-----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, BxNSHmEcsaZKia7ESKKY5oDBGZkWvvciHKYknxauLeVmouJKqSoEJAsPSXFF1bm/ bA0R9HIkdCRmBOG/nN+0VA== 0000008670-96-000004.txt : 19960802 0000008670-96-000004.hdr.sgml : 19960802 ACCESSION NUMBER: 0000008670-96-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960510 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: 96559043 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 March 31, 1996 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 May 3,1996 there were 289,750,405 shares outstanding. Form 10Q Part I. Financial Information Statements of Consolidated Earnings (In thousands, except per share amounts) Three Months Ended Nine Months Ended March 31, March 31, 1996 1995 1996 1995 Revenue $1,031,864 $ 798,989 $2,598,681 $2,093,872 Operating expenses 428,360 309,574 1,087,828 830,378 General, administrative and selling expenses 276,730 224,096 702,095 596,946 Depreciation and amortization 55,298 42,131 148,386 119,641 Systems development and programming costs 63,762 48,120 176,808 138,940 Interest expense 7,804 5,978 22,254 18,177 831,954 629,899 2,137,371 1,704,082 EARNINGS BEFORE INCOME TAXES 199,910 169,090 461,310 389,790 Provision for income taxes 56,010 43,820 126,610 100,900 NET EARNINGS $ 143,900 $ 125,270 $ 334,700 $ 288,890 Earnings Per Share: $ .49 $ .44 $ 1.16 $ 1.02 Dividends per share $ .10 $ .075 $ .2875 $ .225 See notes to consolidated statements. Consolidated Balance Sheets Form10Q (In thousands) March 31, June 30, Assets 1996 1995 Cash and cash equivalents $ 372,836 $ 313,612 Short-term marketable securities 318,663 384,009 Accounts receivable 560,932 377,145 Other current assets 176,935 136,377 Total current assets 1,429,366 1,211,143 Long-term marketable securities 547,188 594,268 Long-term receivables 183,438 189,858 Land and buildings 297,406 287,186 Data processing equipment 606,784 501,403 Furniture, leaseholds and other 376,196 309,592 1,280,386 1,098,181 Less accumulated depreciation (812,009) (682,222) 468,377 415,959 Other assets 86,280 84,212 Intangibles 1,231,854 705,656 $3,946,503 $3,201,096 Liabilities and Shareholders' Equity Notes payable $ 92,378 $ - Accounts payable 142,849 65,955 Accrued expenses & other current liabilities 613,567 385,040 Income taxes 82,706 82,672 Current portion of long-term debt 2,532 9,556 Total current liabilities 934,032 543,223 Long-term debt 407,965 390,177 Other liabilities 80,676 66,865 Deferred income taxes 13,527 18,844 Deferred revenue 90,373 85,372 Shareholders' equity: Common stock 31,427 31,423 Capital in excess of par value 414,398 351,908 Retained earnings 2,446,431 2,182,838 Treasury stock (472,326) (469,554) 2,419,930 2,096,615 $3,946,503 $3,201,096 See notes to consolidated statements. Condensed Statements of Consolidated Cash Flows Form10Q (In thousands) Nine Months Ended March 31, 1996 1995 Cash Flows From Operating Activities: Net earnings $ 334,700 $ 288,890 Expenses not requiring outlay of cash 158,300 129,140 Changes in operating net assets 8,060 (97,429) Net cash flows from operating activities 501,060 320,601 Cash Flows From Investing Activities: Marketable securities 112,426 (65,410) Capital expenditures (115,844) (81,047) Other changes to property, plant and equipment 6,804 1,338 Additions to intangibles (14,040) (28,274) Acquisitions of businesses (466,105) (41,676) Net cash flows from investing activities (476,759) (215,069) Cash Flows From Financing Activities: Proceeds from issuance of notes 92,378 - Repayments of long-term debt (11,769) (1,837) Proceeds from issuance of common stock 107,952 93,546 Repurchases of common stock (55,097) (1,999) Dividends paid (83,181) (63,993) Other (15,360) 7,722 Net cash flows from financing activities 34,923 33,439 Net change in cash and cash equivalents 59,224 138,971 Cash and cash equivalents, at beginning of period 313,612 238,626 Cash and cash equivalents, at end of period $ 372,836 $ 377,597 See notes to consolidated statements. Notes to Consolidated Statements Form10Q 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 approximately $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 one month lag. Accordingly, the consolidated results for the quarter ended March 31, 1996 include GSI's operations for the three months ended February 29, 1996. 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 9 months ended March 31, 1996, and 1995 would have increased by approximately $173 million and $300 million, respectively, and net earnings would have decreased by approximately $9 million ($.03 per share) and $23 million ($.08 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 nine months ended March 31,1996 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 a weighted average number of shares outstanding, which for the quarters ended March 31, 1996 and 1995 were 291,311,000 and 287,092,000 respectively. The weighted average number of shares for the nine months ended March 31, 1996 and 1995 were 289,020,000 and 284,038,000 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. MANAGEMENT'S DISCUSSION AND ANALYSIS Form10Q OPERATING RESULTS Revenue and earnings again reached record levels during the quarter ended March 31, 1996. Revenue and revenue growth by ADP's major service groups are shown below: Revenue 3 Months Ended 9 Months Ended March 31, March 31, 1995 1996 1995 1996 ($ in millions) Employer Services (a) $ 492 $ 597 $1256 $1471 Brokerage Services 170 202 444 539 Dealer Services 112 145 317 403 Other (a) 25 88 77 186 $ 799 $1032 $2094 $2599 Revenue Growth 3 Months Ended 9 Months Ended March 31, March 31, 1995 1996 1995 1996 Employer Services (a) 13% 21% 13% 17% Brokerage Services 12 19 8 21 Dealer Services 32 29 29 27 Other (a) (b) 252 (b) 141 18% 29% 16% 24% (a) reclassified (b) not meaningful Consolidated revenue for the quarter of $1032 million was up an unusually strong 29% from last year, with about half of this revenue growth coming from the recently completed acquisition of GSI, a leading European computer services company. The quarter was also aided by strong Brokerage trading volume. Revenue growth in the Company's three largest businesses, Employer, Brokerage and Dealer services, was strong at 21%, 19%, and 29%, respectively. Each includes some acquisitions. 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 has been reclassified from "Other revenue" and are now included in the Employer Services caption, along with GSI's Employer Services operations. Form10Q Pre-tax earnings for the quarter increased 18% from last year. As expected, several acquisitions currently have low operating margins but should improve as they are integrated into ADP's operations. 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 15% to $144 million. The effective tax rate of 28.0% increased from 25.9% in the comparable quarter last year, primarily because of the estimated impact of non- deductible intangibles arising from the GSI acquisition. Earnings per share, on increased shares outstanding, grew 11% to $.49 from $.44 last year, after a Federal Trade Commission settlement which reduced quarterly earnings per share by $.01. Earnings per share for the first nine months of fiscal 1996 increased 14% to $1.16 from $1.02 last year. Effective November 1, 1995, ADP acquired control of GSI, and 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 March 31, 1996 include GSI's operations for the three months ended February 29, 1996. The GSI acquisition will dilute ADP's fiscal 1996 earnings per share by 1% to 2% and add $400 million in annualized revenue. Fourth quarter revenue growth will be less than in the third quarter as several acquisitions pass their first anniversary. The absence of non-recurring items should improve fourth quarter earnings per share growth. For the full year, we continue to expect revenue growth of over 20% and earnings per share growth close to 15%. FINANCIAL CONDITION The Company's financial condition and balance sheet remain exceptionally strong, and operations continue to generate a strong cash flow. At March 31, 1996, the Company had cash and marketable securities of about $1.2 billion. Shareholders' equity exceeded $2.4 billion and the ratio of long-term debt to equity was 17%. Form10Q A portion of the GSI purchase price was funded by borrowing approximately 466 million French francs (equivalent to $93 million at March 31, 1996) 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 200,000 shares of common stock for treasury at an average price of about $37. For the first three quarters, 1,625,000 shares were purchased at an average price of about $34. The Company has remaining Board authorization to purchase up to 12.6 million additional shares to fund our equity related employee benefit plans. Form10Q PART II. OTHER INFORMATION All items are either inapplicable or would result in negative responses and, therefore, have been omitted. Form10Q 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: May 10, 1996 /s/Richard J. Haviland Richard J. Haviland Corporate Controller and Corporate Vice President (Chief Financial Officer) (Title) EX-27 2
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