ADP 2003 Annual Report Download - page 35

ADP 2003 Annual Report 33
Other intangibles consist primarily of purchased rights,
covenants, patents and trademarks (acquired directly or
through acquisitions). All of the intangible assets have finite
lives and as such are subject to amortization. The weighted-
average remaining useful life of the intangible assets is 11 years
(2 years for software licenses, 15 years for customer contracts
and lists and 14 years for other). Amortization of intangibles
totaled $114 million for fiscal 2003, $115 million for 2002 and
$103 million for 2001. Estimated amortization expenses of the
Company’s existing intangible assets for the next five years are
as follows:
2004 $122,675
2005 $103,026
2006 $ 73,177
2007 $ 56,196
2008 $ 48,599
NOTE 6 Short-term Financing
In October 2002, the Company entered into a new $4.0 billion,
unsecured revolving credit agreement with certain financial
institutions, replacing an existing $4.0 billion credit agreement.
The interest rate applicable to the borrowings is tied to LIBOR
or prime rate depending on the notification provided to the syn-
dicated financial institutions prior to borrowing. The Company
is also required to pay a facility fee on the credit agreement. The
primary uses of the credit facility are to provide liquidity to the
unsecured commercial paper program and to fund normal busi-
ness operations, if necessary. The Company has had no bor-
rowings through June 30, 2003 under the credit agreement,
which expires in October 2003.
In April 2002, the Company initiated a short-term com-
mercial paper program providing for the issuance of up to $4.0
billion in aggregate maturity value of commercial paper at the
Company’s discretion. The Company’s commercial paper pro-
gram is rated A-1+ by Standard and Poor’s and Prime 1 by
Moody’s. These ratings denote the highest quality investment
grade securities. Maturities of commercial paper can range
from overnight to 270 days. The Company uses the commercial
paper issuances as a primary instrument to meet short-term
funding requirements related to client funds obligations. At June
30, 2003 and 2002, there was no commercial paper outstand-
ing. For the year ended June 30, 2003, the Company had aver-
age borrowings of $879 million at an effective weighted average
interest rate of 1.5%. From the inception of the commercial
paper program in April 2002 through the fiscal year ended June
30, 2002, the Company had average borrowings of $667 million
at an effective weighted average interest rate of 1.8%.
The Company’s short-term financing is sometimes
obtained on a secured basis through the use of repurchase
agreements, which are collateralized principally by U.S. govern-
ment securities. These agreements generally have terms ranging
from overnight up to ten days. At June 30, 2003 and 2002, there
were no outstanding repurchase agreements. For the fiscal years
ended June 30, 2003 and 2002, the Company had average out-
standing borrowings of $6 million and $361 million, respectively,
at an average interest rate of 3.0% and 2.6%, respectively.
NOTE 7 Debt
Components of long-term debt are as follows:
June 30, 2003 2002
Zero coupon convertible subordinated
notes (5.25% yield) $39,661 $45,614
Industrial revenue bonds
(with variable interest rates from 1.25% to 1.53%) 36,500 36,474
Other 9,338 8,685
85,499 90,773
Less current portion (825) (125)
$84,674 $90,648
The zero coupon convertible subordinated notes have a
face value of approximately $62 million at June 30, 2003 and
mature February 20, 2012, unless converted or redeemed ear-
lier. At June 30, 2003, the notes were convertible into approxi-
mately 1.6 million shares of the Company’s common stock. The
notes are callable at the option of the Company, and the hold-
ers of the notes can convert into common stock at any time or
require redemption in fiscal 2007. During fiscal 2003 and 2002,
approximately $18 million and $27 million face value of notes
were converted, respectively. As of June 30, 2003 and 2002, the
quoted market prices for the zero coupon notes were approxi-
mately $55 million and $90 million, respectively. The fair value
of the other debt, included above, approximates its carrying
value.
Long-term debt repayments at June 30, 2003 are due as
follows:
2005 $ 417
2006 157
2007 163
2008 854
2009 16,365
Thereafter 66,718
$84,674
Cash payments relating to interest were approximately
$20 million in fiscal 2003, $18 million in fiscal 2002 and $10 mil-
lion in fiscal 2001.