-----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, BehDcrc0kxImIdDHs2CfwarF5zOXG3azMX/T0zvX88eGqFCNQiWD33uL49agKxh4 MdB1wwVXCaHXtUN2BAzhHA== 0001005477-98-003100.txt : 19981118 0001005477-98-003100.hdr.sgml : 19981118 ACCESSION NUMBER: 0001005477-98-003100 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 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: 98745243 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 FORM 10-Q 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, 1998 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) 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 October 31, 1998 there were 302,102,291 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, 1998 1997 ---------- ---------- Revenue $1,210,327 $1,038,498 ---------- ---------- Operating expenses 529,857 443,383 General, administrative and 322,973 289,446 selling expenses Depreciation and amortization 68,907 57,430 Systems development and programming costs 100,740 87,289 Interest expense 5,600 7,510 ---------- ---------- 1,028,077 885,058 ---------- ---------- EARNINGS BEFORE INCOME TAXES 182,250 153,440 Provision for income taxes 59,050 48,030 ---------- ---------- NET EARNINGS $ 123,200 $ 105,410 ========== ========== BASIC EARNINGS PER SHARE $ 0.41 $ 0.36 ========== ========== DILUTED EARNINGS PER SHARE $ 0.40 $ 0.35 ========== ========== Dividends per share $ .1325 $ .115 ========== ========== See notes to consolidated statements. Form 10Q Consolidated Balance Sheets (In thousands) September 30, June 30, 1998 1998 ------------ ---------- Assets Cash and cash equivalents $ 893,800 $ 752,240 Short-term marketable securities 173,823 144,936 Accounts receivable 731,595 727,936 Other current assets 183,671 204,192 ---------- ---------- Total current assets 1,982,889 1,829,304 ---------- ---------- Long-term marketable securities 806,399 765,272 ---------- ---------- Long-term receivables 182,049 177,946 ---------- ---------- Land and buildings 394,352 386,745 Data processing equipment 723,475 696,424 Furniture, leaseholds and other 444,195 432,654 ---------- ---------- 1,562,022 1,515,823 Less accumulated depreciation (980,717) (932,150) ---------- ---------- 581,305 583,673 ---------- ---------- Other assets 154,110 166,112 ---------- ---------- Intangibles 1,693,886 1,653,048 ---------- ---------- $5,400,638 $5,175,355 ========== ========== Liabilities and Shareholders' Equity Notes payable $ 298,084 $ 239,811 Accounts payable 117,102 119,803 Accrued expenses & other current liabilities 806,467 806,297 Income taxes 80,448 55,130 ---------- ---------- Total current liabilities 1,302,101 1,221,041 ---------- ---------- Long-term debt 176,885 192,063 ---------- ---------- Other liabilities 116,562 103,056 ---------- ---------- Deferred income taxes 151,859 147,397 ---------- ---------- Deferred revenue 107,865 105,347 ---------- ---------- Shareholders' equity: Common stock 31,429 31,429 Capital in excess of par value 622,991 617,758 Retained earnings 3,457,791 3,374,729 Treasury stock (496,162) (515,845) Accumulated other comprehensive income (70,683) (101,620) ---------- ---------- 3,545,366 3,406,451 ---------- ---------- $5,400,638 $5,175,355 ========== ========== See notes to consolidated statements. Form 10Q Condensed Statements of Consolidated Cash Flows (In thousands) Three Months Ended September 30, 1998 1997 --------- --------- Cash Flows From Operating Activities: Net earnings $ 123,200 $ 105,410 Expenses not requiring outlay of cash 68,115 75,847 Changes in operating net assets 43,177 65,947 --------- --------- Net cash flows from operating activities 234,492 247,204 --------- --------- Cash Flows From Investing Activities: Purchase of marketable securities (133,363) (126,146) Proceeds from sale of marketable securities 69,067 132,961 Capital expenditures (38,523) (40,442) Other changes to property, plant and equipment 6,229 2,874 Additions to intangibles (16,481) (11,680) Acquisitions of businesses (8,020) (154,793) --------- --------- Net cash flows from investing activities (121,091) (197,226) --------- --------- Cash Flows From Financing Activities: Proceeds from issuance of notes 51,823 90,088 Proceeds from issuance of common stock 23,507 12,830 Repurchases of common stock (7,033) (38,316) Dividends paid (40,138) (33,706) Repayments of long-term debt -- (6,802) --------- --------- Net cash flows from financing activities 28,159 24,094 --------- --------- Net change in cash and cash equivalents 141,560 74,072 Cash and cash equivalents, at beginning of period 752,240 590,578 --------- --------- Cash and cash equivalents, at end of period $ 893,800 $ 664,650 ========= ========= 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, 1998. Note A - The results of operations for the three months ended September 30, 1998 may not be indicative of the results to be expected for the year ending June 30, 1999. Note B - A reconciliation of the income and weighted average shares used in the basic and diluted earnings per share calculations for the three months ended September 30, 1998 and 1997 follows: (In thousands, except EPS) Periods ended September 30, ---------------------------------------------------- 1998 1997 ------------------------- ------------------------ Income Shares EPS Income Shares EPS ------ ------ --- ------ ------ --- Basic $123,200 302,647 $0.41 $105,410 292,628 $0.36 Effect of zero coupon subordinated notes 1,069 3,564 2,754 9,663 Effect of stock options -- 7,407 -- 5,699 ----------------- ----------------- Diluted $124,269 313,618 $0.40 $108,164 307,990 $0.35 ========================= ======================== Note C - Effective July 1, 1998, the Company has adopted FASB Statement No. 130 "Reporting Comprehensive Income". Comprehensive income for the three months ended September 30, 1998 and 1997 follows: September 30, ----------------------- 1998 1997 ---- ---- Net income $123,200 $105,410 Other comprehensive income Foreign currency translation adjustment 32,873 (6,390) Unrealized gain (loss) on securities (1,936) 1,842 -------- -------- Comprehensive income $154,137 $100,862 ======== ======== MANAGEMENT'S DISCUSSION AND ANALYSIS OPERATING RESULTS Revenue and earnings again reached record levels during the quarter ended September 30, 1998. Revenue and revenue growth by ADP's major business units for the three months ended September 30, 1998 and 1997 are shown below: Revenue Revenue Growth September 30, September 30, ------------- -------------- 1998 1997 1998 1997 ---- ---- ---- ---- ($ in millions) Employer Services $ 695 $ 587 18% 20% Brokerage Services 252 223 13 19 Dealer Services 181 166 9 9 Other 82 62 32 (23) ------ ------- -- --- $1,210 $ 1,038 17% 14% ====== ======= == === Consolidated revenue for the quarter of $1,210 million was up 17% from last year. Revenue growth in the Company's three largest businesses, Employer, Brokerage and Dealer Services, was strong at 18%, 13%, and 9%, respectively. The primary components of "Other" revenue are claims services, interest income, foreign exchange differences, and miscellaneous processing services. 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 6%. Pretax earnings for the quarter increased 19% to $182 million. Systems development and programming investments increased to accelerate automation, migrate to new computing technologies, and develop new products. Net earnings for the quarter, after a higher effective tax rate, increased 17% to $123 million. The effective tax rate of 32.4% increased from 31.3% 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 14% to $0.40 from $0.35 last year. For the full year, we expect double digit revenue growth and diluted earnings per share growth of 13-16%. 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, 1998, the Company had cash and marketable securities of $1.9 billion. Shareholders' equity was $3.5 billion and the ratio of long-term debt to equity was 5%. Capital expenditures for fiscal 1999 are expected to approximate $200 million, compared to $199 million in fiscal 1998. During the quarter, ADP purchased 108,500 shares of common stock for treasury at an average price of about $65. At September 30, 1998, the Company had remaining Board authorization to purchase up to 8.4 million additional shares to fund equity related employee benefit plans. 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 this 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. To date, the Company has completed its process of identifying and assessing Year 2000 issues related to its mission-critical systems and is currently in the remediation and testing phases. The Company plans to have the majority of mission-critical systems Year 2000 compliant by December 31, 1998, with the few remaining systems, primarily from recent acquisitions, compliant by March 31, 1999. In addition, the Company has been actively working with external agencies and partners, including governmental 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 is dependent upon those third parties completing their own Year 2000 remediation efforts. The 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) /s/ Richard J. Haviland Date: November 12, 1998 ------------------------------- Richard J. Haviland Chief Financial Officer (Principal Financial Officer) ------------------------------- (Title) EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS JUN-30-1999 SEP-30-1998 893,800 173,823 777,447 45,852 48,389 1,982,889 1,562,022 980,717 5,400,638 1,302,101 176,885 0 0 31,429 3,513,937 5,400,638 0 1,210,327 0 1,018,187 0 4,290 5,600 182,250 59,050 123,200 0 0 0 123,200 .41 .40
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