ADP 2013 Annual Report Download - page 32

and potential acquisition activity, cash balances and cash flows, issuances due to employee benefit plan activity, and market conditions.
Our U.S. short-term funding requirements related to client funds are sometimes obtained through a short-term commercial paper
program, which provides for the issuance of up to $6.75 billion in aggregate maturity value of commercial paper, rather than liquidating
previously-collected client funds that have already been invested in available-for-sale securities. In August 2013 , the Company increased the
U.S. short-term commercial paper program to provide for the issuance of up to $7.25 billion in aggregate maturity value. Our commercial paper
program is rated A-1+ by Standard and Poor’s and Prime-1 by Moody’s. These ratings denote the highest quality commercial paper
securities. Maturities of commercial paper can range from overnight to up to 364 days. For fiscal 2013 and 2012 , our average borrowings
were $2.4 billion and $2.3 billion , respectively, at weighted average interest rate of 0.2% and 0.1% , respectively. The weighted average
maturity of the Company’s commercial paper during fiscal 2013 approximated two days . We have successfully borrowed through the use of
our commercial paper program on an as needed basis to meet short-term funding requirements related to client funds obligations. At June 30,
2013 and June 30, 2012 , we had no outstanding obligations under our short-term commercial paper program.
Our U.S. and Canadian 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 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 $3.0 billion available to us on a committed basis under these reverse
repurchase agreements. We believe that we currently meet all conditions set forth in the committed reverse repurchase agreements to borrow
thereunder, and we are not aware of any conditions that would prevent us from borrowing part or all of the $3.0 billion available to us under the
committed reverse repurchase agreements. 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, 2013 , we had $245.9 million of obligations
outstanding related to reverse repurchase agreements, which were subsequently repaid on July 2, 2013 . At June 30, 2012 , we had no
outstanding obligations under reverse repurchase agreements. For fiscal 2013 and 2012 , we had average outstanding balances under reverse
repurchase agreements of $362.0 million and $297.7 million , respectively, at weighted average interest rates of 0.7% and 0.6% , respectively.
We have a $2.0 billion , 364-day credit agreement with a group of lenders that matures in June 2014 . In addition, we have a four-year
$3.25 billion credit facility maturing in June 2015 that contains an accordion feature under which the aggregate commitment can be increased by
$ 500.0 million , subject to the availability of additional commitments. We also have an existing $ 2.0 billion five-year credit facility that
matures in June 2018 that also contains an accordion feature under which the aggregate commitment can be increased by $ 500.0 million ,
subject to the availability of additional commitments. The interest rate applicable to committed borrowings is tied to LIBOR, the federal funds
effective rate, or the prime rate depending on the notification provided by the Company to the syndicated financial institutions prior to
borrowing. The Company is also required to pay facility fees on the credit agreements. 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,
2013 under the credit agreements. 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 $7.25 billion available to us under the
revolving credit agreements.
Our investment portfolio does not contain any asset-backed securities with underlying collateral of subprime mortgages, alternative-A
mortgages, sub-prime auto loans or sub-prime home equity loans, collateralized debt obligations, collateralized loan obligations, credit default
swaps, asset-backed commercial paper, derivatives, auction rate securities, structured investment vehicles or non-investment grade fixed-income
securities. We own AAA rated senior tranches of fixed rate credit card, auto loan, rate reduction, and other asset-backed securities, secured
predominately by prime collateral. All collateral on asset-backed securities is performing as expected. In addition, we own senior debt directly
issued by Federal Home Loan Banks and Federal Farm Credit Banks. We do own mortgage-backed securities, which represent an undivided
beneficial ownership interest in a group or pool of one or more residential mortgages. These securities are collateralized by the cash flows of 15-
year and 30
-year residential mortgages and are guaranteed by Federal National Mortgage Association and Federal Home Loan Mortgage
Corporation as to the timely payment of principal and interest. 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.
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