ADP 2014 Annual Report Download - page 32

(1) These amounts represent the principal repayments of our debt and are included on our Consolidated Balance Sheets. The estimated interest payments due by the corresponding
period above are excluded from the above and are not material for any periods presented.
(2) Included in these amounts are various facilities and equipment leases and software license agreements. We enter into operating leases in the normal course of business relating to
facilities and equipment, as well as the licensing of software. The majority of our lease agreements have fixed payment terms based on the passage of time. Certain facility and
equipment leases require payment of maintenance and real estate taxes and contain escalation provisions based on future adjustments in price indices. Our future operating lease
obligations could change if we exit certain contracts or if we enter into additional operating lease agreements.
(3) Purchase obligations are comprised of a $202.0 million reinsurance premium with ACE American Insurance Company for the fiscal 2016 policy year, as well as obligations related
to purchase and maintenance agreements on our software, equipment, and other assets.
(4) We made the determination that net cash payments expected to be paid within the next 12 months, related to unrecognized tax benefits of $27.1 million at June 30, 2015 , are
expected to be up to $1 million. We are unable to make reasonably reliable estimates as to the period beyond the next 12 months in which cash payments related to unrecognized tax
benefits are expected to be paid.
(5) Compensation and benefits primarily relates to amounts associated with our employee benefit plans and other compensation arrangements. These amounts exclude the estimated
contributions to our defined benefit plans, which are expected to be $10.7 million in fiscal 2016 .
(6) Acquisition-related obligations relate to deferred purchase consideration payments at future dates. A liability is established at the time of the acquisition for these fixed payments.
In addition to the obligations quantified in the table above, we had obligations for the remittance of funds relating to our payroll and payroll tax filing
services. As of June 30, 2015 , the obligations relating to these matters, which are expected to be paid in fiscal 2016 , total $24,650.5 million and were recorded in
client funds obligations on our Consolidated Balance Sheets. We had $24,865.3 million of cash and marketable securities that have been impounded from our
clients to satisfy such obligations recorded in funds held for clients on our Consolidated Balance Sheets as of J une 30, 2015 .
ADP Indemnity provides workers' compensation and employer's liability deductible reimbursement insurance protection for PEO Services worksite
employees up to $1 million per occurrence. PEO Services has secured specific per occurrence and aggregate stop loss insurance from a wholly-owned and
regulated insurance carrier of AIG that covers all losses in excess of $1 million per occurrence and also any aggregate losses within the $1 million retention that
collectively exceed a certain level in certain policy years. Should A IG and its wholly-owned insurance company be unable to satisfy their contractual obligations,
ADP would also become responsible for satisfying these worksite employee workers' compensation obligations for these claims in excess of $1 million per
occurrence. We utilize historical loss experience and actuarial judgment to determine the estimated claim liability for the PEO Services business. Premiums are
charged to PEO Services to cover the claims expected to be incurred by the PEO Services' worksite employees. Changes in estimated ultimate incurred losses are
recognized by ADP Indemnity. During fiscal 2015 , ADP Indemnity paid a premium of $167.9 million to enter into a reinsurance agreement with ACE American
Insurance Company to cover substantially all losses incurred by A DP Indemnity for the fiscal 2015 policy year up to $1 million per occurrence related to the
workers' compensation and employers' liability deductible reimbursement insurance protection for PEO Services worksite employees. A DP Indemnity paid a
premium of $202.0 million in July 2015 to enter into a reinsurance agreement with ACE American Insurance Company to cover substantially all losses for the
fiscal 2016 policy year on terms substantially similar to the fiscal 2015 reinsurance policy. At J une 30, 2015 , ADP Indemnity had total assets of $433.3 million to
satisfy the actuarially estimated unpaid losses of $369.8 million for the policy years since July 1, 2003. ADP Indemnity paid claims of $26.0 million and $45.3
million , net of insurance recoveries, in fiscal 2015 and 2014 , respectively.
In the normal course of business, we also enter into contracts in which we make representations and warranties that relate to the performance of our
services and products. We do not expect any material losses related to such representations and warranties.
Quantitative and Qualitative Disclosures about Market Risk
Our overall investment portfolio is comprised of corporate investments (cash and cash equivalents, short-term marketable securities, and long-term
marketable securities) and client funds assets (funds that have been collected from clients but not yet remitted to the applicable tax authorities or client employees).
Our corporate investments are invested in cash and cash equivalents and highly liquid, investment-grade marketable securities. These assets are available
for repurchases of common stock for treasury and/or acquisitions, as well as other
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