Analyze, Forecast, and Interpret Income Statement and Balance Sheet

Following are the income statement and balance sheet of ADP Inc.

DATA PROCESSING INC.

Statement of Consolidated Earnings

For Year Ended June $30,2019,$ $ millions

Total revenues $$14,175\mathrm{.}2$

Operating expenses $7,145\mathrm{.}9$

Systems development and programming costs $636\mathrm{.}3$

Depreciation and amortization $304\mathrm{.}4$

Total cost of revenues $8,086\mathrm{.}6$

Selling, general, and administrative expenses $3,064\mathrm{.}2$

Interest expense $129\mathrm{.}9$

Total expenses $11,280\mathrm{.}7$

Other $($income$)$ expense, net $(111\mathrm{.}1)$

Earnings before income taxes $3,005\mathrm{.}6$

Provision for income taxes $712\mathrm{.}8$

Net earnings $$2,292\mathrm{.}8$

DATA PROCESSING INC.

Balance Sheet

$ millions June $30,2019$

Current assets

Cash and cash equivalents $$1,949\mathrm{.}2$

Accounts receivable, net $2,439\mathrm{.}3$

Other current assets $519\mathrm{.}6$

Total current assets before funds held for clients $4,908\mathrm{.}1$

Funds half for clients $29,434\mathrm{.}2$

Total current assets $34,342\mathrm{.}3$

Long$-$term receivables, net $23\mathrm{.}8$

Property, plant and equipment, net $764\mathrm{.}2$

Capitalized contract cost, net $2,428\mathrm{.}5$

Other assets $934\mathrm{.}4$

Goodwill $2,323\mathrm{.}0$

Intangible assets, net $1,071\mathrm{.}5$

Total assets $$41,887\mathrm{.}7$

Current liabilities

Accounts payable $$125\mathrm{.}5$

Accrued expenses and other current liabilities $1,759\mathrm{.}0$

Accrued payroll and payroll$-$related expenses $721\mathrm{.}1$

Dividends payable $340\mathrm{.}1$

Short$-$term deferred revenues $220\mathrm{.}7$

Obligations under reverse repurchase agreements $262\mathrm{.}0$

Income taxes payable $54\mathrm{.}8$

Total current liabilities before client funds obligations $3,483\mathrm{.}2$

Client funds obligations $29,144\mathrm{.}5$

Total current liabilities $32,627\mathrm{.}7$

Long$-$term debt $2,002\mathrm{.}2$

Other liabilities $798\mathrm{.}7$

Deferred income taxes $659\mathrm{.}9$

Long$-$term deferred revenues $399\mathrm{.}3$

Total liabilities $36,487\mathrm{.}8$

Shareholders' equity

Preferred stock, $$1\mathrm{.}00$ par value; Authorized, $0\mathrm{.}3$ shares; issued $,$ none

Common stock, $$0\mathrm{.}10$ par value; Authorized, $1,000\mathrm{.}0$ shares;

issued, $638\mathrm{.}7$ shares; outstanding $434\mathrm{.}2$ shares $63\mathrm{.}9$

Capital in excess of par value $1,183\mathrm{.}2$

Retained earnings $17,500\mathrm{.}6$

Treasury stock, at cost: $204\mathrm{.}5$ shares $(13,090\mathrm{.}5)$

Accumulated other comprehensive loss $(257\mathrm{.}3)$

Total stockholders' equity $5,399\mathrm{.}9$

Total liabilities and stockholders' equity $$41,887\mathrm{.}7$

Assume total revenues grow by $13\%$ in $2020.$ All other percentages $($other than sales growth and provision for income taxes$)$ are based on historic percent of total revenues.

CAPEX for $2020$ will be $1\mathrm{.}1\%$ of total revenue, and depreciation will be $$184\mathrm{.}4$ million.

Goodwill, long$-$term debt, preferred stock, common stock, and Accumulated other comprehensive loss will not change for the year.

The company will acquire intangibles equal to $2\mathrm{.}9\%$ of total revenues and will record amortization expense of $$276\mathrm{.}1$ million.

Income taxes will be $25\%$ of pretax income and income taxes payable will be $7\mathrm{.}7\%$ of $2020$ tax expense.

The company will award $$167\mathrm{.}3$ million of stock$-$based compensation, which increases Capital in excess of par value by the same amount. Assume that the company routinely includes this form of compensation in operating expenses each year.

The company will continue its stock repurchases. DP will repurchase $$750$ million of treasury stock.

Dividends will be $$1,389\mathrm{.}40$ in $2020,$ and dividends payable will be $26\mathrm{.}3\%$ of dividends.

Prepare a forecast of FY$2020$ statement of cash flows.

Note: Round your answers to one decimal place $($for example, enter $14\mathrm{.}6$ for $14\mathrm{.}55555).$

AUTOMATIC DATA PROCESSING, INC.

Forecasted Statement of Cash Flows

For Year Ended

$ millions June $2020$

Net income $($loss$)$

Add: Depreciation

Add: Amortization

Add: Stock based compensation

Accounts receivable, net

Other current assets

Funds held for clients

Long$-$term receivables, net

Capitalized Contract Cost, Net

Other assets

Accounts payable

Accrued expenses and other current liabilities

Accrued payroll and payroll$-$related expenses

Short$-$term deferred revenues

Obligations under reverse repurchase agreements

Income taxes payable

Client funds obligations

Other liabilities

Deferred income taxes

Long$-$term deferred revenues

Operating cash flow

Capital Expenditures

Additional intangibles acquired

Net cash from investing activities

Dividends

Dividends payable

Stock buy backs

Net cash from financing activities

Net change in cash

Beginning cash

Ending cash