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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
 
FORM 10-Q
______________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2020

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From to    
 
Commission File Number 1-5397
__________________________
AUTOMATIC DATA PROCESSING, INC.
(Exact name of registrant as specified in its charter)
__________________________
Delaware22-1467904
(State or other jurisdiction of incorporation or organization)(IRS Employer Identification No.)
One ADP Boulevard
Roseland,NJ07068
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (973) 974-5000
__________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.10 Par Value
(voting)
ADPNASDAQ Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ý   No o
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ý   No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).YesNo
The number of shares outstanding of the registrant’s common stock as of October 27, 2020 was 428,813,999.



Table of Contents
  Page
 
   
Item 1.
 
   
 
   
 
   
 
   
 
   
Item 2.
   
Item 3.
   
Item 4.
  
 
   
Item 1.
   
Item 1A.
   
Item 2.
Item 6.

2


Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Automatic Data Processing, Inc. and Subsidiaries
Statements of Consolidated Earnings
(In millions, except per share amounts)
(Unaudited)
Three Months Ended
September 30,
20202019
REVENUES:  
Revenues, other than interest on funds held
for clients and PEO revenues
$2,269.6 $2,306.2 
Interest on funds held for clients106.5 133.9 
PEO revenues (A)1,094.6 1,055.6 
TOTAL REVENUES3,470.7 3,495.7 
EXPENSES:  
Costs of revenues:  
Operating expenses1,762.1 1,787.7 
Systems development and programming costs168.7 168.2 
Depreciation and amortization103.5 88.9 
TOTAL COSTS OF REVENUES2,034.3 2,044.8 
Selling, general, and administrative expenses681.0 726.5 
Interest expense15.1 39.9 
TOTAL EXPENSES2,730.4 2,811.2 
Other (income)/expense, net(24.9)(54.6)
EARNINGS BEFORE INCOME TAXES765.2 739.1 
Provision for income taxes163.1 156.7 
NET EARNINGS$602.1 $582.4 
BASIC EARNINGS PER SHARE$1.40 $1.35 
DILUTED EARNINGS PER SHARE$1.40 $1.34 
Basic weighted average shares outstanding428.6 432.7 
Diluted weighted average shares outstanding430.0 435.4 

(A) Professional Employer Organization (“PEO”) revenues are net of direct pass-through costs, primarily consisting of payroll wages and payroll taxes of $10,925.8 million and $10,510.6 million for the three months ended September 30, 2020 and 2019, respectively.












See notes to the Consolidated Financial Statements.
3


Automatic Data Processing, Inc. and Subsidiaries
Statements of Consolidated Comprehensive Income
(In millions)
(Unaudited)

Three Months Ended
September 30,
20202019
Net earnings$602.1 $582.4 
Other comprehensive income/(loss):
Currency translation adjustments50.4 (48.9)
Unrealized net gains/(losses) on available-for-sale securities(24.6)96.1 
Tax effect5.5 (20.8)
Reclassification of net (gain)/losses on available-for-sale securities to net earnings(0.3)(2.3)
Tax effect0.1 0.5 
Unrealized loss on cash flow hedging activities(3.3) 
        Tax effect0.8  
Amortization of unrealized loss on cash flow hedging activities0.6  
Tax effect  
Reclassification of pension liability adjustment to net earnings2.5 (1.7)
Tax effect(1.0)0.5 
Other comprehensive income, net of tax30.7 23.4 
Comprehensive income$632.8 $605.8 
























See notes to the Consolidated Financial Statements.
4


Automatic Data Processing, Inc. and Subsidiaries
Consolidated Balance Sheets
(In millions, except per share amounts)
(Unaudited)
September 30,June 30,
20202020
Assets
Current assets:  
Cash and cash equivalents$1,613.1 $1,908.5 
    Accounts receivable, net of allowance for doubtful accounts of $89.1 and $92.5, respectively
2,489.1 2,441.3 
Other current assets 762.9 506.2 
Total current assets before funds held for clients4,865.1 4,856.0 
Funds held for clients29,950.3 26,708.1 
Total current assets34,815.4 31,564.1 
Long-term receivables, net of allowance for doubtful accounts of $0.6 and $0.5, respectively
16.1 18.6 
Property, plant and equipment, net701.5 703.9 
Operating lease right-of-use asset479.0 493.7 
Deferred contract costs2,397.9 2,401.6 
Other assets438.0 458.4 
Goodwill2,326.3 2,309.4 
Intangible assets, net1,215.9 1,215.8 
Total assets$42,390.1 $39,165.5 
Liabilities and Stockholders' Equity  
Current liabilities:  
Accounts payable$111.2 $102.0 
Accrued expenses and other current liabilities1,900.2 1,980.7 
Accrued payroll and payroll-related expenses494.7 557.0 
Dividends payable387.1 387.3 
Short-term deferred revenues205.0 212.5 
Obligations under reverse repurchase agreements (A) 13.6 
Short-term debt 1,001.8 
Income taxes payable133.0 40.1 
Total current liabilities before client funds obligations3,231.2 4,295.0 
Client funds obligations29,098.4 25,831.6 
Total current liabilities32,329.6 30,126.6 
Long-term debt1,993.9 1,002.8 
Operating lease liabilities330.4 344.4 
Other liabilities813.9 837.0 
Deferred income taxes743.0 731.9 
Long-term deferred revenues370.4 370.6 
Total liabilities36,581.2 33,413.3 
Commitments and contingencies (Note 13)
Stockholders' equity:  
Preferred stock, $1.00 par value: authorized, 0.3 shares; issued, none
  
Common stock, $0.10 par value: authorized, 1,000.0 shares; issued, 638.7 shares at September 30, 2020 and June 30, 2020;
 outstanding, 429.3 and 429.9 shares at September 30, 2020 and June 30, 2020, respectively
63.9 63.9 
Capital in excess of par value1,348.4 1,333.8 
Retained earnings18,644.7 18,436.3 
Treasury stock - at cost: 209.4 and 208.9 shares at September 30, 2020 and June 30, 2020, respectively
(14,264.0)(14,067.0)
Accumulated other comprehensive income (loss)15.9 (14.8)
Total stockholders’ equity5,808.9 5,752.2 
Total liabilities and stockholders’ equity$42,390.1 $39,165.5 

(A) As of June 30, 2020, $13.6 million of long-term marketable securities have been pledged as collateral under the Company's reverse repurchase agreements (see Note 9).


See notes to the Consolidated Financial Statements.
5

Automatic Data Processing, Inc. and Subsidiaries
Statements of Consolidated Cash Flows
(In millions)
(Unaudited)


Three Months Ended
September 30,
20202019
Cash Flows from Operating Activities:
Net earnings$602.1 $582.4 
Adjustments to reconcile net earnings to cash flows provided by operating activities:  
Depreciation and amortization131.1 117.3 
Amortization of deferred contract costs232.3 227.3 
Deferred income taxes23.5 44.4 
Stock-based compensation expense33.8 37.1 
Net pension income(11.1)(2.7)
Net amortization of premiums and accretion of discounts on available-for-sale securities12.4 12.2 
Impairment of assets2.8  
Gain on sale of assets(0.2)(1.9)
Other6.1 11.9 
Changes in operating assets and liabilities:  
Increase in accounts receivable(78.7)(96.8)
Increase in other assets(454.8)(391.7)
Increase/(Decrease) in accounts payable5.7 (15.1)
Decrease in accrued expenses and other liabilities(23.1)(91.6)
Net cash flows provided by operating activities481.9 432.8 
Cash Flows from Investing Activities:  
Purchases of corporate and client funds marketable securities(812.8)(1,409.9)
Proceeds from the sales and maturities of corporate and client funds marketable securities1,196.7 1,653.7 
Capital expenditures(43.5)(56.8)
Additions to intangibles(76.4)(88.2)
Proceeds from sale of property, plant, and equipment and other assets0.2 23.4 
Net cash flows provided by investing activities264.2 122.2 
Cash Flows from Financing Activities:  
Net increase/(decrease) in client funds obligations3,203.3 (8,063.3)
Payments of debt(1,000.6)(0.5)
Proceeds from the issuance of debt991.1  
Settlement of cash flow hedges(43.6) 
Repurchases of common stock(213.6)(309.7)
Net proceeds from stock purchase plan and stock-based compensation plans(7.9)(32.1)
Dividends paid(391.0)(343.3)
Net (payments)/proceeds related to reverse repurchase agreements(13.6)166.3 
Net proceeds of commercial paper borrowings 3,536.7 
Net cash flows provided by/(used in) financing activities2,524.1 (5,045.9)
Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents37.9 (33.1)
Net change in cash, cash equivalents, restricted cash, and restricted cash equivalents3,308.1 (4,524.0)
Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period7,053.6 6,796.2 
Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period$10,361.7 $2,272.2 
Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents to the Consolidated Balance Sheets
Cash and cash equivalents$1,613.1 $1,403.9 
Restricted cash and restricted cash equivalents included in funds held for clients (A)8,748.6 868.3 
Total cash, cash equivalents, restricted cash, and restricted cash equivalents$10,361.7 $2,272.2 
Supplemental disclosures of cash flow information:
Cash paid for interest$27.3 $53.6 
Cash paid for income taxes, net of income tax refunds$45.4 $45.6 
(A) See Note 6 for a reconciliation of restricted cash and restricted cash equivalents in funds held for clients on the Consolidated Balance Sheets.


See notes to the Consolidated Financial Statements.
6


Automatic Data Processing, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
(Tabular dollars in millions, except per share amounts or where otherwise stated)
(Unaudited)
Note 1.  Basis of Presentation

The accompanying Consolidated Financial Statements and footnotes thereto of Automatic Data Processing, Inc., its subsidiaries and variable interest entity (“ADP” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).  The Consolidated Financial Statements and footnotes thereto are unaudited.  In the opinion of the Company’s management, the Consolidated Financial Statements reflect all adjustments, which are of a normal recurring nature, that are necessary for a fair presentation of the Company’s interim financial results.

The Company has a grantor trust, which holds the majority of the funds provided by its clients pending remittance to employees of those clients, tax authorities, and other payees.  The Company is the sole beneficial owner of the trust.  The trust meets the criteria in Accounting Standards Codification (“ASC”) 810, “Consolidation” to be characterized as a variable interest entity (“VIE”).  The Company has determined that it has a controlling financial interest in the trust because it has both (1) the power to direct the activities that most significantly impact the economic performance of the trust (including the power to make all investment decisions for the trust) and (2) the right to receive benefits that could potentially be significant to the trust (in the form of investment returns) and, therefore, consolidates the trust.  Further information on these funds and the Company’s obligations to remit to its clients’ employees, tax authorities, and other payees is provided in Note 6, “Corporate Investments and Funds Held for Clients.” 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the assets, liabilities, revenue, expenses, and accumulated other comprehensive income that are reported in the Consolidated Financial Statements and footnotes thereto. Actual results may differ from those estimates. Interim financial results are not necessarily indicative of financial results for a full year.  The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020 (“fiscal 2020”).

Note 2.  New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Effective July 1, 2020, the Company adopted accounting standard update (“ASU”) 2018-13, “Fair Value Measurement.” The update modifies the disclosure requirements on fair value measurements. The adoption of ASU 2018-13 modified the disclosures in Note 6 but did not have an impact on the Company's consolidated results of operations, financial condition, or cash flows.
Effective July 1, 2020, the Company adopted ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This update introduces the current expected credit loss (“CECL”) model, which requires an entity to measure credit losses based on expected losses rather than incurred losses for certain financial instruments and financial assets, including trade receivables. The adoption of ASU 2016-13 did not have a material impact on the Company's consolidated results of operations, financial condition, or cash flows.










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Recently Issued Accounting Pronouncements
The following table summarizes recent ASU's issued by the Financial Accounting Standards Board (“FASB”) that could have a material impact on the Company's consolidated results of operations, financial condition, or cash flows.
StandardDescriptionEffective DateEffect on Financial Statements or Other Significant Matters
ASU 2018-14 Compensation-Retirement Benefits-Defined Benefit PlansThis update modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans by removing and adding certain disclosures for these plans. The eliminated disclosures include (a) the amounts in accumulated other comprehensive income expected to be recognized in net periodic benefit costs over the next fiscal year, and (b) the effects of a one percentage point change in assumed health care cost trend rates on the net periodic benefit costs and the benefit obligation for post-retirement health care benefits. Additional disclosures include descriptions of significant gains and losses affecting the benefit obligation for the period. The amendments in ASU 2018-14 would need to be applied on a retrospective basis. July 1, 2021
(Fiscal 2022)
The adoption of this guidance will modify disclosures but will not have an impact on the Company's consolidated results of operations, financial condition, or cash flows.

Note 3.  Revenue

Based upon similar operational and economic characteristics, the Company’s revenues are disaggregated by its three strategic pillars: Human Capital Management (“HCM”), HR Outsourcing (“HRO”), and Global (“Global”) Solutions, with separate disaggregation for PEO zero-margin benefits pass-through revenues and client funds interest revenues.  The Company believes these revenue categories depict how the nature, amount, timing, and uncertainty of its revenue and cash flows are affected by economic factors.

HCM provides a suite of product offerings that assist employers of all types and sizes in all stages of the employment cycle, from recruitment to retirement. Global is generally consistent with the types of services provided within HCM but represents geographies outside of the United States and includes our multinational offerings. HCM and Global revenues are primarily attributable to fees for providing solutions for payroll, benefits, talent, retirement services and HR processing and fees charged to implement the Company's solutions for clients.

HRO provides a comprehensive human resources outsourcing solution, including offering benefits, providing workers’ compensation insurance, and administering state unemployment insurance, among other human resources functions. This revenue is primarily driven by the PEO. Amounts collected from PEO worksite employers include payroll, fees for benefits, and an administrative fee that also includes payroll taxes, fees for workers’ compensation and state unemployment taxes. The payroll and payroll taxes collected from the worksite employers are presented in revenue net, as the Company does not retain risk and acts as an agent with respect to this aspect of the PEO arrangement. With respect to the payroll and payroll taxes, the worksite employer is primarily responsible for providing the service and has discretion in establishing wages. The fees collected from the worksite employers for benefits (i.e., PEO benefits pass-throughs), workers’ compensation and state unemployment taxes are presented in revenues and the associated costs of benefits, workers’ compensation and state unemployment taxes are included in operating expenses, as the Company acts as a principal with respect to this aspect of the arrangement. With respect to these fees, the Company is primarily responsible for fulfilling the service and has discretion in establishing price. The Company has further disaggregated HRO to separate out its PEO zero-margin benefits pass-through revenues.

The Company recognizes client funds interest revenues on collected but not yet remitted funds held for clients in revenues as earned, as the collection, holding and remittance of these funds are critical components of providing these services.



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The following tables provide details of revenue by our strategic pillars with disaggregation for PEO zero-margin benefits pass-throughs and client funds interest, and include a reconciliation to the Company’s reportable segments:
Three Months Ended
September 30,
Types of Revenues20202019
HCM$1,530.6 $1,568.5 
HRO, excluding PEO zero-margin benefits pass-throughs582.4 591.1 
PEO zero-margin benefits pass-throughs741.0 699.1 
Global510.2 503.1 
Interest on funds held for clients106.5 133.9 
Total Revenues$3,470.7 $3,495.7 

Reconciliation of disaggregated revenue to our reportable segments for the three months ended September 30, 2020:

Types of RevenuesEmployer ServicesPEOOtherTotal
HCM$1,532.3 $ $(1.7)$1,530.6 
HRO, excluding PEO zero-margin benefits pass-throughs229.1 353.6 (0.3)582.4 
PEO zero-margin benefits pass-throughs 741.0  741.0 
Global510.2   510.2 
Interest on funds held for clients105.2 1.3  106.5 
Total Segment Revenues$2,376.8 $1,095.9 $(2.0)$3,470.7 

Reconciliation of disaggregated revenue to our reportable segments for the three months ended September 30, 2019:

Types of RevenuesEmployer ServicesPEOOtherTotal
HCM$1,570.0 $ $(1.5)$1,568.5 
HRO, excluding PEO zero-margin benefits pass-throughs235.7 356.5 (1.1)591.1 
PEO zero-margin benefits pass-throughs 699.1  699.1 
Global503.1   503.1 
Interest on funds held for clients132.6 1.3  133.9 
Total Segment Revenues$2,441.4 $1,056.9 $(2.6)$3,495.7 

Contract Balances

The timing of revenue recognition for HCM, HRO and Global Solutions is consistent with the invoicing of clients, as invoicing occurs in the period the services are provided. Therefore, the Company does not recognize a contract asset or liability resulting from the timing of revenue recognition and invoicing.

Changes in deferred revenue related to set up fees for the three months ended September 30, 2020 were as follows:

Contract Liability
Contract liability, July 1, 2020$522.7 
Recognition of revenue included in beginning of year contract liability(43.8)
Contract liability, net of revenue recognized on contracts during the period30.7 
Currency translation adjustments16.2 
Contract liability, September 30, 2020$525.8 

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Note 4.  Earnings per Share (“EPS”)
BasicEffect of Employee Stock Option SharesEffect of
Employee
Restricted
Stock
Shares
Diluted
Three Months Ended September 30, 2020
Net earnings$602.1   $602.1 
Weighted average shares (in millions)428.6 0.6 0.8 430.0 
EPS$1.40   $1.40 
Three Months Ended September 30, 2019    
Net earnings$582.4   $582.4 
Weighted average shares (in millions)432.7 1.3 1.4 435.4 
EPS$1.35   $1.34 

Options to purchase 2.1 million and 0.7 million shares of common stock for the three months ended September 30, 2020 and 2019, respectively, were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.

Note 5. Other (Income)/Expense, Net
Three Months Ended
September 30,
20202019
Interest income on corporate funds$(13.8)$(32.3)
Realized (gains) / losses on available-for-sale securities, net(0.3)(2.3)
Impairment of assets2.8  
Gain on sale of assets(0.2)(1.9)
Non-service components of pension income, net (see Note 11)(13.4)(18.1)
Other (income)/expense, net$(24.9)$(54.6)

In fiscal 2021, the Company recorded impairment charges of $2.8 million as a result of recognizing certain owned facilities at fair value given intent to sell and accordingly classified as held for sale.

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Note 6. Corporate Investments and Funds Held for Clients

Corporate investments and funds held for clients at September 30, 2020 and June 30, 2020 were as follows:
 September 30, 2020
Amortized
Cost
Gross
Unrealized
 Gains
Gross
Unrealized
Losses
 Fair Market Value (A)
Type of issue:   
Money market securities, cash and other cash equivalents$10,361.7 $ $ $10,361.7 
Available-for-sale securities:
Corporate bonds9,013.1 458.0 (0.4)9,470.7 
Asset-backed securities2,942.7 98.4 (0.2)3,040.9 
U.S. Treasury securities3,581.3 108.8  3,690.1 
U.S. government agency securities1,341.8 34.5 (0.8)1,375.5 
Canadian government obligations and Canadian government agency obligations
1,037.0 22.6  1,059.6 
Commercial mortgage-backed securities810.1 54.5  864.6 
Canadian provincial bonds652.7 34.8  687.5 
Other securities974.5 41.7  1,016.2 
Total available-for-sale securities20,353.2 853.3 (1.4)21,205.1 
Total corporate investments and funds held for clients$30,714.9 $853.3 $(1.4)$31,566.8 
(A) Included within available-for-sale securities are corporate investments with fair values of $3.4 million and funds held for clients with fair values of $21,201.7 million. All available-for-sale securities were included in Level 2 of the fair value hierarchy.
 June 30, 2020
Amortized 
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Market Value (B)
Type of issue:    
Money market securities, cash and other cash equivalents$7,053.6 $ $ $7,053.6 
Available-for-sale securities: 
Corporate bonds9,188.7 473.4  9,662.1 
Asset-backed securities3,274.6 96.0 (0.5)3,370.1 
U.S. Treasury securities3,580.6 120.8  3,701.4 
U.S. government agency securities1,128.2 35.6  1,163.8 
Canadian government obligations and Canadian government agency obligations
1,018.7 23.1  1,041.8 
Commercial mortgage-backed securities814.3 53.9  868.2 
Canadian provincial bonds676.6 33.6  710.2 
Other securities1,018.1 41.1 (0.2)1,059.0 
Total available-for-sale securities20,699.8 877.5 (0.7)21,576.6 
Total corporate investments and funds held for clients$27,753.4 $877.5 $(0.7)$28,630.2 
(B) Included within available-for-sale securities are corporate investments with fair values of $13.6 million and funds held for clients with fair values of $21,563.0 million. All available-for-sale securities were included in Level 2 of the fair value hierarchy.

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For a description of the fair value hierarchy and the Company's fair value methodologies, including the use of an independent third-party pricing service, see Note 1 “Summary of Significant Accounting Policies” in the Company's Annual Report on Form 10-K for fiscal 2020. The Company concurred with and did not adjust the prices obtained from the independent pricing service. The Company had no available-for-sale securities included in Level 1 or Level 3 at September 30, 2020.

The unrealized losses and fair values of available-for-sale securities that have been in an unrealized loss position for a period of less than and greater than 12 months as of September 30, 2020, are as follows: 
September 30, 2020
Securities in Unrealized Loss Position Less Than 12 MonthsSecurities in Unrealized Loss Position Greater Than 12 MonthsTotal
Gross
Unrealized
Losses
Fair Market
Value
Gross
Unrealized
Losses
Fair Market
Value
Gross
Unrealized
Losses
Fair
Market Value
Corporate bonds$(0.4)$151.5 $ $ $(0.4)$151.5 
Asset-backed securities(0.2)77.5   (0.2)77.5 
U.S. Treasury securities      
U.S. government agency securities(0.8)320.0   (0.8)320.0 
Canadian government obligations and Canadian government agency obligations
      
Commercial mortgage-backed securities   1.5  1.5 
Canadian provincial bonds      
Other securities 12.9    12.9 
 $(1.4)$561.9 $ $1.5 $(1.4)$563.4 

The unrealized losses and fair values of available-for-sale securities that have been in an unrealized loss position for a period of less than and greater than 12 months as of June 30, 2020, are as follows:

June 30, 2020
Securities in Unrealized Loss Position Less Than 12 MonthsSecurities in Unrealized Loss Position Greater Than 12 MonthsTotal
Gross
Unrealized
Losses
Fair Market
Value
Gross
Unrealized
Losses
Fair Market
Value
Gross
Unrealized
Losses
Fair
Market Value
Corporate bonds$ $ $ $ $ $ 
Asset-backed securities(0.5)43.9   (0.5)43.9 
U.S. Treasury securities 2.0    2.0 
U.S. government agency securities      
Canadian government obligations and Canadian government agency obligations
      
Commercial mortgage-backed securities   1.5  1.5 
Canadian provincial bonds      
Other securities(0.2)17.1   (0.2)17.1 
 $(0.7)$63.0 $ $1.5 $(0.7)$64.5 

At September 30, 2020, Corporate bonds include investment-grade debt securities with a wide variety of issuers, industries, and sectors, primarily carry credit ratings of A and above, and have maturities ranging from October 2020 through September 2030.

At September 30, 2020, asset-backed securities include AAA-rated senior tranches of securities with predominantly prime collateral of fixed-rate auto loan, credit card, equipment lease, and rate reduction receivables with fair values of $1,520.8 million, $1,100.4 million, $321.9 million, and $97.1 million, respectively. These securities are collateralized by the cash flows
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of the underlying pools of receivables. The primary risk associated with these securities is the collection risk of the underlying receivables. All collateral on such asset-backed securities has performed as expected through September 30, 2020.

At September 30, 2020, U.S. government agency securities primarily include debt directly issued by Federal Farm Credit Banks and Federal Home Loan Banks with fair values of $614.7 million and $590.8 million, respectively. U.S. government agency securities represent senior, unsecured, non-callable debt that primarily carry ratings of Aaa by Moody's, and AA+ by Standard & Poor's, with maturities ranging from October 2020 through December 2029.

At September 30, 2020, other securities and their fair value primarily include municipal bonds of $576.7 million, AA-rated United Kingdom Gilt securities of $197.3 million, and AAA-rated and AA-rated sovereign bonds of $77.2 million.

Classification of corporate investments on the Consolidated Balance Sheets is as follows:
September 30,June 30,
20202020
Corporate investments:  
Cash and cash equivalents$1,613.1 $1,908.5 
Short-term marketable securities (a)3.4  
Long-term marketable securities (b) 13.6 
Total corporate investments$1,616.5 $1,922.1 
 
(a) - Short-term marketable securities are included within Other current assets on the Consolidated Balance Sheets.
(b) - Long-term marketable securities are included within Other assets on the Consolidated Balance Sheets.

Funds held for clients represent assets that, based upon the Company's intent, are restricted for use solely for the purposes of satisfying the obligations to remit funds relating to the Company’s payroll and payroll tax filing services, which are classified as client funds obligations on our Consolidated Balance Sheets.

Funds held for clients have been invested in the following categories:
September 30,June 30,
20202020
Funds held for clients:  
Restricted cash and cash equivalents held to satisfy client funds obligations$8,748.6 $5,145.1 
Restricted short-term marketable securities held to satisfy client funds obligations5,614.4 5,541.2 
Restricted long-term marketable securities held to satisfy client funds obligations15,587.3 16,021.8 
Total funds held for clients$29,950.3 $26,708.1 

Client funds obligations represent the Company's contractual obligations to remit funds to satisfy clients' payroll, tax, and other payee payment obligations and are recorded on the Consolidated Balance Sheets at the time that the Company impounds funds from clients. The client funds obligations represent liabilities that will be repaid within one year of the balance sheet date. The Company has reported client funds obligations as a current liability on the Consolidated Balance Sheets totaling $29,098.4 million and $25,831.6 million at September 30, 2020 and June 30, 2020, respectively. The Company has classified funds held for clients as a current asset since these funds are held solely for the purpose of satisfying the client funds obligations. Of the Company’s funds held for clients at September 30, 2020 and June 30, 2020, $26,805.6 million and $23,740.0 million, respectively, are held in the grantor trust. The liabilities held within the trust are intercompany liabilities to other Company subsidiaries and are eliminated in consolidation.

The Company has reported the cash flows related to the purchases of corporate and client funds marketable securities and related to the proceeds from the sales and maturities of corporate and client funds marketable securities on a gross basis in the investing section of the Statements of Consolidated Cash Flows. The Company has reported the cash and cash equivalents related to client funds investments with original maturities of ninety days or less, within the beginning and ending balances of cash, cash equivalents, restricted cash, and restricted cash equivalents. These amounts have been reconciled to the Consolidated Balance Sheets on the Statements of Consolidated Cash Flows. The Company has reported the cash flows related to the cash received from and paid on behalf of clients on a net basis within net increase / (decrease) in client funds obligations in the financing activities section of the Statements of Consolidated Cash Flows.
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Approximately 79% of the available-for-sale securities held a AAA-rating or AA-rating at September 30, 2020, as rated by Moody's, Standard & Poor's, DBRS for Canadian dollar-denominated securities, and Fitch for asset-backed and commercial mortgage-backed securities.  All available-for-sale securities were rated as investment grade at September 30, 2020.
 
Expected maturities of available-for-sale securities at September 30, 2020 are as follows:
One year or less$5,617.8 
One year to two years4,283.0 
Two years to three years3,817.6 
Three years to four years2,932.7 
After four years4,554.0 
Total available-for-sale securities$21,205.1 

Note 7.  Leases

The Company records leases on the consolidated balance sheets as operating lease right-of-use (“ROU”) assets, records the current portion of operating lease liabilities within accrued expenses and other current liabilities and, separately, records long-term operating lease liabilities.

The Company has entered into operating lease agreements for facilities and equipment. The Company's leases have remaining lease terms of up to approximately eleven years. Operating lease ROU assets and operating lease liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term. The lease liabilities are measured by discounting future lease payments at the Company’s collateralized incremental borrowing rate for financing instruments of a similar term, unless the implicit rate is readily determinable. ROU assets also include adjustments related to prepaid or deferred lease payments and lease incentives. The difference between total ROU assets and total lease liabilities are primarily attributable to pre-payments of our obligations and the recognition of various lease incentives.

The components of operating lease expense were as follows:
Three Months Ended
September 30,
20202019
Operating lease cost$39.1 $44.2 
Short-term lease cost0.4 2.7 
Variable lease cost2.1 1.3 
Total operating lease cost$41.6 $48.2 
The following table provides supplemental cash flow information related to the Company's leases:

Three Months Ended
September 30,
20202019
Cash paid for operating lease liabilities$45.3 $40.2 
Operating lease ROU assets obtained in exchange for new operating lease liabilities$23.2 $6.7 








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Other information related to our operating lease liabilities is as follows:
September 30,June 30,
20202020
Weighted-average remaining lease term (in years)66
Weighted-average discount rate2.3 %2.3 %

As of September 30, 2020, maturities of operating lease liabilities are as follows:
Nine months ending June 30, 2021$77.8 
Twelve months ending June 30, 202293.7 
Twelve months ending June 30, 202379.6 
Twelve months ending June 30, 202459.2 
Twelve months ending June 30, 202543.5 
Thereafter101.2 
Total undiscounted lease obligations455.0 
Less: Imputed interest(29.9)
Net lease obligations$425.1 

Current operating lease liabilities were approximately $94.7 million and $95.5 million as of September 30, 2020 and June 30, 2020, respectively, and are included within Accrued expenses and other current liabilities on the Consolidated Balance Sheets.

Note 8. Goodwill and Intangible Assets, net

Changes in goodwill for the three months ended September 30, 2020 are as follows:
Employer
Services
PEO
Services
Total
Balance at June 30, 2020$2,304.6 $4.8 $2,309.4 
Additions and other adjustments   
Currency translation adjustments16.9  16.9 
Balance at September 30, 2020$2,321.5 $4.8 $2,326.3 

Components of intangible assets, net, are as follows:
September 30,June 30,
20202020
Intangible assets:  
Software and software licenses$2,776.2 $2,719.1 
Customer contracts and lists1,029.4 1,021.2 
Other intangibles239.3 239.2 
 4,044.9 3,979.5 
Less accumulated amortization:  
Software and software licenses(1,950.4)(1,912.0)
Customer contracts and lists(654.1)(628.3)
Other intangibles(224.5)(223.4)