Note H: Supplemental Information

Property and equipment, net of accumulated depreciation: Depreciation expense was $30.3 million and $86.8 million for the three and nine months ended February 28, 2025, respectively, compared to $32.3 million and $94.7 million for the three and nine months ended February 29, 2024, respectively.

Goodwill and intangible assets, net of accumulated amortization: Amortization expense relating to intangible assets was $12.8 million and $37.0 million for the three and nine months ended February 28, 2025, respectively, compared to $12.5 million and $36.2 million for the three and nine months ended February 29, 2024, respectively. Goodwill and intangible assets were recorded during the nine months ended February 29, 2024 related to the acquisition of Alterna. The goodwill related to this acquisition is included in the Purchased Receivable reporting unit for goodwill impairment testing. Refer to Note D Business Combinations for additional information regarding this acquisition and the impact it had on goodwill and intangible assets. The Company did not recognize an impairment loss as it relates to its goodwill or intangible assets during the nine months ended February 28, 2025 or February 29, 2024.

Short-term financing: Outstanding borrowings on the Company’s credit facilities had a weighted-average interest rate of 4.11% and 6.14% as of February 28, 2025 and May 31, 2024, respectively. The unused amount available under these credit facilities as of February 28, 2025 was approximately $2.0 billion.

The credit facilities contain various financial and operational covenants that are usual and customary for such arrangements. The Company was in compliance with all of these covenants as of February 28, 2025.

Letters of credit: The Company had irrevocable standby letters of credit available totaling $168.7 million and $168.5 million as of February 28, 2025 and May 31, 2024, respectively, primarily to secure commitments for certain insurance policies. The letters of credit expire at various dates between March 03, 2025 and February 28, 2026. No amounts were outstanding on these letters of credit as of, or during the nine months ended February 28, 2025 and February 29, 2024, or as of May 31, 2024.

Long-term debt: There have been no material changes to the Company's long-term debt agreement or balances subsequent to May 31, 2024. The Company’s long-term debt agreement contains customary representations, warranties, affirmative and negative covenants, including financial covenants that are usual and customary for such arrangements. The Company was in compliance with all of these covenants as of February 28, 2025.

Bridge Loan Commitment: On January 7, 2025, the Company and a Company subsidiary, Paychex of New York, LLC, entered into a Bridge Loan Commitment with JPMorgan Chase Bank, N.A. (“JPM”), pursuant to which JPM committed to provide a 364-day senior unsecured credit facility of up to $3.5 billion for the acquisition of Paycor, including related fees and expenses. The Company incurred $11.4 million in debt financing fees, including structuring and commitment fees, which were capitalized as Prepaid expenses and other current assets on the Company’s Consolidated Balance Sheets and are recognized as interest expense on a straight-line basis until the expected issuance date for permanent financing. There were no borrowings under the Bridge Loan Commitment as of February 28, 2025 or for the period from January 7, 2025 to February 28, 2025.

The Company and certain subsidiaries will guarantee any borrowings that are made under the Bridge Loan Commitment. The Bridge Loan Commitment contains various financial and operational covenants that would have been applicable to any borrowings under the Bridge Loan Commitment and that are usual and customary for such arrangements. If such covenants were in effect, the Company would have been in compliance with all of these covenants as of February 28, 2025.

Interest Rate Swaption Contracts: On January 31, 2025, the Company executed three Swaption Contracts with JPM. The Swaption Contracts qualify as cash flow hedges, have an aggregate notional amount of $3.0 billion, and are being utilized to manage exposure to fluctuations in benchmark interest rates associated with the anticipated issuance of long-term fixed rate debt to fund the planned acquisition of Paycor. At inception, the Company recorded Swaption Contract assets related to paid premiums of $19.2 million. The fair value of the Swaption Contract assets is classified as Prepaid expenses and other current assets on the Company’s Consolidated Balance Sheets. Refer to Note G: Fair Value Measurements for additional information on the Company's Swaption Contracts.