ADP 2008 Annual Report Download - page 52

NOTE 10. SHORT-TERM FINANCING
In June 2008, the Company entered into a $2.25 billion, 364-day credit agreement with a group of lenders. The 364-day facility replaced the
Company’ s prior $1.75 billion 364-day facility. The Company also has a $1.5 billion credit facility and a $2.25 billion credit facility that
mature in June 2010 and June 2011, respectively. The five-year facilities contain accordion features under which the aggregate commitments
can each be increased by $500 million, subject to the availability of additional commitments. The interest rate applicable to the borrowings is
tied to LIBOR or 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 to provide funding for general corporate purposes, if necessary. The Company had no borrowings through
June 30, 2008 under the credit agreements.
The Company maintained a U.S. short-term commercial paper program, which provided for the issuance of up to $5.5 billion in aggregate
maturity value of commercial paper at the Company’ s discretion. In July 2008, the Company increased the U.S. short-term commercial paper
program to provide for the issuance of up to $6.0 billion in aggregate maturity value. The Company’ s 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. At June 30, 2008 and 2007, there was no commercial paper outstanding. In
fiscal 2008 and 2007, the Company’ s average borrowings were $1.4 billion and $1.5 billion, respectively, at a weighted average interest rate of
4.2% and 5.3%, respectively. The weighted average maturity of the Company’ s commercial paper in fiscal 2008 and 2007 was less than two
days for both fiscal years.
The Company’ s 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.
These agreements generally have terms ranging from overnight to up to five business days. At June 30, 2008, the Company had an $11.8
million obligation outstanding related to reverse repurchase agreements. The term of the reverse repurchase transaction matured on July 2,
2008 and the outstanding obligation was repaid. At June 30, 2007, there were no outstanding obligations under reverse repurchase agreements.
In fiscal 2008 and 2007, the Company had average outstanding balances under reverse repurchase agreements of $360.4 million and $141.6
million, respectively, at weighted average interest rates of 3.4% and 4.4%, respectively.
NOTE 11. DEBT
Components of long-term debt are as follows:
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, 2008, the
Company has recorded approximately $2.7 million within accrued expenses and other current liabilities and approximately $18.0 million
within long-term debt on the Company’ s Consolidated Balance Sheets.
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June 30, 2008 2007
Industrial revenue bonds (with variable interest rates from 2.88% to 3.45%) $34.1 $ 36.6
Secured financing 20.7 -
Other - 7.1
54.8 43.7
Less: current portion (2.7) (0.2)
$52.1 $ 43.5