-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WKrPEqqgH1bdJIp+zu2cCh4gc572s2bkgyFm7ib0j8SdAdobMA7Qvlg2kylM1oOl pA90yyZ30xgEpNFw/0vDKQ== 0000008670-96-000002.txt : 19960603 0000008670-96-000002.hdr.sgml : 19960603 ACCESSION NUMBER: 0000008670-96-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960213 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AUTOMATIC DATA PROCESSING INC CENTRAL INDEX KEY: 0000008670 STANDARD INDUSTRIAL CLASSIFICATION: 7374 IRS NUMBER: 221467904 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05397 FILM NUMBER: 96516985 BUSINESS ADDRESS: STREET 1: ONE ADP BOULVARD CITY: ROSELAND STATE: NJ ZIP: 07068 BUSINESS PHONE: 2019945000 MAIL ADDRESS: STREET 1: ONE ADP BOULEVARD CITY: ROSELAND STATE: NJ ZIP: 07068 10-Q 1 LIVE SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended December 31, 1995 Commission File Number 1-5397 Automatic Data Processing, Inc (Exact name of registrant as specified in its charter ) Delaware 22-1467904 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) One ADP Boulevard, Roseland, New Jersey 07068 (Address of principal executive offices) (Zip Code) Registrant's Telephone Number, Including Area Code (201) 994-5000 No change Former name, former address & former fiscal year, if changed since last report. Indicate by check mark whether the Registrant (1) has filed all annual, quarterly and other reports required to be filed with the commission and (2) has been subject to the filing requirements for at least the past 90 days. X Yes No As of January 31, 1996 there were 290,446,169 common shares outstanding. Form 10Q Part I. Financial Information Statements of Consolidated Earnings (In thousands, except per share amounts) Three Months Ended Six Months Ended December 31, December 31, 1995 1994 1995 1994 Revenue $819,723 $672,597 $1,566,817 $1,294,883 Operating expenses 342,690 268,107 659,467 520,804 General, administrative and selling expenses 210,343 183,923 425,365 372,852 Depreciation and amortization 48,618 39,751 93,089 77,509 Systems development and programming costs 58,867 46,464 113,046 90,819 Interest expense 8,605 6,252 14,450 12,199 669,123 544,497 1,305,417 1,074,183 EARNINGS BEFORE INCOME TAXES 150,600 128,100 261,400 220,700 Provision for income taxes 41,700 33,180 70,600 57,080 NET EARNINGS $108,900 $ 94,920 $ 190,800 $ 163,620 EARNINGS PER SHARE: $ .38 $ .33 $ .66 $ .58 Dividends per share $ .10 $ .075 $ .1875 $ .15 See notes to consolidated statements. Form 10Q Consolidated Balance Sheets (In thousands) December 31, June 30, Assets 1995 1995 Cash and cash equivalents $ 238,264 $ 313,612 Short-term marketable 263,300 384,009 securities Accounts receivable 511,036 377,145 Other current assets 216,841 136,377 Total current assets 1,229,441 1,211,143 Long-term marketable 553,579 594,268 securities Long-term receivables 185,175 189,858 Land and buildings 295,560 287,186 Data processing equipment 591,477 501,403 Furniture, leaseholds and 379,171 309,592 other 1,266,208 1,098,181 Less accumulated (797,760) (682,222) depreciation 468,448 415,959 Other assets 79,506 84,212 Intangibles 1,211,373 705,656 $3,727,522 $3,201,096 Liabilities and Shareholders' Equity Notes payable $ 50,350 $ - Accounts payable 119,339 65,955 Accrued expenses 607,264 385,040 & other current liabilities Income taxes 77,980 82,672 Current portion of long-term 1,811 9,556 debt Total current liabilities 856,744 543,223 Long-term debt 398,309 390,177 Other liabilities 98,451 66,865 Deferred income taxes 15,187 18,844 Deferred revenue 109,611 85,372 Shareholders' equity: Common stock 31,423 31,423 Capital in excess of par 386,179 351,908 value Retained earnings 2,319,612 2,182,838 Treasury stock (487,994) (469,554) 2,249,220 2,096,615 $3,727,522 $3,201,096 See notes to consolidated statements. Form 10Q Condensed Statements of Consolidated Cash Flows (In thousands) Six Months Ended December 31, 1995 1994 Cash Flows From Operating Activities: Net earnings $ 190,800 $ 163,620 Expenses not requiring 101,851 87,498 outlay of cash Changes in operating net 23,629 (74,812) assets Net cash flows from operating 316,280 176,306 activities Cash Flows From Investing Activities: Marketable securities 161,398 (56,042) Capital expenditures (79,455) (52,230) Other changes to property, plant 1,738 2,797 and equipment Additions to intangibles - (8,531) Acquisitions of businesses (481,915) (26,301) Net cash flows from investing (398,234) (140,307) activities Cash Flows From Financing Activities: Proceeds from issuance of notes 50,350 - (related to GSI acquisition) Repayments of long-term debt (9,549) (364) Proceeds from issuance of common 69,413 59,411 stock Repurchases of common stock (47,727) (1,999) Dividends paid (54,025) (42,543) Other (1,856) (970) Net cash flows from financing 6,606 13,535 activities Net change in cash and cash (75,348) 49,534 equivalents Cash and cash equivalents, at 313,612 238,626 beginning of period Cash and cash equivalents, at $ 238,264 $ 288,160 end of period See notes to consolidated statements. Form 10Q Notes to Consolidated Statements The information furnished herein reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods. All adjustments are of a normal recurring nature. These statements should be read in conjunction with the annual financial statements and related notes of the Company for the year ended June 30, 1995. Note A - Effective November 1, 1995, ADP acquired control of GSI Participations, a leading computer services company based in Paris, France. As of the close of the January 15, 1996 shareholder tender period, ADP had purchased approximately 100% of GSI for approx- imately $460 million in cash. Based on preliminary allocations of purchase price, this transaction resulted in approximately $485 million of goodwill and other intangibles. Amortization of these intangibles in the accompanying financial statements is based on an assumed blended amortization period of 25 years. The allocation of purchase price as reflected in the accompanying balance sheet is preliminary and subject to adjustment upon receipt of final appraisal information and management's final estimates as to the fair value of assets acquired and liabilities assumed. The financial results of GSI are included in ADP's consolidated results on a month lag. Accordingly, the consolidated results for the quarter ended December 31, 1995 include GSI's operations through November 30, 1995. On an unaudited pro forma basis, assuming that the acquisition had been made as of July 1, 1994, the consolidated revenues of ADP for the 6 months ended December 31, 1995, and 1994 would have increased by approximately $173 million and $207 million, respect- ively, and net earnings would have decreased by approx- imately $9 million ($.03 per share) and $18 million ($.06 per share), respectively. The Company believes these unaudited pro forma results of operations are not indicative of the actual results of operations that would have occurred had the purchase been made as of July 1, 1994 or of the results which will occur in the future. Note B - The results of operations for the six months ended December 31, 1995 may not be indicative of the results to be expected for the year ending June 30, 1996. Note C - Earnings per share are based on the weighted average number of shares outstanding, which for the quarters ended December 31, 1995 and 1994 were 288,001,000 and 283,436,000, respectively. The weighted average number of shares for the six months ended December 31, 1995 and 1994 were 287,866,000 and 282,500,000 respectively. Note D - As of January 1, 1996, the Company had a two-for- one stock split. All per share earnings and dividends and references to common stock in this report have been retroactively restated to reflect the increased number of common shares outstanding. Form 10Q MANAGEMENT'S DISCUSSION AND ANALYSIS OPERATING RESULTS Revenue and earnings again reached record levels during the quarter ended December 31, 1995. Revenue and revenue growth by ADP's major service groups are shown below: Revenue 3 Months Ended 6 Months Ended December 31, December 31, 1994 1995 1994 1995 ($ in millions) Employer Services (a) $ 397 $ 461 $ 765 $ 874 Brokerage Services 139 169 274 338 Dealer Services 109 132 204 258 Other (a) 28 58 52 97 $ 673 $ 820 $1295 $1567 Revenue Growth 3 Months Ended 6 Months Ended December 31, December 31, 1994 1995 1994 1995 Employer Services (a) 14% 16% 13% 14% Brokerage Services 6 22 6 23 Dealer Services 30 21 27 26 Other (a) 87 107 58 87 16% 22% 15% 21% (a) reclassified Consolidated revenue for the quarter of $820 million was up 22% from last year, with approximately 25% of the revenue growth coming from the recently completed acquisition of GSI. Revenue growth in Employer, Brokerage and Dealer Services, primarily from internal sources, was 16%, 22% and 21% respectively. These growth rates also include some acquisitions in each business unit. New client sales in Employer Services and trading volumes in Brokerage Services continued to be quite strong. The primary components of "Other revenue" are claims services, services for wholesalers, the non-employer services businesses of GSI and interest income. In addition, Other revenue has been reduced to adjust for the difference between actual interest income earned on invested tax filing funds and income credited to Employer Services at a standard rate of 7.8%. The revenue from two businesses providing payroll services in Europe have been reclassified from Other revenue and are now included in the Employer Services caption along with GSI's Employer Services operations. Pretax earnings for the quarter increased 18% from last year. Pretax margins were slightly lower than the prior year as a result of lower margins associated with certain acquisitions and new products. Systems development and programming investments increased to accelerate automation, migrate to new computing technologies, and develop new products. Form 10Q Net earnings for the quarter increased 15% to $109 million. The effective tax rate of 27.7% was slightly higher than previous periods, primarily because of lower municipal investment balances and the estimated impact of non-deductible intangibles arising from the GSI acquisition. Earnings per share for the quarter increased 15% to $.38 from $.33 last year. The Company previously announced a two-for-one common stock split effective January 1, 1996. All share and per share amounts are adjusted for the split. Effective November 1, 1995, ADP acquired control of GSI, a leading computer services company based in Paris, France. As of the close of the January 15, 1996 shareholder tender period, ADP had purchased virtually 100% of GSI. GSI is the leading European provider of payroll and human resource information services. GSI also provides facilities management, banking, clearing, and other information services in Europe. The financial results of GSI are included in ADP's consolidated results on a one month lag. Accordingly, the consolidated results for the quarter ended December 31, 1995 include GSI's operations through November 30, 1995. The GSI acquisition will dilute ADP's fiscal 1996 earnings per share by 1% to 2% and add $400 million in annualized revenue. With the acquisition of GSI, we now expect revenue growth of over 20% and earnings per share growth of close to 15% for the full year. FINANCIAL CONDITION The Company's financial condition and balance sheet remain exceptionally strong, and operations continue to generate a strong cash flow. At December 31, 1995, the Company had cash and marketable securities in excess of $1.0 billion. Shareholders equity exceeded $2.2 billion and the ratio of long-term debt to equity was 18%. The GSI purchase price of approximately $460 million was funded by borrowing approximately $93 million of short- term debt ($50 million as of December 31, 1995) with the remainder coming from the Company's cash and marketable securities. Capital expenditures for fiscal 1996 are expected to approximate $170 million, compared to $118 million in fiscal 1995. During the quarter, ADP purchased approximately 680,000 shares of common stock for treasury at an average price of about $33. The Company has remaining Board authorization to purchase up to 12.6 million additional shares to fund our equity related employee benefit plans. Form 10Q PART II. OTHER INFORMATION All items are either inapplicable or would result in negative responses and, therefore, have been omitted. Form 10Q SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AUTOMATIC DATA PROCESSING, INC. (Registrant) Date: February 13, 1996 /s/ Fred D. Anderson, Jr. Fred D. Anderson, Jr. Chief Financial Officer and Corporate Vice President (Principal Financial Officer) (Title) EX-27 2
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