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 DecemberMarch 31, 19961997 Commission File Number 1-5397
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Automatic Data Processing, Inc.Inc
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(Exact name of registrant as specified in its charter)charter )
Delaware 22-1467904
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One ADP Boulevard, Roseland, New Jersey 07068
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (201) 994-5000
No change
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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
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As of January 31,May 2, 1997, there were 292,060,000 common292,832,377 shares outstanding.
Form 10Q
Part I. Financial Information
Statements of Consolidated EarningsSTATEMENTS OF CONSOLIDATED EARNINGS
-----------------------------------
(In thousands, except per share amounts)
Three Months Ended SixNine Months Ended
DecemberMarch 31, DecemberMarch 31,
---------------------- ----------------------
1997 1996 19951997 1996
1995---- ---- ---- ----
Revenue $995,575 $819,723 $1,906,305 $1,566,817$1,126,284 $1,031,864 $3,032,589 $2,598,681
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Operating expenses 418,015 342,690 809,535 659,467440,329 428,360 1,249,684 1,087,828
General, administrative and
selling expenses 261,531 210,343 522,320 425,365308,063 276,730 830,563 702,095
Depreciation and amortization 55,284 48,618 108,353 93,08959,163 55,298 167,515 148,386
Systems development and 74,849 63,762 213,977 176,808
programming costs
73,065 58,867 139,128 113,046
Interest expense 6,970 8,605 14,159 14,450
814,865 669,123 1,593,495 1,305,4177,250 7,804 21,410 22,254
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889,654 831,954 2,483,149 2,137,371
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EARNINGS BEFORE INCOME TAXES 180,710 150,600 312,810 261,400236,630 199,910 549,440 461,310
Provision for income taxes 53,130 41,700 91,950 70,60071,700 56,010 163,650 126,610
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NET EARNINGS 127,580 108,900 220,860 190,800$ 164,930 $ 143,900 $ 385,790 $ 334,700
========== ========== ========== ==========
EARNINGS PER SHARE $ .44.56 $ .38.49 $ .761.33 $ .661.16
========== ========== ========== ==========
Dividends per share $ .12.115 $ .10 $ .22.33 $ .1875.2875
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See notes to consolidated statements.
Form 10Q
Consolidated Balance Sheets
(In thousands)
DecemberCONSOLIDATED BALANCE SHEETS
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(IN THOUSANDS)
March 31, June 30,
Assets 1997 1996
1996- - ------ ---------- ----------
Cash and cash equivalents $ 462,300537,817 $ 314,416
Short-term marketable securities 372,687445,992 321,743
Accounts receivable 577,787632,300 507,198
Other current assets 246,899233,219 310,926
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Total current assets 1,659,6731,849,328 1,454,283
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Long-term marketable securities 419,118395,083 462,461
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Long-term receivables 178,507178,378 188,184
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Land and buildings 352,070343,085 322,975
Data processing equipment 621,146639,715 578,935
Furniture, leaseholds and other 348,345359,266 330,610
1,321,561---------- ----------
1,342,066 1,232,520
Less accumulated depreciation (812,174) (764,254)
509,387841,311 764,254
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500,755 468,266
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Other assets 21,54925,621 19,597
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Intangibles 1,335,5551,334,160 1,247,094
$ 4,123,789---------- ----------
$4,283,325 $3,839,885
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Liabilities and Shareholders' Equity
Notes payable $ 132,236126,626 $ 90,746
Accounts payable 93,37796,986 96,351
Accrued expenses & other current
liabilities 594,208704,840 590,355
Income taxes 62,38665,813 52,954
Current portion of long-term debt 1,8311,093 5,207
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Total current liabilities 884,038995,358 835,613
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Long-term debt 418,300402,672 403,743
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Other liabilities 104,85387,803 78,508
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Deferred income taxes 89,329107,815 112,880
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Deferred revenue 100,650105,826 93,795
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Shareholders' equity:
Common stock 31,429 31,428
Capital in excess of par value 425,821402,527 406,200
Retained earnings 2,697,0432,828,111 2,537,952
Treasury stock (627,674)(678,216) (660,234)
2,526,619---------- ----------
2,583,851 2,315,346
$ 4,123,789---------- ----------
$4,283,325 $3,839,885
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See notes to consolidated statements.
Form 10Q
Condensed Statements of Consolidated Cash Flows
(In thousands)
SixCONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
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(IN THOUSANDS)
Nine Months Ended
DecemberMarch 31,
1997 1996
1995------ -------
Cash Flows From Operating Activities:
Net earnings $ 220,860385,790 $ 190,800334,700
Expenses not requiring outlay of cash 112,720 101,851203,638 158,300
Changes in operating net assets (17,353) 23,6291,970 8,060
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Net cash flows from operating activities 316,227 316,280587,458 501,060
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Cash Flows From Investing Activities:
Purchase of marketable securities (602,688) (532,254)(832,442) (918,839)
Proceeds from sale of marketable securities 595,087 693,652773,256 1,031,265
Capital expenditures (79,093) (79,455)(111,799) (115,844)
Other changes to property, plant and equipment (752) 1,7386,076 6,804
Additions to intangibles (32,711) -(40,961) (14,040)
Acquisitions of businesses (64,494) (481,915)(92,238) (466,105)
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Net cash flows from investing activities (184,651) (398,234)(298,108) (476,759)
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Cash Flows From Financing Activities:
Proceeds from issuance of notes 41,780 50,35045,802 92,378
Repayments of long-term debt (3,991) (9,549)(52,426) (11,769)
Proceeds from issuance of common stock 78,324 69,41369,323 107,952
Repurchases of common stock (37,358) (47,727)(107,990) (55,097)
Dividends paid (62,447) (54,025)(62,438) (83,181)
Other - (1,856)41,780 (15,360)
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Net cash flows from financing activities 16,308 6,606(65,949) 34,923
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Net change in cash and cash equivalents 147,884 (75,348)223,401 59,224
Cash and cash equivalents, at beginning of period 314,416 313,612
Cash and cash equivalents, at end of period $ 462,300537,817 $ 238,264372,836
========= =========
See notes to consolidated statements.
Form 10Q
Notes to Consolidated StatementsNOTES TO CONSOLIDATED STATEMENTS
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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, 1996.
Note A - The results of operations for the sixnine months ended DecemberMarch 31, 19961997 may
not be indicative of the results to be expected for the year ending
June 30, 1997.
Note B - Earnings per share are based on a weighted average number of shares
outstanding, which for the quarters ended DecemberMarch 31, 1997 and 1996 were
292,624,000 and 1995 were 290,502,000 and 288,001,000291,311,000 respectively. The weighted average number
of shares for the sixnine months ended DecemberMarch 31, 1997 and 1996 were
290,504,000 and 1995
were 289,493,000 and 287,866,000289,020,000 respectively.
Form 10Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
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OPERATING RESULTS
Revenue and earnings again reached record levels during the quarter ended DecemberMarch
31, 1996.1997.
Revenue and revenue growth by ADP's major business groupsunits are shown below:
Revenue
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3 Months Ended 69 Months Ended
DecemberMarch 31, DecemberMarch 31,
1997 1996 19951997 1996
1995------ ------ ------ ------
($ in millions)
Employer Services (a) $ 551667 $ 445 $1,042 $ 843575 $1708 $1418
Brokerage Services 200 169 388 338226 202 614 539
Dealer Services 162 132 315 258164 145 479 403
Other (a) 83 74 161 128
$ 996 $ 820 $1,906 $1,56769 110 232 239
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$1126 $1032 $3033 $2599
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Revenue Growth
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3 Months Ended 69 Months Ended
DecemberMarch 31, DecemberMarch 31,
1997 1996 19951997 1996
1995------ ------ ------ ------
Employer Services (a) 24% 16% 24% 15%22% 20% 17%
Brokerage Services 18 22 15 2312 19 14 21
Dealer Services 23 21 22 2613 29 19 28
Other (a) 12 76 26 59
21% 22% 22% 21%(37) 150 (3) 91
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9% 29% 17% 24%
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(a) reclassified
Consolidated revenue forRevenue exceeded $1.1 billion in the quarter grew 21%ended March 31, 1997, an increase
of 12% before factoring in a non-recurring 3% reduction in revenue arising from
last
year to $996 million.the recent disposition of GSI's facilities management business. Revenue growth
in the Company's three largest businesses, Employer, Brokerage and Dealer
Services, was strong at 24%16%, 18%12%, and 23%13%, respectively. Each includes some
acquisitions.
The primary components of "Other revenue" are claims services, services for
wholesalers, the non-employer services businesses of GSI, interest income and
interest income.foreign exchange differences. 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. In
prior years, this standard rate was 7.8%. In fiscal 97'97 the standard rate was
changed to 6.0% and, accordingly, the previously reported balances for Employer
Services and "Other revenue" have been reclassified.
Pretax earnings for the quarter increased 20%18% from last year. As expected,
overall corporate margins were slightly
lower than inimproved compared to the comparable prior year's quarter becauseas we
passed the anniversary date of the impactseveral of prior yearlast year's acquisitions. 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%15%
to $128$165 million. The effective tax rate of 29.4%30.3% increased from 27.7%28.0% in the
comparable quarter last year, primarily because of the impact of non-deductible amortization of
intangibles arising from the GSI acquisition and an increased mix of taxable vs.
non-taxable investments.
Earnings per share grew 16%14% to $.44$.56 from $.38$.49 last year.
For the full year, we continue to expect double-digit
revenue growth and about 15% earnings per share growth.growth
of approximately 15%.
FINANCIAL CONDITION
The Company's financial condition and balance sheet remain exceptionally strong,
and operations continue to generate a strong cash flow. At DecemberMarch 31, 1996,1997, the
Company had cash and marketable securities in excess of $1.2approximately $1.4 billion.
Shareholders' equity exceeded $2.5was approximately $2.6 billion and the ratio of long-term
debt to equity was 17%16%.
Capital expenditures for fiscal 1997 are expected to approximate $200 million,
compared to $168 million in fiscal 1996.
During the first halfnine months of fiscal 97,'97, ADP purchased 992,000about 2.7 million
shares of common stock for treasury at an average price of about $38.$40. The
Company has remaining Board authorization to purchase up to 6.64.9 million
additional shares to fund equity related employee benefit plans.
Form 10Q
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 2. Changes in Securities
On October 4, 1996, the Company issued an aggregate
amount of 96,982 shares of its Common Stock to the
three shareholders of a company acquired by the Company
in exchange for all of the issued6. Exhibits and outstanding
shares of capital stock of the acquired company
pursuant to the terms of a stock purchase agreement.
No underwriters were involved in the foregoing sale of
securities. The Company issued the shares without
registration under the Securities Act of 1933,Reports on Form 8-K.
(a) Exhibits
Exhibit
Number Exhibit
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3.2 By-laws, as amended in reliance upon the exemption therefrom set
forth in Section 4(2) of such Act, relating to sales by
an issuer not involving a public offering.
Item 4. Submission of Matters to a Vote of Security
Holders
The Company's Annual Meeting of the Stockholders was
heldand restated on November 12, 1996. The following members were
elected to the Company's Board of Directors to hold
office for the ensuing year.
Nominee In Favor Withheld
Gary C. Butler 221,180,456 709,142
Joseph A. Califano Jr 221,110,149 779,449
Leon G. Cooperman 221,277,002 612,596
George H. Heilmeier 221,257,241 632,357
Ann Dibble Jordan 221,225,079 664,519
Harvey M. Krueger 221,205,991 683,607
Charles P. Lazarus 220,910,099 979,499
Frederic V. Malek 221,232,167 657,431
Henry Taub 221,252,820 636,778
Laurence A. Tisch 220,832,311 1,057,287
Arthur F. Weinbach 221,210,653 678,945
Josh S. Weston 221,177,268 712,330
The result of the voting on the following additional
item were as follows:
(a) Ratify the appointment of Deloitte & Touche LLP to
serve as the Company's independent certified public
accountants for the fiscal year which began on July 1,
1996.
The votes of the stockholders on this amendment were as
follows:
In Favor Opposed Abstained
220,987,378 423,795 478,425March 24, 1997
Form 10Q
SIGNATURES
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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.
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(Registrant)
Date: February 13,May 9, 1997 s/
____________________________/s/ Richard J. Haviland
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Richard J. Haviland
Vice President, Finance
(Principal Financial Officer)
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(Title)