Annual report pursuant to Section 13 and 15(d)

Commitments and Contingencies

v3.19.2
Commitments and Contingencies
12 Months Ended
May 31, 2019
Commitments and Contingencies [Abstract]  
Commitments and Contingencies

Note Q — Commitments and Contingencies

Contingencies:   The Company is subject to various claims and legal matters that arise in the normal course of its business. These include disputes or potential disputes related to breach of contract, tort, employment-related claims, tax claims, and other matters.

The Company’s management currently believes that resolution of outstanding legal matters will not have a material adverse effect on the Company’s financial position or results of operations. However, legal matters are subject to inherent uncertainties and there exists the possibility that the ultimate resolution of these matters could have a material adverse impact on the Company’s financial position and the results of operations in the period in which any such effect is recorded.



Lease commitments:  The Company leases office space and data processing equipment under terms of various operating leases. Rent expense for fiscal years 2019,  2018, and 2017 was $42.9 million, $39.9 million, and $39.7 million, respectively. As of May 31, 2019, future minimum lease payments under various non-cancelable operating leases with terms of more than one year are as follows:







 

 

 



 

 

 



 

Minimum

In millions

 

lease

Year ending May 31,

 

payments

2020

 

$

37.7 

2021

 

 

29.9 

2022

 

 

21.3 

2023

 

 

13.8 

2024

 

 

10.5 

Thereafter

 

 

10.7 



Other commitments:    As of May 31, 2019, the Company had outstanding commitments under purchase orders, legally binding contractual arrangements, and commitments under existing workers’ compensation insurance agreements with minimum future payment obligations of approximately $289.9 million, including $5.6 million of commitments to purchase capital assets.  These minimum future payment obligations relate to the following fiscal years:







 

 

 



 

 

 



 

Minimum

In millions

 

payment

Year ending May 31,

 

obligation

2020

 

$

176.2 

2021

 

 

44.8 

2022

 

 

19.2 

2023

 

 

11.5 

2024

 

 

7.4 

Thereafter

 

 

30.8 



In the normal course of business, the Company makes representations and warranties that guarantee the performance of services under service arrangements with clients. Historically, there have been no material losses related to such guarantees. In addition, the Company has entered into indemnification agreements with its officers and directors, which require the Company to defend and, if necessary, indemnify these individuals for certain pending or future claims as they relate to their services provided to the Company.

Paychex currently self-insures the deductible portion of various insured exposures under certain corporate employee benefit plans. The Company’s estimated loss exposure under these insurance arrangements is recorded in other current liabilities on the Consolidated Balance Sheets. Historically, the amounts accrued have not been material and are not material as of the reporting date. The Company also maintains insurance coverage in addition to its purchased primary insurance policies for gap coverage for employment practices liability, errors and omissions, warranty liability, theft and embezzlement, cyber threats, and acts of terrorism; and capacity for deductibles and self-insured retentions through its captive insurance company.