ADP 2012 Annual Report Download - page 72

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. These agreements are collateralized principally by government and government agency
securities. These agreements generally have terms ranging from overnight to up to five business days. The Company has $3.0 billion available
to it on a committed basis under these reverse repurchase agreements. At June 30, 2012 and 2011, there were no outstanding obligations under
reverse repurchase agreements. In fiscal 2012 and 2011, the Company had average outstanding balances under reverse repurchase agreements
of $297.7 million and $505.2 million, respectively, at weighted average interest rates of 0.6% and 0.4%, respectively.
NOTE 12. FOREIGN CURRENCY RISK MANAGEMENT PROGRAMS
The Company is exposed to market risk from changes in foreign currency exchange rates that could impact its consolidated results of
operations, financial position or cash flows. The Company manages its exposure to these market risks through its regular operating and
financing activities and, when deemed appropriate, through the use of derivative financial instruments. The Company uses derivative financial
instruments as risk management tools and not for trading purposes.
During fiscal 2010, the Company was exposed to foreign exchange fluctuations on U.S. Dollar denominated short-term intercompany amounts
payable by a Canadian subsidiary to a U.S. subsidiary of the Company in the amount of $178.6 million U.S. Dollars. In order to manage the
exposure related to the foreign exchange fluctuations between the Canadian Dollar and the U.S. Dollar, the Canadian subsidiary entered into a
foreign exchange forward contract, which obligated the Canadian subsidiary to buy $178.6 million U.S. dollars at a rate of 1.15 Canadian
Dollars to each U.S. Dollar on December 1, 2009. Upon settlement of such contract on December 1, 2009, an additional foreign exchange
forward contract was entered into that obligated the Canadian subsidiary to buy $29.4 million U.S. Dollars at a rate of 1.06 Canadian dollars to
each U.S. Dollar on February 26, 2010. The net loss on the foreign exchange forward contracts of $15.8 million for the twelve months ended
June 30, 2010 was recognized in earnings in fiscal 2010 and substantially offset the foreign currency mark-to-market gains and losses on the
related short-term intercompany amounts payable. The short-
term intercompany amounts payable were fully paid by the Canadian subsidiary to
the U.S. subsidiary by February 2010.
There were no derivative financial instruments outstanding at June 30, 2012, 2011, or 2010.
NOTE 13. EMPLOYEE BENEFIT PLANS
A. Stock Plans. The Company recognizes stock-
based compensation expense in net earnings based on the fair value of the award on the date of
grant. Stock-based compensation consists of the following:
1 Stock Options. Stock options are granted to employees at exercise prices equal to the fair market value of the Company's common
stock on the dates of grant. Stock options are issued under a graded vesting schedule. Options granted prior to July 1, 2008 generally
vest ratably over five years and have a term of 10 years. Options granted after July 1, 2008 generally vest ratably over four years and
have a term of 10 years. Compensation expense for stock options is recognized over the requisite service period for each separately
vesting portion of the stock option award.
65