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Dynamic quotes 
OFFON

AUTOMATIC DATA PROCESSING, INC.

(ADP)
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AUTOMATIC DATA PROCESSING : Management's Discussion and Analysis of Financial Condition and Results of Operations Tabular dollars are presented in millions, except per share amounts (form 10-K)

08/04/2021 | 02:10pm EDT
The following section discusses our year ended June 30, 2021 ("fiscal 2021"), as
compared to year ended June 30, 2020 ("fiscal 2020"). A detailed review of our
fiscal 2020 performance compared to our fiscal 2019 performance is set forth in
Part II, Item 7 of our Form 10-K for the fiscal year ended June 30, 2020.

FORWARD-LOOKING STATEMENTS


This document and other written or oral statements made from time to time by ADP
may contain "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Statements that are not historical in
nature and which may be identified by the use of words like "expects,"
"assumes," "projects," "anticipates," "estimates," "we believe," "could" "is
designed to" and other words of similar meaning, are forward-looking statements.
These statements are based on
                                       25

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management's expectations and assumptions and depend upon or refer to future
events or conditions and are subject to risks and uncertainties that may cause
actual results to differ materially from those expressed. Factors that could
cause actual results to differ materially from those contemplated by the
forward-looking statements or that could contribute to such difference include:
ADP's success in obtaining and retaining clients, and selling additional
services to clients; the pricing of products and services; the success of our
new solutions; compliance with existing or new legislation or regulations;
changes in, or interpretations of, existing legislation or regulations; overall
market, political and economic conditions, including interest rate and foreign
currency trends and inflation; competitive conditions; our ability to maintain
our current credit ratings and the impact on our funding costs and
profitability; security or cyber breaches, fraudulent acts, and system
interruptions and failures; employment and wage levels; changes in technology;
availability of skilled technical associates; the impact of new acquisitions and
divestitures; the adequacy, effectiveness and success of our business
transformation initiatives; and the impact of any uncertainties related to major
natural disasters or catastrophic events, including the coronavirus ("COVID-19")
pandemic. ADP disclaims any obligation to update any forward-looking statements,
whether as a result of new information, future events or otherwise, except as
required by law. These risks and uncertainties, along with the risk factors
discussed under "Item 1A. Risk Factors," and in other written or oral statements
made from time to time by ADP, should be considered in evaluating any
forward-looking statements contained herein.

NON-GAAP FINANCIAL MEASURES


In addition to our U.S. GAAP results, we use adjusted results and other non-GAAP
metrics to evaluate our operating performance in the absence of certain items
and for planning and forecasting of future periods. Adjusted EBIT, adjusted EBIT
margin, adjusted net earnings, adjusted diluted earnings per share, adjusted
effective tax rate and organic constant currency are all non-GAAP financial
measures. Please refer to the accompanying financial tables in the "Non-GAAP
Financial Measures" section for a discussion of why ADP believes these measures
are important and for a reconciliation of non-GAAP financial measures to their
comparable GAAP financial measures.

EXECUTIVE OVERVIEW

Highlights from the year ended June 30, 2021 include:

3%                          60 basis points                        6%
Revenue Growth              Earnings Before Income Taxes Margin    Diluted EPS Growth
                            Expansion

2%                          (40) basis points                      2%
Organic Constant            Adjusted EBIT Margin Expansion         Adjusted Diluted EPS
Currency                                                           Growth
Revenue Growth




23%   Employer Services                        2%      PEO Services
      New Business Bookings Growth                     Average Worksite Employee Growth

$3.0B                   Cash Returned via Shareholder Friendly Actions
                        $1.6B Dividends | $1.4B Share Repurchases



We are a leading global provider of cloud-based Human Capital Management ("HCM")
technology solutions to employers around the world. The global COVID-19 pandemic
has had a significant impact on the global business environment and on our
clients, but our priority has been and continues to be the safety of our
associates and the needs of our clients. We have continued to provide HCM
services, including the processing of payroll and tax obligations, to our
clients during this time. ADP's efforts have also been focused on providing
information and tools to help clients understand and navigate the governmental
relief that has been adopted globally. In addition, we released a Return to
Workplace solution that assists our clients in bringing their employees back to
work safely through a comprehensive set of tools designed to streamline the
entire process.

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During the fiscal year, we continued to advance our market-leading solutions and
achieved some new milestones. Earlier this year, our next-gen payroll solution
earned ADP its 6th consecutive "Top HR Product Award" at the annual HR
Technology Conference. This solution features a highly scalable, policy-based
framework that enables easy self-service and powerful transparency. In February,
we announced the launch of Roll, a new mobile-first payroll and tax filing
product aimed at small businesses, which combines an AI-driven chat-based
interface with the power and scale of our payroll and tax filing expertise. We
continued to add to our robust DataCloud platform by introducing the Diversity,
Equity and Inclusion (DEI) Dashboard which can help businesses analyze their
diversity landscape through a simple Q&A format and user interface that allows
them to better set, track and expand their DEI goals. For our RUN platform,
which is a leading solution in the market with approximately 750,000 clients, we
began to roll out a new user experience and launched TimeKeeping Plus, an
entirely new, native workforce management solution. This year, we reached
100,000 clients across our workforce management solutions for the first time, as
the pandemic reinforced the need for robust workforce management solutions for
our clients while they navigate the new norm of increasingly flexible schedules
and work arrangements.

Our suite of HRO solutions also continued to deliver steady growth this year,
despite the dynamic economic environment. Within PEO, the average worksite
employee count grew 12% in the fourth quarter resulting in annual growth of 2%.
We also have over 2 million worksite employees on our other HRO solutions within
our Employer Services segment, as clients look for ways to outsource parts of
the HR function to a best-in-class provider like ADP.

We continue to drive innovation by anticipating our clients' evolving needs and
always designing for people as the world of work changes. We lead the HCM
industry by driving growth through our strategic, cloud-based HCM solutions and
developing innovations like our next gen platforms. We further enable these
solutions by supplementing them with organic, differentiated investments such as
the ADP Datacloud and ADP Marketplace, and through our compliance expertise.

For fiscal 2021, we drove solid revenue growth of 3% for the year, continued to
invest for sustainable growth despite market conditions, and managed any
non-essential spend prudently. Employer Services New Business Bookings was up
23% for fiscal 2021. In addition, the Employer Services client revenue retention
rate for fiscal 2021 improved 170 basis points to 92.2% as compared to our rate
for fiscal 2020. The PEO average number of Worksite Employees increased 2% for
fiscal 2021. Our pays per control metric, which represents the number of
employees on ADP clients' payrolls in the United States when measured on a
same-store-sales basis for a subset of clients ranging from small to large
businesses, turned positive in the fourth quarter resulting in annual growth of
negative 3% for fiscal 2021.

We have a strong business model, a highly cash generative business with low
capital intensity, and offer a suite of products that provide critical support
to our clients' HCM functions. We generate sufficient free cash flow to satisfy
our cash dividend and our modest debt obligations, which enables us to absorb
the impact of downturns and remain steadfast in our reinvestments, our longer
term strategy, and our commitments to shareholder friendly actions. We are
committed to building upon our past successes by investing in our business
through enhancements in research and development and by driving meaningful
transformation in the way we operate. Our financial condition remains solid at
June 30, 2021 and we remain well positioned to support our associates and our
clients.

                                       27
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RESULTS AND ANALYSIS OF CONSOLIDATED OPERATIONS

Total Revenues

For the year ended June 30, respectively:

                    [[Image Removed: adp-20210630_g17.jpg]]
                     á 3% YoY Growth
                     á 2% YoY Growth, Organic Constant Currency



Revenues for fiscal 2021 increased due to strong retention, new business started
from New Business Bookings, an increase in zero-margin benefits pass-throughs
and one percentage point of favorability from foreign currency. This increase is
partially offset by a one percentage point of pressure from our interest earned
on funds held for clients discussed below. Refer to "Analysis of Reportable
Segments" for additional discussion of the increases in revenue for both of our
reportable segments, Employer Services and Professional Employer Organization
("PEO") Services.

Total revenues in fiscal 2021 include interest on funds held for clients of
$422.4 million, as compared to $545.2 million in fiscal 2020. The decrease in
the consolidated interest earned on funds held for clients resulted from the
decrease in our average interest rate earned to 1.5% in fiscal 2021, as compared
to 2.1% in fiscal 2020. The decrease is partially offset by an increase in our
average client funds balances of 5.2% to $27.4 billion in fiscal 2021 as
compared to fiscal 2020.










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Total Expenses
                                                                                           Years Ended
                                                                                   June 30,
                                                                                                                                            %
                                                                                               2021          2020         Change
Costs of revenues:
Operating expenses                                                                            $  7,520.7$  7,404.1                   2  %
Systems development and programming costs                                                          716.6               674.1                   6  %
Depreciation and amortization                                                                      403.0               366.9                  10  %
Total costs of revenues                                                                          8,640.3             8,445.1                   2  %
Selling, general and administrative expenses                                                     3,040.5             3,003.0                   1  %
Interest expense                                                                                    59.7               107.1                 (44) %
Total expenses                                                                                $ 11,740.5$ 11,555.2                   2  %




For the year ended June 30, 2021, operating expenses increased due to the
increase in our PEO Services zero-margin benefits pass-through costs to $3,092.0
million from $2,907.7 million for the year ended June 30, 2021 and 2020,
respectively, the impact of foreign currency, and an increase in incentive
compensation costs due to decreases in the prior year. These increases were
partially offset by reduced costs as a result of our broad-based transformation
initiatives and excess capacity headcount actions in the prior year, a change of
$52.5 million in our estimated losses related to ADP Indemnity compared to prior
year, reduced travel expenses and decreased pension costs as a result of U.S.
pension service costs that were eliminated with the July 1, 2020 cessation of
U.S. participants accruing any future service benefits ("U.S. pension freeze").

Systems development and programming costs increased for fiscal 2021 due to
increased investments and costs to develop, support, and maintain our products,
partially offset by capitalization of costs related to our strategic projects,
including our next gen platforms.

Depreciation and amortization expense increased related to the amortization of our acquisitions of intangibles and internally developed software.


Selling, general and administrative expenses increased for the year ended
June 30, 2021 due to an increase in
incentive compensation costs, investments in our sales organization, and the
impact of foreign currency, partially offset by a decrease in charges related to
transformation initiatives, reduced costs as a result of our broad-based
transformation initiatives and excess capacity headcount actions in the prior
year for non-sales associates, capitalization of costs to obtain a contract
under ASC 606, reduced travel expenses, legal settlements, and a decrease in bad
debt expense.

Interest expense decreased for the year ended June 30, 2021 primarily due to a
decrease in average interest rates for commercial paper borrowings to 0.1% for
the year ended June 30, 2021, as compared to 1.6% for the year ended June 30,
2020. This was coupled with a decrease in average daily borrowings under our
commercial paper program to $1.6 billion for the year ended June 30, 2021, as
compared to $2.7 billion for the year ended June 30, 2020.

Other (Income)/Expense, net
(In millions)
Years ended June 30,                                                     2021             2020            $ Change
Interest income on corporate funds                                    $ 

(36.5) $ (84.5)$ (48.0)


Realized (gains)/losses on available-for-sale securities, net           (11.3)            (12.9)             (1.6)
Impairment of assets                                                     19.9              29.9              10.0

Gain on sale of assets                                                   (8.1)             (5.8)              2.3
Gain on sale of investment                                               (1.7)             (0.2)              1.5
Non-service components of pension income, net                           (58.6)            (74.5)            (15.9)
Other (income)/expense, net                                           $ (96.3)$ (148.0)$  (51.7)



                                       29
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Other (income)/expense, net, decreased $51.7 million in fiscal 2021, as compared
to fiscal 2020 as a result of a decrease in interest income on corporate funds
due to lower interest rates earned and the change in non-service components of
pension income, net, and the items described below. See Note 10 of our
Consolidated Financial Statements for further details on non-service components
of pension income, net.

In fiscal 2021, the Company recorded impairment charges of $19.9 million which
is comprised of a write down of $10.5 million related to internally developed
software which was determined to have no future use, impairment charges of $9.4
million related to operating right-of-use assets and certain related fixed
assets associated with vacating certain leased locations early, and recognizing
certain owned facilities at fair value given intent to sell and accordingly
classified as held for sale.

In fiscal 2020, the Company recorded impairment charges of $29.9 million, which
is comprised of $25.3 million as a result of recognizing certain owned
facilities at fair value given intent to sell and accordingly classified as held
for sale and vacating certain leased locations early and recorded total
impairment charges of $4.6 million related to operating right-of-use assets and
certain related fixed assets associated with the vacated locations.

Earnings Before Income Taxes

For the year ended June 30, respectively:

[[Image Removed: adp-20210630_g18.jpg]] [[Image Removed: adp-20210630_g19.jpg]]

                        á 6% YoY Growth       á 60 bps YoY Growth



Earnings before income taxes increased in fiscal 2021 due to the increases in revenues partially offset by the increases in expenses discussed above.


Overall margin increased in fiscal 2021 as a result of operational efficiencies,
coupled with a decrease in charges related to transformation initiatives, legal
settlements, reduced costs as a result of our broad-based transformation
initiatives and excess capacity headcount actions in the prior year, a change of
$52.5 million in our estimated losses related to ADP Indemnity compared to prior
year, decreased selling expense, and decreased interest expense. These were
partially offset by an increase in incentive compensation costs, a decrease in
interest earned on funds held for clients, and incremental pressure from growth
in our zero-margin benefits pass-throughs.







                                       30
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Adjusted Earnings before certain Interest and Taxes ("Adjusted EBIT")

For the year ended June 30, respectively: [[Image Removed: adp-20210630_g20.jpg]] [[Image Removed: adp-20210630_g21.jpg]]

                        á 1% YoY Growth       â 40 bps YoY Growth



Adjusted EBIT and Adjusted EBIT margin exclude certain interest amounts, legal settlements, gain on sale of assets, net charges related to our broad-based transformation initiatives and the impact of the net severance charges as applicable in the respective periods.

Provision for Income Taxes

The effective tax rate in fiscal 2021 and 2020 was 22.7% and 22.5%, respectively. The increase in the effective tax rate is primarily due to combined benefits from a valuation allowance release related to foreign tax credit carryforwards and a foreign tax law change during fiscal 2020 as well as a decrease in the excess tax benefit on stock-based compensation, partially offset by favorable adjustments to prior year tax liabilities during fiscal 2021. Refer to Note 11, Income Taxes, within the Notes to the Consolidated Financial Statements for further discussion.

Adjusted Provision for Income Taxes


The adjusted effective tax rate in fiscal 2021 and 2020 was 22.7% and 22.6%,
respectively. The drivers of the adjusted effective tax rate are the same as the
drivers of the effective tax rate discussed above.


















                                       31
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Net Earnings and Diluted Earnings per Share

For the year ended June 30, respectively: [[Image Removed: adp-20210630_g22.jpg]] [[Image Removed: adp-20210630_g23.jpg]]

                          á 5% YoY Growth       á 6% YoY Growth



For fiscal 2021, adjusted net earnings and adjusted diluted EPS reflect the changes in components described above.


For fiscal 2021, diluted EPS increased as a result of the impact of fewer shares
outstanding resulting from the repurchase of approximately 8.2 million shares
during fiscal 2021 and 6.2 million shares during fiscal 2020, partially offset
by the issuances of shares under our employee benefit plans.

Adjusted Net Earnings and Adjusted Diluted Earnings per Share

For the year ended June 30, respectively: [[Image Removed: adp-20210630_g24.jpg]] [[Image Removed: adp-20210630_g25.jpg]]

                          á 1% YoY Growth       á 2% YoY Growth



For fiscal 2021, adjusted net earnings and adjusted diluted EPS reflect the changes in components described above.

                                       32

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ANALYSIS OF REPORTABLE SEGMENTS

                                                                            Revenues
                                                                      Years Ended
                                                                       June 30,                                             % Change
                                                                                                                                                             Organic
                                                                                                                                                            Constant
                                                            2021                2020                                         As Reported                    Currency
Employer Services                                       $ 10,195.2$ 10,086.6                                                  1  %                        -  %
PEO Services                                               4,818.3             4,511.5                                                  7  %                        7  %
Other                                                         (8.1)               (8.3)                                                  n/m                         n/m

                                                        $ 15,005.4$ 14,589.8                                                  3  %                        2  %


                                 Earnings before Income Taxes
                                        Years Ended
                                         June 30,                                    % Change
                                  2021                   2020                                    As Reported
Employer Services      $       3,052.1$ 3,058.2                                          -  %
PEO Services                     718.8                    609.3                                         18  %
Other                           (409.7)                  (484.9)                                          n/m

                       $       3,361.2$ 3,182.6                                          6  %


n/m - not meaningful

Employer Services

Revenues

Revenues increased in fiscal 2021 due to strong retention, business started from
New Business Bookings and one percentage point of favorability from foreign
currency. Employer Services client revenue retention rate for fiscal 2021
improved 170 basis points to 92.2% as compared to our rate for fiscal 2020.
Increases in revenues were partially offset by a decrease in interest earned on
funds held for clients.

Earnings before Income Taxes

Employer Services' earnings before income taxes was flat in fiscal 2021 due to
increased revenues discussed above offset by increases in expenses. The
increases in expenses were due to an increase in incentive compensation costs,
investments in our sales organization, an increase in amortization expense, and
the impact of foreign currency. The increases in expenses were offset by reduced
costs as a result of our broad-based transformation initiatives and excess
capacity headcount actions for non-sales associates, reduced travel expenses,
and a decrease in bad debt expense.
















                                       33
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For the year ended June 30, respectively:

                    [[Image Removed: adp-20210630_g26.jpg]]
                                   â 40 bps YoY Growth




Employer Services' overall margin decreased for fiscal 2021 due to an increase
in incentive compensation costs, a decrease in interest earned on funds held for
clients, and an increase in amortization expense. This decrease was partially
offset by reduced costs as a result of our broad-based transformation
initiatives and excess capacity headcount actions in the prior year, and a
decrease in bad debt expense.

Revenues
                                                                                                                      PEO Revenues
                                                                        Years Ended
                                                                       June 30,                      Change
                                                                                                2021               2020               $                %
PEO Services' revenues                                                                      $ 4,818.3$ 4,511.5$ 306.8               7  %
Less: PEO zero-margin benefits pass-throughs                                                  3,092.0            2,907.7            184.3               6  %
PEO Services' revenues excluding zero-margin benefits
pass-throughs                                                                               $ 1,726.3$ 1,603.8$ 122.5               8  %


PEO Services' revenues increased 7% and PEO Services' revenues excluding zero-margin benefits pass-through costs increased 8% in fiscal 2021. PEO Services' revenues increased due to a 2% increase in the average number of Worksite Employees in fiscal 2021 driven by an increase in the number of new PEO Services clients, partially offset by a modest decline in pays per control.

Earnings before Income Taxes


PEO Services' earnings before income taxes increased 18% in fiscal 2021 due to
increased revenues discussed above, partially offset by increases in expenses.
The increases in expenses were due to the increase in zero-margin benefits
pass-through costs of $184.3 million described above, partially offset by a
change of $52.5 million in our estimated losses related to ADP Indemnity
compared to the prior year, and a decrease in selling expenses.







                                       34
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For the year ended June 30, respectively:

                    [[Image Removed: adp-20210630_g27.jpg]]
                                   á 140 bps YoY Growth



PEO Services' overall margin increased for fiscal 2021 due to an increase in
revenues as discussed above, a change in our estimated losses related to ADP
Indemnity compared to the prior year, and a decrease in selling expenses.

ADP Indemnity provides workers' compensation and employer's liability deductible
reimbursement insurance protection for PEO Services' worksite employees up to $1
million per occurrence. PEO Services has secured a workers' compensation and
employer's liability insurance policy that caps the exposure for each claim at
$1 million per occurrence and has also secured aggregate stop loss insurance
that caps aggregate losses at a certain level in fiscal years 2012 and prior
from an admitted and licensed insurance company of AIG. We utilize historical
loss experience and actuarial judgment to determine the estimated claim
liability, and changes in estimated ultimate incurred losses are included in the
PEO segment.

Additionally, starting in fiscal year 2013, ADP Indemnity paid premiums to enter
into reinsurance arrangements with ACE American Insurance Company, a
wholly-owned subsidiary of Chubb Limited ("Chubb"), to cover substantially all
losses incurred by the Company up to the $1 million per occurrence related to
the workers' compensation and employer's liability deductible reimbursement
insurance protection for PEO Services' worksite employees. Each of these
reinsurance arrangements limits our overall exposure incurred up to a certain
limit. The Company believes the likelihood of ultimate losses exceeding this
limit is remote. During fiscal 2021, ADP Indemnity paid a premium of $240
million to enter into a reinsurance arrangement with Chubb to cover
substantially all losses incurred by ADP Indemnity for the fiscal 2021 policy
year up to $1 million per occurrence. ADP Indemnity recorded a pre-tax benefit
of approximately $32 million in fiscal 2021 and a pre-tax loss of approximately
$20 million in fiscal 2020, which were primarily a result of changes in our
estimated actuarial losses. ADP Indemnity paid a premium of $260 million in July
2021 to enter into a reinsurance agreement with Chubb to cover substantially all
losses incurred by ADP Indemnity for fiscal 2022 policy year on terms
substantially similar to the fiscal 2021 reinsurance policy.

Other


The primary components of "Other" are certain corporate overhead charges and
expenses that have not been allocated to the reportable segments, including
corporate functions, costs related to our transformation office, legal
settlements, severance costs, non-recurring gains and losses, the elimination of
intercompany transactions, and other interest expense.

                                       35

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Non-GAAP Financial Measures


In addition to our GAAP results, we use the adjusted results and other non-GAAP
metrics set forth in the table below to evaluate our operating performance in
the absence of certain items and for planning and forecasting of future periods:
     Adjusted Financial Measures            U.S. GAAP Measures
Adjusted EBIT                          Net earnings

Adjusted provision for income taxes Provision for income taxes Adjusted net earnings

                  Net earnings

Adjusted diluted earnings per share    Diluted earnings per share
Adjusted effective tax rate            Effective tax rate

Organic constant currency              Revenues



We believe that the exclusion of the identified items helps us reflect the
fundamentals of our underlying business model and analyze results against our
expectations and against prior period, and to plan for future periods by
focusing on our underlying operations. We believe that the adjusted results
provide relevant and useful information for investors because it allows
investors to view performance in a manner similar to the method used by
management and improves their ability to understand and assess our operating
performance.  The nature of these exclusions is for specific items that are not
fundamental to our underlying business operations.  Since these adjusted
financial measures and other non-GAAP metrics are not measures of performance
calculated in accordance with U.S. GAAP, they should not be considered in
isolation from, as a substitute for, or superior to their corresponding U.S.
GAAP measures, and they may not be comparable to similarly titled measures at
other companies.
                                       36

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                                                                          Years Ended
                                                                           June 30,                              % Change
                                                                    2021               2020                     As Reported
Net earnings                                                    $ 2,598.5$ 2,466.5                               5  %
Adjustments:
Provision for income taxes                                          762.7              716.1
All other interest expense (a)                                       57.3               59.2
All other interest income (a)                                        (6.5)             (20.5)

Gain on sale of assets                                                  -               (0.2)

Transformation initiatives (b)                                          -               77.4
Excess capacity severance charges (c)                                 2.9               25.4

Legal settlements (d)                                               (30.7)              25.0
Adjusted EBIT                                                   $ 3,384.2$ 3,348.9                               1  %
Adjusted EBIT Margin                                                 22.6  %            23.0  %

Provision for income taxes                                      $   762.7$   716.1                               7  %
Adjustments:

Gain on sale of assets (e)                                              -               (0.1)

Transformation initiatives (e)                                          -               19.2
Excess capacity severance charges (e)                                 0.5                6.3

Legal settlements (e)                                                (7.5)               6.2

Adjusted provision for income taxes                             $   755.7$   747.7                               1  %
Adjusted effective tax rate (f)                                      22.7  %            22.6  %

Net earnings                                                    $ 2,598.5$ 2,466.5                               5  %
Adjustments:

Gain on sale of assets                                                  -               (0.2)
Income tax provision on gain on sale of assets (e)                      -                0.1

Transformation initiatives (b)                                          -               77.4
Income tax benefit for transformation initiatives (e)                   -              (19.2)
Excess capacity severance charges (c)                                 2.9               25.4
Income tax benefit for excess capacity severance charges
(e)                                                                  (0.5)              (6.3)

Legal settlements (d)                                               (30.7)              25.0
Income tax provision/ (benefit) for legal settlements (e)             7.5               (6.2)

Adjusted net earnings                                           $ 2,577.7$ 2,562.5                               1  %

Diluted EPS                                                     $    6.07$    5.70                               6  %
Adjustments:

Gain on sale of assets (e)                                              -                  -

Transformation initiatives (b) (e)                                      -               0.13
Excess capacity severance charges (c) (e)                            0.01               0.04

Legal settlements (d) (e)                                           (0.05)              0.04

Adjusted diluted EPS                                            $    6.02$    5.92                               2  %



(a) We include the interest income earned on investments associated with our
client funds extended investment strategy and interest expense on borrowings
related to our client funds extended investment strategy as we believe these
amounts to be fundamental to the underlying operations of our business model.
The adjustments in the table above represent the interest income and interest
expense that are not related to our client funds extended investment strategy
and are labeled as "All other interest expense" and "All other interest income."

(b) In fiscal 2021, transformation initiatives include impairment charges as a
result of recognizing certain owned facilities at fair value given intent to
sell and accordingly classified as held for sale and lease asset impairment
charges, offset by gain on sale of assets and net reversals of charges related
to other transformation initiatives, including severance.

Unlike other severance charges which are not included as an adjustment to get to
adjusted results, these specific charges relate to actions taken as part of our
broad-based, company-wide transformation initiative.

                                       37

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(c) Represents net severance cost related to excess capacity. Unlike certain
other severance charges in prior periods that are not
included as an adjustment to get to adjusted results, these specific charges
relate to actions that are part of our broad-based,
company-wide initiatives to address excess capacity across our business and
functions, including charges in fiscal 2020 due to the COVID-19 pandemic.

(d) Represents legal settlements including an insurance recovery in fiscal 2021.

(e) The income tax provision/(benefit) was calculated based on the marginal rate in effect for the year ended June 30, 2021.


(f) The Adjusted effective tax rate is calculated as our Adjusted provision for
income taxes divided by the sum of our Adjusted net earnings plus our Adjusted
provision for income taxes.

The following table reconciles our reported growth rates to the non-GAAP measure
of organic constant currency, which excludes the impact of acquisitions, the
impact of dispositions, and the impact of foreign currency. The impact of
acquisitions and dispositions is calculated by excluding the current year
revenues of acquisitions until the one-year anniversary of the transaction and
by excluding the prior year revenues of divestitures for the one-year period
preceding the transaction. The impact of foreign currency is determined by
calculating the current year result using foreign exchange rates consistent with
the prior year. The PEO segment is not impacted by acquisitions, dispositions or
foreign currency.
                                                                            Year Ended
                                                                             June 30,
                                                                               2021
Consolidated revenue growth as reported                                            3  %
Adjustments:
Impact of acquisitions                                                             -  %

Impact of foreign currency                                                        (1) %
Consolidated revenue growth, organic constant currency                      

2 %


Employer Services revenue growth as reported                                       1  %
Adjustments:
Impact of acquisitions                                                             -  %

Impact of foreign currency                                                        (1) %
Employer Services revenue growth, organic constant currency                 

- %

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2021, cash and cash equivalents were $2.6 billion, which were primarily invested in time deposits and money market funds.


For corporate liquidity, we expect existing cash, cash equivalents, long-term
marketable securities, cash flow from operations together with our $9.7 billion
of committed credit facilities and our ability to access both long-term and
short-term debt financing from the capital markets will be adequate to meet our
operating, investing, and financing activities such as regular quarterly
dividends, share repurchases, and capital expenditures for the foreseeable
future. Our financial condition remains solid at June 30, 2021 and we have
sufficient liquidity as noted above; however, given the uncertainty in the
rapidly changing market and economic conditions related to the COVID-19
pandemic, we will continue to evaluate the nature and extent of the impact to
our financial condition and liquidity.

For client funds liquidity, we have the ability to borrow through our financing
arrangements under our U.S. short-term commercial paper program and our U.S.,
Canadian and United Kingdom short-term reverse repurchase agreements, together
with our $9.7 billion of committed credit facilities and our ability to use
corporate liquidity when necessary to meet short-term funding requirements
related to client funds obligations. Please see "Quantitative and Qualitative
Disclosures about Market Risk" for a further discussion of the risks, including
with respect to the COVID-19 pandemic, related to our client funds extended
investment strategy. See Note 8 of our Consolidated Financial Statements for a
description of our short-term financing including commercial paper.

                                       38

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Operating, Investing and Financing Cash Flows

Our cash flows from operating, investing, and financing activities, as reflected in the Statements of Consolidated Cash Flows are summarized as follows:

                                                                  Years ended June 30,
                                                                 2021                2020                   $ Change
Cash provided by (used in):
Operating activities                                        $   3,093.3$ 3,026.2$    67.1
Investing activities                                           (3,515.0)           3,156.3                 (6,671.3)
Financing activities                                            6,437.5           (5,890.6)                12,328.1
Effect of exchange rate changes on cash, cash
equivalents, restricted cash, and restricted cash
equivalents                                                        73.8              (34.5)                   108.3
Net change in cash, cash equivalents, restricted
cash, and restricted cash equivalents                       $   6,089.6$   257.4$ 5,832.2



Net cash flows provided by operating activities increased due to a net favorable
change in the components of operating assets and liabilities as compared to the
year ended June 30, 2020.

Net cash flows from investing activities changed due to the timing of proceeds
and purchases of corporate and client funds marketable securities of $6,771.2
million.

Net cash flows from financing activities changed due to a net increase in the
cash flow from client funds obligations of $11,549.4 million, which is due to
the timing of impounds from our clients and payments to our clients' employees
and other payees, and proceeds from debt issuances. These were partially offset
by payments of debt, more cash returned to shareholders via share repurchases
and dividends, and settlement of cash flow hedges in fiscal 2021.

We purchased approximately 8.2 million shares of our common stock at an average
price per share of $170.04 during fiscal 2021, as compared to purchases of 6.2
million shares at an average price per share of $160.61 during fiscal 2020. From
time to time, the Company may repurchase shares of its common stock under its
authorized share repurchase program. The Company considers several factors in
determining when to execute share repurchases, including, among other things,
actual and potential acquisition activity, cash balances and cash flows,
issuances due to employee benefit plan activity, and market conditions.
Capital Resources and Client Fund Obligations

We have $3.0 billion of senior unsecured notes with maturity dates in 2025,
2028, and 2030. We may from time to time revisit the long-term debt market to
refinance existing debt, finance investments including acquisitions for our
growth, and maintain the appropriate capital structure. However, there can be no
assurance that volatility in the global capital and credit markets would not
impair our ability to access these markets on terms acceptable to us, or at all.
See Note 9 of our Consolidated Financial Statements for a description of our
notes.

Our U.S. short-term funding requirements related to client funds are sometimes
obtained on an unsecured basis through the issuance of commercial paper, rather
than liquidating previously-collected client funds that have already been
invested in available-for-sale securities. This commercial paper program
provides for the issuance of up to $9.7 billion in aggregate maturity value. Our
commercial paper program is rated A-1+ by Standard and Poor's, Prime-1 ("P-1")
by Moody's and F1+ by Fitch. 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, 2021 and 2020, we had no commercial paper borrowing
outstanding. Details of the borrowings under the commercial paper program are as
follows:
Years ended June 30,                                                2021    

2020

Average daily borrowings (in billions)                            $ 1.6$ 2.7
Weighted average interest rates                                     0.1  %      1.6  %
Weighted average maturity (approximately in days)                    1 day  

2 days




Our U.S., Canadian, and United Kingdom short-term funding requirements related
to client funds obligations are sometimes obtained on a secured basis through
the use of reverse repurchase agreements, which are collateralized principally
by
                                       39

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government and government agency securities, rather than liquidating
previously-collected client funds that have already been invested in
available-for-sale securities. These agreements generally have terms ranging
from overnight to up to five business days. We have successfully borrowed
through the use of reverse repurchase agreements on an as-needed basis to meet
short-term funding requirements related to client funds obligations. At June 30,
2021 and 2020, there were $23.5 million and $13.6 million, respectively, of
outstanding obligations related to the reverse repurchase agreements. Details of
the reverse repurchase agreements are as follows:
                Years ended June 30,                             2021          2020
                Average outstanding balances                  $ 136.7$ 263.4
                Weighted average interest rates                   0.2  %        1.6  %



We vary the maturities of our committed credit facilities to limit the
refinancing risk of any one facility. We have a $3.75 billion, 364-day credit
agreement that matures in June 2022 with a one year term-out option. In
addition, we have a five-year $2.75 billion credit facility and a five-year $3.2
billion credit facility maturing in June 2024 and June 2026, respectively, each
with an accordion feature under which the aggregate commitment can be increased
by $500 million, subject to the availability of additional commitments. The
primary uses of the credit facilities are to provide liquidity to the commercial
paper program and funding for general corporate purposes, if necessary. We had
no borrowings through June 30, 2021 under the credit facilities. We believe that
we currently meet all conditions set forth in the revolving credit agreements to
borrow thereunder, and we are not aware of any conditions that would prevent us
from borrowing part or all of the $9.7 billion available to us under the
revolving credit agreements. See Note 8 of our Consolidated Financial Statements
for a description of our short-term financing including credit facilities.

Our investment portfolio does not contain any asset-backed securities with
underlying collateral of sub-prime mortgages, alternative-A mortgages, sub-prime
auto loans or sub-prime home equity loans, collateralized debt obligations,
collateralized loan obligations, credit default swaps, derivatives, auction rate
securities, structured investment vehicles or non-investment grade fixed-income
securities. We own AAA-rated senior tranches of primarily fixed rate auto loan,
credit card, equipment lease, and rate reduction receivables, secured
predominantly by prime collateral. All collateral on asset-backed securities is
performing as expected through June 30, 2021. In addition, we own U.S.
government securities which primarily include debt directly issued by Federal
Farm Credit Banks and Federal Home Loan Banks. Our client funds investment
strategy is structured to allow us to average our way through an interest rate
cycle by laddering the maturities of our investments out to five years (in the
case of the extended portfolio) and out to ten years (in the case of the long
portfolio). This investment strategy is supported by our short-term financing
arrangements necessary to satisfy short-term funding requirements relating to
client funds obligations. See Note 4 of our Consolidated Financial Statements
for a description of our corporate investments and funds held for clients.

Capital expenditures for fiscal 2021 were $178.3 million, as compared to $168.3
million for fiscal 2020. We expect capital expenditures in fiscal 2022 to be
between $200 million and $225 million.

Contractual Obligations

The following table provides a summary of our contractual obligations at June 30, 2021: (In millions)

Payments due by period

                                           Less than            1-3               3-5             More than
Contractual Obligations                     1 year             years             years             5 years           Unknown            Total

Debt Obligations (1)                     $     64.2$ 128.5

$ 1,111.8$ 2,092.1 $ - $ 3,396.6

Operating Lease Obligations (2) $ 103.2$ 160.7

   $   102.5$   100.9          $     -          $   467.3
Purchase Obligations (3)                 $    448.5$ 184.8$    25.3          $       -          $     -          $   658.6
Obligations Related to
Unrecognized
   Tax Benefits (4)                      $     14.8          $     -          $       -          $       -          $  85.1$    99.9
Other Long-Term Liabilities
Reflected
  on our Consolidated Balance
Sheets:
Compensation and Benefits (5)            $     49.0$  64.9$    57.4$   267.2$  33.9$   472.4

Total                                    $    679.7$ 538.9$ 1,297.0$ 2,460.2$ 119.0$ 5,094.8

(1)These amounts represent the principal and interest payments of our debt.

                                       40

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(2)Included in these amounts are various facilities and equipment leases. We
enter into operating leases in the normal course of business relating to
facilities and equipment. The majority of our lease agreements have fixed
payment terms based on the passage of time. Certain facility and equipment
leases require payment of maintenance and real estate taxes and contain
escalation provisions based on future adjustments in price indices. Our future
operating lease obligations could change if we exit certain contracts or if we
enter into additional operating lease agreements.

(3)Purchase obligations are comprised of a $260 million reinsurance premium with
Chubb for the fiscal 2022 policy year, as well as obligations related to
software subscription licenses and purchase and maintenance agreements on our
software, equipment, and other assets.

(4)Based on current estimates, we expect to make cash payments up to $14.8 million in the next twelve months for obligations related to unrecognized tax benefits across various jurisdictions and tax periods. For $85.1 million of obligations related to unrecognized tax benefits we are unable to make reasonably reliable estimates as to the period in which cash payments are expected to be paid.

(5)Compensation and benefits primarily relates to amounts associated with our employee benefit plans and other compensation arrangements. These amounts exclude the estimated contributions to our defined benefit plans, which are expected to be $10.0 million in fiscal 2022.


In addition to the obligations quantified in the table above, we had obligations
for the remittance of funds relating to our payroll and payroll tax filing
services. As of June 30, 2021, the obligations relating to these matters, which
are expected to be paid in fiscal 2022, total $34,403.8 million and were
recorded in client funds obligations on our Consolidated Balance Sheets. We had
$34,905.8 million of cash and cash equivalents and marketable securities that
were impounded from our clients to satisfy such obligations recorded in funds
held for clients on our Consolidated Balance Sheets as of June 30, 2021.

Separately, ADP Indemnity paid a premium of $260 million in July 2021 to enter
into a reinsurance agreement with Chubb to cover substantially all losses
incurred by ADP Indemnity for the fiscal 2022 policy year. At June 30, 2021, ADP
Indemnity had total assets of $564.2 million to satisfy the actuarially
estimated unpaid losses of $487.4 million for the policy years since July 1,
2003. ADP Indemnity paid claims of $3.3 million and $4.4 million, net of
insurance recoveries, in fiscal 2021 and 2020, respectively. Refer to the
"Analysis of Reportable Segments - PEO Services" above for additional
information regarding ADP Indemnity.

In the normal course of business, we also enter into contracts in which we make
representations and warranties that relate to the performance of our services
and products. We do not expect any material losses related to such
representations and warranties.

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