ADP 2002 Annual Report Download - page 35

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concerning the recognition and measurement of an impair-
ment loss for certain types of long-lived assets and expands
the scope of a discontinued operation. The provisions of
SFAS No. 144 are effective for fiscal years beginning after
December 15, 2001 and generally are to be applied
prospectively. The Company adopted this statement on July
1, 2002. The Company does not expect the adoption of
SFAS No. 144 to have a material impact on the Company’s
2003 financial statements.
NOTE 2. OTHER (INCOME) EXPENSE CONSISTS
OF THE FOLLOWING:
(In thousands)
Years ended June 30 , 200 2 200 1 200 0
Interest income on corporate funds $(118,672) $(163,918) $(119,080)
Realized (gains) losses on investments (16,454) 77,594 32,359
Interest expense 21 ,164 14,260 13,140
Total other (income) expense $(113,962) $ (72,064) $ (73,581)
NOTE 3. ACQUISITIONS AND DISPOSITIONS
The Company purchased several businesses for approxi-
mately $232 million in fiscal 2002 (including $12 million in
common stock), $75 million in fiscal 2001, and $200 million
(including $25 million in common stock) in fiscal 2000, net
of cash acquired. The results of these acquired businesses
are included in operations from the dates of acquisition.
Goodwill recognized in these transactions amounted to
$167 million, of which $48 million is expected to be fully
deductible for tax purposes. Other intangible assets
acquired in these transactions amounted to $51 million.
Additionally, ADP made contingent payments totaling
$21 million, relating to previously consummated acquisi-
tions. Goodwill and other intangible assets related to
these transactions were allocated to the Company’s
reportable segments as follows for the twelve months
ended June 30, 2002:
Customer Other
(In thousands) Goodwill Software Lists Intangibles
Employer Services $ 88,4 75 $ 1 0,35 3 $ 7,3 0 5 $
—
Brokerage Services 47 ,681 — 9,585 —
Dealer Services 45 ,473 7 ,7 45 9 ,0 00 20 0
Other 6,5 69 7 ,0 23
— —
Total $ 18 8,19 8 $ 25 ,1 21 $ 25,8 90 $2 00
Weighted average
amortization period N/A 3 .8 years 8.3 years 6 .0 years
NOTE 4. NON-RECURRING ITEM
In fiscal 1999 the Company divested its Brokerage front-
office business to Bridge Information Systems, Inc. (Bridge),
and received $90 million of Bridge convertible preferred
stock as part of the proceeds. In fiscal 2001 Bridge filed
for bankruptcy and the Company recorded a $90 million
($54 million net of tax) write-off of its investment, reflected
in the “other (income) expense” line item.
NOTE 5. RECEIVABLES
Accounts receivable is net of an allowance for doubtful
accounts of $53 million and $42 million at June 30, 2002
and 2001, respectively.
The Company finances the sale of computer systems to
certain of its clients. These finance receivables, most of
which are due from automobile and truck dealerships, are
reflected in the consolidated balance sheets as follows:
(In thousands)
June 30 , 200 2 200 1
Current Long-term Current Long-term
Receivables $1 8 1,60 9 $ 22 7,42 2 $189,079 $267,394
Less:
Allowance for
doubtful accounts (9 ,2 16 ) (16 ,020 ) (9,717) (16,666)
Unearned income (2 3 ,1 00 ) (18 ,633 ) (28,603) (25,764)
$1 4 9,29 3 $ 19 2,76 9 $150,759 $224,964
Unearned income from finance receivables represents the
excess of gross receivables over the sales price of the com-
puter systems financed. Unearned income is amortized
using the interest method to maintain a constant rate of
return on the net investment over the term of each contract.
Long-term receivables at June 30, 2002 mature as follows:
(In thousands)
2004 $1 2 2,57 0
2005 64 ,567
2006 30 ,457
2007 9,4 30
2008 364
Thereafter 34
$2 2 7,42 2
NOTE 6. INTANGIBLE ASSETS
Components of intangible assets are as follows:
(In thousands)
June 30 , 200 2 200 1
Goodwill $1 ,375 ,6 54 $1,151,873
Intangibles
Software licenses 46 2 ,4 74 343,228
Customer lists 36 0 ,2 68 317,087
Other 39 8 ,4 95 426,172
Total intangibles 1,2 21 ,2 37 1,086,487
Total goodwill and intangibles 2,5 96 ,8 91 2,238,360
Less accumulated amortization (7 19 ,6 93 ) (636,950)
$1 ,877 ,1 98 $1,601,410
Other intangibles consist primarily of purchased rights,
covenants, and patents (acquired directly or through acqui-
sitions) amortized over periods from 3 to 25 years. Amorti-
zation of intangibles totaled $115 million for fiscal 2002,
$103 million for 2001 and $89 million for 2000.