ADP 2011 Annual Report Download - page 57

During fiscal 2008, the Company entered into a secured financing agreement, whereby the Company borrowed $21.1 million from a
third party in exchange for a security interest in a single client
’ s unbilled accounts receivable, which is billable over a ten - year period.
The Company will continue to collect amounts due from the client as they are billed. The security interest in the receivables retained
by the third party is without recourse against the Company in the event that the client does not make the appropriate payments to
the Company. As of June 30, 2011, the Company has recorded approximately $2.8 million within accrued expenses and other current
liabilities and approximately $12.6 million within long - term debt on the Company ’ s Consolidated Balance Sheets related to the
secured financing arrangement.
The fair value of the industrial revenue bonds and other debt, included above, approximates carrying value.
Long
- term debt repayments at June 30, 2011 are due as follows:
Cash payments relating to interest on long
- term debt and the short - term financing arrangements described in Note 11 were
approximately $8.8 million, $8.9 million, and $40.1 million in fiscal 2011, 2010 and 2009, respectively.
NOTE 13. FOREIGN CURRENCY RISK MANAGEMENT PROGRAMS
The Company is exposed to market risk from changes in foreign currency exchange rates that could impact its consolidated results of
operations, financial position or cash flows. The Company manages its exposure to these market risks through its regular operating
and financing activities and, when deemed appropriate, through the use of derivative financial instruments. The Company uses
derivative financial instruments as risk management tools and not for trading purposes.
During fiscal 2010, the Company was exposed to foreign exchange fluctuations on U.S. Dollar denominated short
- term intercompany
amounts payable by a Canadian subsidiary to a U.S. subsidiary of the Company in the amount of $178.6 million U.S. Dollars. In order
to manage the exposure related to the foreign exchange fluctuations between the Canadian Dollar and the U.S. Dollar, the Canadian
subsidiary entered into a foreign exchange forward contract, which obligated the Canadian subsidiary to buy $178.6 million U.S.
dollars at a rate of 1.15 Canadian Dollars to each U.S. Dollar on December 1, 2009. Upon settlement of such contract on December 1,
2009, an additional foreign exchange forward contract was entered into that obligated the Canadian subsidiary to buy $29.4 million
U.S. Dollars at a rate of 1.06 Canadian dollars to each U.S. Dollar on February 26, 2010. The net loss on the foreign exchange forward
contracts of $15.8 million for the twelve months ended June 30, 2010 was recognized in earnings in fiscal 2010 and substantially
offset the foreign currency mark
- to - market gains and losses on the related short - term intercompany amounts payable. The short - term
intercompany amounts payable were fully paid by the Canadian subsidiary to the U.S. subsidiary by February 2010.
There were no derivative financial instruments outstanding at June 30, 2011, 2010, or 2009.
NOTE 14. EMPLOYEE BENEFIT PLANS
A. Stock Plans. The Company recognizes stock
- based compensation expense in net earnings based on the fair value of the award on
the date of grant. Stock
- based compensation consists of the following:
●Stock Options. Stock options are granted to employees at exercise prices equal to the fair market value of the Company
’ s
common stock on the dates of grant. Stock options are issued under a grade vesting schedule. Options granted prior to July
1, 2008 generally vest ratably over five years and have a term of 10 years. Options granted after July 1, 2008 generally vest
ratably over four years and have a term of 10 years. Compensation expense for stock options is recognized over the requisite
service period for each separately vesting portion of the stock option award.
57
2013
$
17.1
2014
1.8
2015
1.8
2016
1.8
2017
1.8
Thereafter
9.9
$
34.2