0000950142-17-002032.txt : 20171215 0000950142-17-002032.hdr.sgml : 20171215 20171115151829 ACCESSION NUMBER: 0000950142-17-002032 CONFORMED SUBMISSION TYPE: CORRESP PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20171115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AUTOMATIC DATA PROCESSING INC CENTRAL INDEX KEY: 0000008670 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 221467904 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: CORRESP BUSINESS ADDRESS: STREET 1: ONE ADP BOULVARD CITY: ROSELAND STATE: NJ ZIP: 07068 BUSINESS PHONE: 9739745000 MAIL ADDRESS: STREET 1: ONE ADP BOULEVARD CITY: ROSELAND STATE: NJ ZIP: 07068 CORRESP 1 filename1.htm
FOIA CONFIDENTIAL TREATMENT REQUESTED BY AUTOMATIC DATA PROCESSING, INC.
PURSUANT TO RULE 83 (17 C.F.R. 200.83).  THIS LETTER OMITS CONFIDENTIAL INFORMATION
INCLUDED IN THE UNREDACTED VERSION OF THE LETTER THAT WAS DELIVERED TO THE
DIVISION OF CORPORATION FINANCE
 
 
Automatic Data Processing, Inc.
One ADP Boulevard
Roseland, NJ 07068

 
November 10, 2017


VIA EDGAR
Ms. Tiffany Piland Posil
Special Counsel
Office of Mergers and Acquisitions
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549

 
Re:
Automatic Data Processing, Inc.
Definitive Additional Materials on Schedule 14A
Filed October 17 and 19, 2017
File No. 001-05397
 
Dear Ms. Piland Posil:

Set forth below is our response to the comment raised in your letter dated November 2, 2017 (the “Comment Letter”).  Automatic Data Processing, Inc. (the “Company”) acknowledges that it is responsible for the adequacy and accuracy of the disclosures in its Definitive Additional Materials on Schedule 14A, filed October 17 and 19, 2017.  The Company understands that the comments of the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) do not foreclose the Commission from taking any action with respect to the filing.  The Company also acknowledges that it may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

For your convenience, we have repeated the comment as set forth in the Comment Letter and provided our response to the comment immediately below.


 
Definitive Additional Materials on Schedule 14A

Exhibit 3 to Schedule 14A filed October 19, 2017

1. We note your response to prior comment 3 and your subsequent soliciting materials that reference expected operational margin expansion of 500 basis points over the next three years. Please clarify how operational margins differ from net operational margins and provide the reconciliation required by Regulation G and Item 10(e) of Regulation S-K in the next filing you make in connection with this solicitation.

RESPONSE:
 
Attached as Annex A to this letter is an explanation of how the Company calculates operational margin expansion and a reconciliation of each element of that calculation to its most comparable GAAP metric.
 
*     *     *     *
 
Please feel free to contact me at 973-974-5572 should you require any additional information or have any additional questions.

Very truly yours,

/s/ Jan Siegmund        
Jan Siegmund
Chief Financial Officer


Cc:
Deloitte & Touche LLP
Karen Valerie, Partner

Paul, Weiss, Rifkind, Wharton & Garrison LLP
Scott A. Barshay, Partner
Steven J. Williams, Partner
David S. Huntington, Partner
 
 
Annex A
 
The concept of the operational margin expansion calculation illustrates operations as a key margin contributor to ADP’s overall Adjusted EBIT margin expansion by calculating the drag from incremental PEO pass-through costs and incremental lift from client funds.  The calculation, which is demonstrated below, takes each element (e.g., PEO passthroughs, net impact of client funds) as a percentage of revenue to calculate the impact to margin in each year, and strikes the difference to show the impact of our margin expansion/(contraction) from each of these "non-operational" elements. The remainder is the amount of our Adjusted EBIT margin that is expected to come from operational improvements and strategic initiatives (platform migrations, service alignment and productivity initiatives).  For the operational improvements and strategic initiatives, we utilized internal business cases for these initiatives and the expected cost savings for each initiative to attribute the margin growth to each on page 35 of the September 12, 2017 Investor Presentation. 
 
 
$M
   
2017
    
Net earnings from continuing operations
    
1,733.4
    
Adjustments
          
Provision for income taxes
    
797.7
    
All other interest expense
    
59.3
    
All other interest income
(22.4
)
  
Gain on sale of businesses
    
(205.4
)
  
Workforce Optimization Effort
    
(5.0
)
  
Service Alignment Initiative
    
90.0
    
Adjusted EBIT
    
2,447.6
    
            
Revenues
    
12,379.8
    
           
           
Adjusted EBIT margin %
    
19.8
%
  
PEO passthrough costs (A)
    
2,628.4
    
           
           
           
PEO passthrough costs/total revenues
    
21.2
%
  
            
Client funds interest revenue (A)
    
397.4
    
Corporate extended interest income (B)
    
54.3
    
Corporate extended interest expense (C)
    
(20.7
)
  
Net client funds strategy
    
431.0
    
            
Net client funds strategy/total revenues
    
3.5
%
  
 
 
 
Non-GAAP reconciliations of various inputs in
calculation above
    
(A) Composition of Revenue
        
 
  
2017
    
PEO passthrough revenues
    
2,628.4
    
Client funds interest revenue
    
397.4
    
Other revenues
    
9,354.0
    
Revenues from continuing operations
    
12,379.8
    
 
          
(A) Composition of Operating Expenses
    
2017
    
PEO passthrough costs
    
2,628.4
    
Other Operating Expenses
    
3,787.7
    
Operating Expenses
    
6,416.1
    
 
          
(B) Composition of Other income, net
    
2017
    
Corporate extended interest income
    
54.3
    
Other interest income
    
22.4
    
Other Other income, net
    
207.6
    
Other income, net
    
284.3
    
 
          
(C) Composition of Interest Expense
    
2017
    
Corporate extended interest expense
    
20.7
    
Other interest expense
    
59.3
    
Interest Expense
    
80.0