-----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, DezUvF3s+5aidf0/3cGF9glwh60DlGPybnFat+xAuUjMCSN4MpiDEn6GK+RPShu2 nFORs6K5l2rqiV9wlbItFg== 0001005477-98-001550.txt : 19980528 0001005477-98-001550.hdr.sgml : 19980528 ACCESSION NUMBER: 0001005477-98-001550 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980513 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: SEC FILE NUMBER: 001-05397 FILM NUMBER: 98618656 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 QUARTERLY REPORT 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, 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 April 30, 1998, there were 301,025,427 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, ---------------------- ---------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Revenue $1,309,329 $1,126,284 $3,495,853 $3,032,589 ---------- ---------- ---------- ---------- Operating expenses 535,975 440,329 1,469,560 1,249,864 General, administrative and selling expenses 334,506 308,063 910,379 830,383 Depreciation and amortization 61,512 59,163 177,135 167,515 Systems development and 93,626 74,849 272,276 213,977 programming costs Interest expense 4,650 7,250 19,463 21,410 ---------- ---------- ---------- ---------- 1,030,269 889,654 2,848,813 2,483,149 ---------- ---------- ---------- ---------- EARNINGS BEFORE INCOME TAXES 279,060 236,630 647,040 549,440 Provision for income taxes 88,460 71,700 203,640 163,650 ---------- ---------- ---------- ---------- NET EARNINGS $ 190,600 $ 164,930 $ 443,400 $ 385,790 ========== ========== ========== ========== BASIC EARNINGS PER SHARE $ .64 $ .56 $ 1.50 $ 1.33 ========== ========== ========== ========== DILUTED EARNINGS PER SHARE $ .62 $ .55 $ 1.46 $ 1.29 ========== ========== ========== ========== Dividends per share $ .1325 $ .115 $ .38 $ .33 ========== ========== ========== ========== See notes to consolidated statements. Form 10Q Consolidated Balance Sheets (In thousands) March 31, June 30, Assets 1998 1997 ---------- ---------- Cash and cash equivalents $ 871,040 $ 590,578 Short-term marketable securities 233,651 434,341 Accounts receivable 738,583 605,068 Other current assets 203,000 175,335 ---------- ---------- Total current assets 2,046,274 1,805,322 ---------- ---------- Long-term marketable securities 600,188 470,164 ---------- ---------- Long-term receivables 173,935 176,771 ---------- ---------- Land and buildings 369,659 361,594 Data processing equipment 679,723 626,013 Furniture, leaseholds and other 406,727 364,161 ---------- ---------- 1,456,109 1,351,768 Less accumulated depreciation (916,997) (832,423) ---------- ---------- 539,112 519,345 ---------- ---------- Other assets 150,857 96,383 ---------- ---------- Intangibles 1,438,204 1,314,787 ---------- ---------- $4,948,570 $4,382,772 ========== ========== Liabilities and Shareholders' Equity Notes payable $ 183,831 $ 129,168 Accounts payable 110,127 110,266 Accrued expenses & other current liabilities 847,558 717,868 Income taxes 84,874 61,479 Current portion of long-term debt 1,404 1,091 ---------- --------- Total current liabilities 1,227,794 1,019,872 ---------- --------- Long-term debt 223,596 401,162 ---------- --------- Other liabilities 92,120 91,685 ---------- --------- Deferred income taxes 57,196 102,751 ---------- --------- Deferred revenue 105,646 106,737 ---------- --------- Shareholders' equity: Common stock 31,429 31,429 Capital in excess of par value 603,759 480,492 Retained earnings 3,253,465 2,922,317 Treasury stock (546,562) (697,887) Translation adjustment (99,873) (75,786) ---------- --------- 3,242,218 2,660,565 ---------- ---------- $4,948,570 $4,382,772 ========== ========== See notes to consolidated statements. Form 10Q Condensed Statements of Consolidated Cash Flows (In thousands) Nine Months Ended March 31, 1998 1997 ---- ---- Cash Flows From Operating Activities: Net earnings $ 443,400 $ 385,790 Expenses not requiring outlay of cash 191,012 203,638 Changes in operating net assets 73,798 31,903 --------- --------- Net cash flows from operating activities 708,210 621,331 --------- --------- Cash Flows From Investing Activities: Purchase of marketable securities (346,447) (537,091) Proceeds from sale of marketable securities 394,930 477,905 Capital expenditures (129,317) (111,799) Other changes to property, plant and equipment 9,768 6,076 Additions to intangibles (81,868) (40,961) Acquisitions of businesses (206,186) (92,238) --------- --------- Net cash flows from investing activities (359,120) (298,108) --------- --------- Cash Flows From Financing Activities: Proceeds from issuance of notes 59,810 87,582 Repayments of long-term debt - (52,426) Proceeds from issuance of common stock 24,721 69,323 Repurchases of common stock (40,907) (107,990) Dividends paid (112,252) (96,311) --------- --------- Net cash flows from financing activities (68,628) (99,822) --------- --------- Net change in cash and cash equivalents 280,462 223,401 Cash and cash equivalents, at beginning of 590,578 314,416 period --------- --------- Cash and cash equivalents, at end of $ 871,040 $ 537,817 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, 1997. Note A - The results of operations for the nine months ended March 31, 1998 may not be indicative of the results to be expected for the year ending June 30, 1998. Note B - The Company implemented Statement of Financial Accounting Standards No. 128, "Earnings Per Share" as of December 31, 1997 which required the disclosure of basic and diluted earnings per share. A reconciliation of the income and weighted average shares used in both calculations follows: (In thousands, except EPS) Periods ended March 31, 1998 ---------------------------------------------------- Three month period Nine month period ------------------------- ------------------------ Income Shares EPS Income Shares EPS ------ ------ --- ------ ------ --- Basic $190,600 299,847 $0.64 $443,400 295,370 $1.50 Effect of zero coupon subordinated notes 1,433 5,347 6,651 7,909 Effect of stock options - 7,030 - 6,014 ----------------- ----------------- Diluted $192,033 312,224 $0.62 $450,051 309,293 $1.46 ========================= ======================== Periods ended March 31, 1997 ---------------------------------------------------- Three month period Nine month period ------------------------- ------------------------ Income Shares EPS Income Shares EPS ------ ------ --- ------ ------ --- Basic $164,930 292,624 $ 0.56 $385,790 290,504 $ 1.33 Effect of zero coupon subordinated notes 2,844 9,707 8,473 9,707 Effect of stock options - 5,442 - 6,038 ----------------- ----------------- Diluted $167,774 307,773 $ 0.55 $394,263 306,249 $ 1.29 ========================= ======================== MANAGEMENT'S DISCUSSION AND ANALYSIS OPERATING RESULTS Revenue and earnings again reached record levels during the quarter ended March 31, 1998. Revenue and revenue growth by ADP's major business units are shown below: Revenue ----------------------------------- 3 Months Ended 9 Months Ended March 31, March 31, 1998 1997 1998 1997 ------ ------ ------ ------ ($ in millions) Employer Services $ 791 $ 667 $2,045 $1,708 Brokerage Services 281 226 736 614 Dealer Services 180 164 519 479 Other 57 69 196 232 ------ ------ ------ ------ $1,309 $1,126 $3,496 $3,033 ====== ====== ====== ====== Revenue Growth ----------------------------------- 3 Months Ended 9 Months Ended March 31, March 31, 1998 1997 1998 1997 ------ ------ ------ ------ Employer Services 19% 16% 20% 20% Brokerage Services 24 12 20 14 Dealer Services 10 13 8 19 Other (17) (37) (16) (3) ----- ----- ----- ----- 16% 9% 15% 17% ===== ===== ===== ===== Consolidated revenue for the quarter grew 16% from last year to $1,309 million. Revenue growth in the Company's three largest businesses, Employer, Brokerage and Dealer Services, was strong at 19%, 24%, and 10%, respectively. The primary components of "Other revenue" are claims services, services for wholesalers, 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 18% to $279 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 16% to $191 million. The effective tax rate of 31.7% increased from 30.3% in the comparable quarter last year, primarily as a result of the greater proportion of taxable earnings versus non-taxable interest earnings. Basic earnings per share grew 14% to $.64 from $.56 last year. For the full year, the Company expects over 15% growth in revenue and pretax earnings and basic earnings per share growth in the area of 13-14% above 1997's $1.80 per share (which is prior to non-recurring items). 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, 1998, the Company had cash and marketable securities of approximately $1.7 billion. Shareholders' equity was approximately $3.2 billion and the ratio of long-term debt to equity was 7%. Capital expenditures for fiscal 1998 are expected to be approximately $200 to $225 million depending on the completion of certain projects, compared to $175 million in fiscal 1997. During the first nine months of fiscal 1998, ADP purchased 896,000 shares of common stock for treasury at an average price of approximately $46. The Company has remaining Board authorization to purchase up to 8.5 million additional shares to fund equity related employee benefit plans. During the first nine months of fiscal 1998, 392,000 of the Company's zero coupon convertible subordinate notes were converted to over 5 million shares of common stock. The Company's investment portfolio consists primarily of high grade fixed income investments, such as AA or better rated fixed income municipal instruments, maturing in less than 7 years, and such portfolio does not subject the Company to material market risk exposures. PART II. OTHER INFORMATION Except as noted below, all other items are 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: May 13, 1998 /s/ Richard J. Haviland -------------------------- Richard J. Haviland Chief Financial Officer (Principal Financial Officer) ----------------------------- (Title) EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS JUN-30-1998 JUL-01-1997 MAR-31-1998 871,040 233,651 779,743 41,160 23,243 2,046,274 1,456,109 916,997 4,948,570 1,227,794 223,596 0 0 31,429 3,210,789 4,948,570 0 3,495,853 0 2,818,573 0 10,777 19,463 647,040 203,640 443,400 0 0 0 443,400 1.50 1.46
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