Paychex 2011 Annual Report Download - page 38

Commitments and Contractual Obligations
Lines of credit: As of May 31, 2011, we had unused borrowing capacity available under four uncommitted,
secured, short-term lines of credit at market rates of interest with financial institutions as follows:
Financial institution Amount available Expiration date
JP Morgan Chase Bank, N.A. ........................... $350 million February 2012
Bank of America, N.A. ............................... $250 million February 2012
PNC Bank, National Association ......................... $150 million February 2012
Wells Fargo Bank, National Association ................... $150 million February 2012
Our credit facilities are evidenced by promissory notes and are secured by separate pledge security agreements
by and between Paychex and each of the financial institutions (the “Lenders”), pursuant to which we have granted
each of the Lenders a security interest in certain of our investment securities accounts. The collateral is maintained
in a pooled custody account pursuant to the terms of a control agreement and is to be administered under an
intercreditor agreement among the Lenders. Under certain circumstances, individual Lenders may require that
collateral be transferred from the pooled account into segregated accounts for the benefit of such individual
Lenders.
The primary uses of the lines of credit would be to meet short-term funding requirements related to deposit
account overdrafts and client fund obligations arising from electronic payment transactions on behalf of our clients
in the ordinary course of business, if necessary. No amounts were outstanding against these lines of credit during
fiscal 2011 or as of May 31, 2011.
JP Morgan Chase Bank, N.A. and Bank of America, N.A. are also parties to our irrevocable standby letters of
credit, which are discussed below.
Letters of credit: As of May 31, 2011, we had irrevocable standby letters of credit outstanding totaling
$47.4 million, required to secure commitments for certain of our insurance policies. The letters of credit expire at
various dates between July 2011 and December 2011, and are collateralized by securities held in our investment
portfolios. No amounts were outstanding on these letters of credit during fiscal 2011 or as of May 31, 2011.
Subsequent to May 31, 2011, the letter of credit expiring in July 2011 was renewed and will expire in July 2012.
Other commitments: We have entered into various operating leases and purchase obligations that, under
GAAP, are not reflected on the Consolidated Balance Sheets as of May 31, 2011. The table below summarizes our
estimated annual payment obligations under these commitments as of May 31, 2011:
In millions Total
Less than
1 year 1-3 years 4-5 years
More than
5 years
Payments due by period
Operating leases
(1)
.................... $150.0 $39.4 $56.6 $33.5 $20.5
Purchase obligations
(2)
................. 72.4 44.2 21.3 5.8 1.1
Total .............................. $222.4 $83.6 $77.9 $39.3 $21.6
(1) Operating leases are primarily for office space and equipment used in our branch operations.
(2) Purchase obligations include our estimate of the minimum outstanding commitments under purchase orders to
buy goods and services and legally binding contractual arrangements with future payment obligations. Included
in the total purchase obligations is $6.0 million of commitments to purchase capital assets. Amounts actually
paid under certain of these arrangements may be higher due to variable components of these agreements.
The liability for uncertain tax positions was approximately $34.4 million as of May 31, 2011. Refer to Note I of
the Notes to Consolidated Financial Statements, contained in Item 8 of this Form 10-K, for more information on
income taxes. We are not able to reasonably estimate the timing of future cash flows related to this liability and have
excluded it from the table above. We are currently under a state income tax audit for the fiscal years ended May 31,
2004 through 2009. On July 14, 2010, we received a summary of proposed tax adjustments from the New York State
Department of Taxation and Finance, which was in excess of the reserve recorded as of May 31, 2011. The outcome
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