-----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, RI+5d+wZddZKrQBKO0cUJXueh3rE4L2jCSEjnBL0MxJuX7AgQk646kXQnNeLDILf 7b7EYxfR5qjO5N8YSy1spg== 0000008670-99-000011.txt : 19991124 0000008670-99-000011.hdr.sgml : 19991124 ACCESSION NUMBER: 0000008670-99-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991105 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: SEC FILE NUMBER: 001-05397 FILM NUMBER: 99741813 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 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 September 30, 1999 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 (973) 974-5000 -------------- 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 October 31, 1999 there were 625,108,036 common shares outstanding. Form 10Q Part I. Financial Information STATEMENT OF CONSOLIDATED EARNINGS ---------------------------------- (In thousands, except per share amounts) Three Months Ended ----------------------------- September 30, September 30, 1999 1998 ---- ---- Revenues, other than PEO $1,306,938 $1,208,431 PEO revenues (net of pass-through costs of $467,111 and $386,237, respectively) 44,157 36,695 ---------- ---------- Total revenues 1,351,095 1,245,126 ---------- ---------- Operating expenses 551,090 553,308 General, administrative and selling expenses 404,991 329,589 Depreciation and amortization 65,634 69,662 Systems development and programming costs 103,655 101,071 Interest expense 3,535 5,721 ---------- ---------- 1,128,905 1,059,351 ---------- ---------- EARNINGS BEFORE INCOME TAXES 222,190 185,775 Provision for income taxes 75,990 60,351 ---------- ---------- NET EARNINGS $ 146,200 $ 125,424 ========== ========== BASIC EARNINGS PER SHARE $ 0.23 $ 0.20 ========== ========== DILUTED EARNINGS PER SHARE $ 0.23 $ 0.20 ========== ========== Dividends per share $ .07625 $ .06625 ========== ========== See notes to consolidated statements. Form 10Q CONSOLIDATED BALANCE SHEETS --------------------------- (IN THOUSANDS) September 30, June 30, 1999 1999 ------------ ----------- Assets - - ------ Cash and cash equivalents $ 953,800 $ 861,280 Short-term marketable securities 419,082 231,214 Accounts receivable 825,420 860,836 Other current assets 245,570 240,927 ---------- ---------- Total current assets 2,443,872 2,194,257 Long-term marketable securities 945,947 1,076,546 Long-term receivables 218,412 213,413 Land and buildings 399,453 400,189 Data processing equipment 559,695 550,757 Furniture, leaseholds and other 451,410 449,862 ---------- ---------- 1,410,558 1,400,808 Less accumulated depreciation (846,180) (821,514) ---------- ---------- 564,378 579,294 Other assets 287,806 228,936 Intangibles 1,486,310 1,532,374 ---------- ---------- $5,946,725 $5,824,820 ========== ========== Liabilities and Shareholders' Equity - - ------------------------------------ Notes payable $ 60,185 $ 66,952 Accounts payable 103,026 130,456 Accrued expenses & other current liabilities 1,012,757 952,326 Income taxes 147,091 136,659 ---------- ---------- Total current liabilities 1,323,059 1,286,393 Long-term debt 140,935 145,765 Other liabilities 145,189 132,081 Deferred income taxes 136,250 138,236 Deferred revenue 106,951 114,404 Shareholders' equity: Common stock 62,858 62,858 Capital in excess of par value 405,736 421,333 Retained earnings 3,947,496 3,848,421 Treasury stock (148,917) (189,204) Accumulated other comprehensive income (172,832) (135,467) ---------- ---------- 4,094,341 4,007,941 ---------- ---------- $5,946,725 $5,824,820 ========== ========== See notes to consolidated statements. Form 10Q CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS ----------------------------------------------- (IN THOUSANDS) Three Months Ended September 30, 1999 1998 ---- ---- Cash Flows From Operating Activities: - - ------------------------------------- Net earnings $146,200 $125,424 Expenses not requiring outlay of cash 66,093 69,063 Changes in operating net assets 27,717 40,020 -------- -------- Net cash flows from operating activities 240,010 234,507 -------- -------- Cash Flows From Investing Activities: - - ------------------------------------- Purchase of marketable securities (172,216) (133,363) Proceeds from sale of marketable securities 99,092 69,067 Capital expenditures (23,919) (39,345) Additions to intangibles (11,646) (16,481) Acquisitions of businesses (886) (8,020) Other (12,030) 6,229 -------- -------- Net cash flows from investing activities (121,605) (121,913) -------- -------- Cash Flows From Financing Activities: - - ------------------------------------- Proceeds from issuance of notes 1,478 53,209 Repayments of debt (7,398) (3,721) Proceeds from issuance of common stock 27,659 23,569 Repurchases of common stock - (7,033) Dividends paid (47,624) (40,138) -------- -------- Net cash flows from financing activities (25,885) 25,886 -------- -------- Net change in cash and cash equivalents 92,520 138,480 Cash and cash equivalents, at beginning of period 861,280 763,063 -------- -------- Cash and cash equivalents, at end of period $953,800 $901,543 ======== ======== 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. 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, 1999. Note A - The results of operations for the three months ended September 30, 1999 may not be indicative of the results to be expected for the year ending June 30, 2000. Note B - The calculation of basic and diluted earnings per share is as follows: (In thousands, except EPS) Periods ended September 30, --------------------------------------------------- 1999 1998 ------------------------ ------------------------ Income Shares EPS Income Shares EPS -------- ------- ----- -------- ------- ----- Basic $146,200 624,392 $0.23 $125,424 612,477 $0.20 Effect of zero coupon subordinated notes 753 4,745 1,069 7,128 Effect of stock options - 13,683 - 14,985 ----------------- ----------------- Diluted $146,953 642,820 $0.23 $126,493 634,590 $0.20 ======================== ======================== Note C - Comprehensive income for the three months ended September 30, 1999 and 1998 follows: September 30, 1999 1998 -------- -------- Net income $146,200 $125,424 Other comprehensive income: Foreign currency translation adjustment (27,851) 32,873 Unrealized gain(loss) on securities (9,514) (1,936) -------- -------- Comprehensive income $108,835 $156,361 ======== ======== Form 10Q Note D - Interim financial data by segment: ADP evaluates performance of its business units based on recurring operating results before interest, income taxes and foreign currency gains and losses. Certain revenues and expenses are charged to business units at a standard rate for management and motivation reasons. Other costs are recorded based on management responsibility. As a result, various income and expense items, including non-recurring gains and losses, are recorded at the corporate level and certain shared costs are not allocated. Goodwill amortization is charged to business units at an accelerated rate to act as a surrogate for the cost of capital for acquisitions. Revenues on invested client funds are credited to Employer Services at a standard rate of 6%. Prior year's business unit results have been restated to reflect the current year's foreign exchange standard rates. Results of the Company's three largest business units, Employer Services, Brokerage Services and Dealer Services are shown below. (In millions) Employer Brokerage Dealer Three months ended Services Services Services September 30, ---------- ----------- ----------- 1999 1998 1999 1998 1999 1998 ---- ---- ---- ---- ---- ---- Revenues $ 809 $ 720 $ 258 $ 251 $ 187 $ 179 Pretax earnings $ 147 $ 111 $ 54 $ 30 $ 30 $ 24 Form 10Q MANAGEMENT'S DISCUSSION AND ANALYSIS ------------------------------------ OPERATING RESULTS Revenues and earnings again reached record levels during the quarter ended September 30, 1999. Revenues and revenue growth by ADP's major business units for the three months ended September 30, 1999 and 1998 are shown below: Revenues Revenue Growth September 30, September 30, ---------------- --------------- 1999 1998 1999 1998 ---- ---- ---- ---- ($ in millions) Employer Services $ 809 $ 720 12% 19% Brokerage Services 258 251 3 13 Dealer Services 187 179 4 10 Other 97 95 2 27 ------ ------ ---- ---- $1,351 $1,245 9% 17% ====== ====== ==== ==== Consolidated revenues for the quarter of approximately $1.4 billion were up 9% from last year. Revenue growth in the Company's three largest businesses, Employer, Brokerage and Dealer Services, was 12%, 3%, and 4%, respectively. Brokerage Services' growth was 24% excluding the impact of last year's sale of the Front Office business. The primary components of "Other" revenues are claims services, interest income, foreign exchange differences, and miscellaneous processing services. In addition, "Other" revenues has been reduced to adjust for the difference between actual interest income earned on invested client funds and income credited to Employer Services at a standard rate of 6%. The prior year's business unit results have been restated to reflect the current year's foreign exchange standard rates. Pretax earnings for the quarter increased 20% to approximately $222 million. Consolidated pre-tax margins increased primarily from the impact of prior year dispositions in Employer Services and Brokerage Services and increased productivity in core businesses. Systems development and programming investments increased to accelerate automation, migrate to new computing technologies, and develop new products. Excluding prior year dispositions, systems development and programming investments increased over 10% from the last year. Net earnings for the quarter, after a higher effective tax rate, increased 17% to approximately $146 million. The effective tax rate of 34.2% increased from 32.5% in the comparable quarter last year, primarily as a result of the greater weighting of taxable versus non-taxable earnings. Diluted earnings per share grew 15% to $0.23 from $0.20 last year. For the full year, we expect revenue growth of about 10% and diluted earnings per share growth of about 15% above the $1.13 reported prior to non-recurring items in fiscal 1999. Form 10Q FINANCIAL CONDITION The Company's financial condition and balance sheet remain exceptionally strong, and operations continue to generate a strong cash flow. At September 30, 1999, the Company had cash and marketable securities of $2.3 billion. Shareholders' equity was $4.1 billion and the ratio of long-term debt to equity was 3%. Capital expenditures for fiscal 2000 are expected to approximate $215 million, compared to $178 million in fiscal 1999. The Company's investment portfolio for corporate and client funds consists primarily of fixed income securities subject to interest rate risk, including reinvestment risk. The Company has historically had the ability to hold these investments until maturity, and therefore interest rate risk has not had an adverse impact on income or cash flows. OTHER MATTERS The majority of the Company's services involve computer processing and, as such, the Year 2000 could have a significant impact on the Company's products and services. As a result, the Company has worked for several years addressing both internal and third-party Year 2000 compliance issues. The majority of the Company's mission-critical systems are Year 2000 compliant and the few remaining systems, primarily from recent acquisitions, are expected to be compliant before the end of the calendar year. In addition, the Company has been actively working with external agencies and partners, including government agencies, to determine and conform to their Year 2000 compliance plans. Third-party interface testing and resolution of Year 2000 issues with external agencies and partners are dependent upon those third parties completing their own Year 2000 remediation efforts. The cost of Year 2000 remediation is not expected to have a material adverse effect on the Company's overall results, as these costs are not expected to be substantially different from normal recurring costs that are incurred for systems development and implementation. This report contains "forward-looking statements" based on management's expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ from those expressed. Factors that could cause differences include: ADP's success in obtaining, retaining and selling additional services to clients; the pricing of products and services; overall economic trends, including interest rate and foreign currency trends; impact of Year 2000; stock market activity; auto sales and related industry changes; employment levels; changes in technology; availability of skilled technical associates and the impact of new acquisitions. Form 10Q PART II. OTHER INFORMATION Except as noted below, all other items are either inapplicable or would result in negative responses and, therefore, have been omitted. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit Number Exhibit ------ ------- 27.1 Financial Data Schedule 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: November 5, 1999 /s/ Richard J. Haviland ----------------------- Richard J. Haviland Chief Financial Officer (Principal Financial Officer) ----------------------------- (Title) EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS JUN-30-2000 JUL-1-1999 SEP-30-1999 953,800 419,082 869,867 44,447 44,115 2,443,872 1,410,558 846,180 5,946,725 1,323,059 140,935 0 0 62,858 4,031,483 5,946,725 0 1,351,095 0 1,122,515 0 2,855 3,535 222,190 75,990 146,200 0 0 0 146,200 .23 .23
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