in the final year.
Acquisitions and divestitures: Business acquisitions occurred sporadically, with notable purchases in 2017 and 2018, diminishing thereafter. Proceeds from sales of divested businesses were significant in 2016 and 2017, with no subsequent data reported.
Net cash flows from investing activities: Investing cash flows fluctuated widely, with heavy outflows in 2016 and 2018-2019, and an unusual positive inflow in 2020, possibly linked to changes in securities transactions or asset sales. In 2021, investing activities again resulted in outflows.
Client funds obligations: Net changes in client funds obligations were volatile, with large positive net increases in 2016 and 2021 and significant decreases in 2017 and 2020, reflecting varying client activity and fund management.
Debt activity: Debt issuance occurred in 2016 and 2021, while repayments were relatively minor except in 2021 when payments rose markedly, indicating refinancing or debt reduction efforts during that year.
Share repurchases and stock plans: The company consistently repurchased common stock every year, with the highest amount in 2021. Offsetting this, proceeds from stock purchase and compensation plans fluctuated but generally were much lower than repurchase amounts.
Dividends: Dividends paid increased steadily from $944 million in 2016 to $1.58 billion in 2021, reflecting a commitment to returning capital to shareholders.
Net cash flows from financing activities: Financing cash flows varied significantly across the years, showing positive inflows in 2016 and 2021, but sizable outflows in 2017 through 2020, suggesting shifts in capital structure management strategies.
Cash and cash equivalents: The overall cash position increased with some volatility, declining notably in 2017 and 2018 but recovering thereafter, culminating at a substantial year-end balance of over $13 billion in 2021.

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Automatic Data Processing Inc. (NASDAQ:ADP)

Cash Flow Statement