ADP 2003 Annual Report Download - page 39

ADP 2003 Annual Report 37
NOTE 12 Accumulated Other Comprehensive
Income (Loss)
Comprehensive income is a measure of income which includes
both net income and other comprehensive income (loss). Other
comprehensive income (loss) results from items deferred on the
balance sheet in shareholders’ equity. Other comprehensive
income (loss) was $277 million, $115 million and ($4) million in
2003, 2002 and 2001, respectively. The accumulated balances
for each component of other comprehensive income (loss) are
as follows:
June 30, 2003 2002 2001
Currency translation adjustments $(69,535) $(243,581) $(317,085)
Unrealized gain on
available-for-sale securities, net of tax 233,830 125,268 84,121
Minimum pension liability adjustment,
net of tax (5,476) ——
Accumulated other comprehensive
income (loss) $158,819 $(118,313) $(232,964)
NOTE 13 Financial Data By Segment
Employer Services, Brokerage Services and Dealer Services
are the Company’s largest business units. ADP evaluates per-
formance of its business units based on operating results
before interest on corporate funds, foreign currency gains and
losses, and income taxes. Certain revenues and expenses are
charged to business units at a standard rate for management
and motivation reasons. Other costs are recorded based on
management responsibility. Prior years’ business unit revenues
and earnings before income taxes have been adjusted to reflect
updated fiscal year 2003 budgeted foreign exchange rates.
Business unit assets include funds held for clients but exclude
corporate cash, marketable securities and goodwill. “Other”
consists primarily of Claims Services, miscellaneous process-
ing services and corporate. Reconciling items for revenues and
earnings before income taxes include foreign exchange differ-
ences between the actual foreign exchange rates and the fiscal
year 2003 budgeted foreign exchange rates and the adjustment
for the difference between actual interest income earned on
invested funds held for clients and interest credited to Employer
Services at a standard rate of 6%. The business unit results also
include an internal cost of capital charge related to the funding
of acquisitions and other investments. This charge is eliminated
in consolidation and as such represents a reconciling item to
earnings before income taxes.
NOTE 11 Contractual Commitments, Contingencies
and Off-Balance Sheet Arrangements
The Company has obligations under various facilities and
equipment leases and software license agreements. Total
expense under these agreements was approximately $319 mil-
lion in 2003, $272 million in 2002 and $269 million in 2001, with
minimum commitments at June 30, 2003 as follows:
Years ending June 30,
2004 $296,258
2005 226,301
2006 139,741
2007 95,010
2008 73,288
Thereafter 99,057
$929,655
In addition to fixed rentals, certain leases require payment
of maintenance and real estate taxes and contain escalation
provisions based on future adjustments in price indices.
As of June 30, 2003, the Company has purchase com-
mitments of approximately $66 million relating to software and
equipment maintenance contracts, of which $40 million relates
to fiscal 2004 and the remaining $26 million relates to fiscal
years 2005 through 2009.
The Company is subject to various claims and litigation in
the normal course of business. The Company does not believe
that the resolution of these matters will have a material impact
on the consolidated financial statements.
It is not our business practice to enter into off-balance
sheet arrangements. However, in the normal course of busi-
ness, the Company does enter into contracts in which it makes
representations and warranties that guarantee the performance
of the Company’s products and services as well as other
indemnifications entered into in the normal course of business.
Historically, there have been no material losses related to such
guarantees and indemnifications.