Automatic Data Processing, Inc., also known as ADPยฎ, is a leading global technology company providing human capital management (HCM) solutions. With over 1.1 million clients, ADP is considered a leading provider of HR services such as talent, time management, benefits and payroll.
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, 1997 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 November 6, 1997 there were 292,492,256 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, 1997 1996 -------- -------- Revenue $1,038,498 $910,730 ---------- -------- Operating expenses 443,383 391,520 General, administrative and 289,446 260,789 selling expenses Depreciation and amortization 57,430 53,068 Systems development and programming costs 87,289 66,063 Interest expense 7,510 7,190 ---------- -------- 885,058 778,630 ---------- -------- EARNINGS BEFORE INCOME TAXES 153,440 132,100 Provision for income taxes 48,030 38,820 ---------- -------- NET EARNINGS $ 105,410 $ 93,280 ========== ======== EARNINGS PER SHARE $ .36 $ .32 ========== ======== Dividends per share $ .115 $ .10 ========== ======== See notes to consolidated statements.
Form 10Q CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) September 30, June 30, 1997 1996 ---------- ---------- ASSETS Cash and cash equivalents $ 664,650 $ 590,578 Short-term marketable securities 376,643 434,341 Accounts receivable 601,413 605,068 Other current assets 177,830 175,335 ---------- ---------- Total current assets 1,820,536 1,805,322 ---------- ---------- Long-term marketable securities 522,889 470,164 ---------- ---------- Long-term receivables 169,606 176,771 ---------- ---------- Land and buildings 364,871 361,594 Data processing equipment 647,776 626,013 Furniture, leaseholds and other 376,324 364,161 ---------- ---------- 1,388,971 1,351,768 Less accumulated depreciation (863,944) (832,423) ---------- ---------- 525,027 519,345 ---------- ---------- Other assets 92,730 96,383 ---------- ---------- Intangibles 1,405,298 1,314,787 ---------- ---------- $4,536,086 $4,382,772 ---------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY Notes payable $ 206,320 $ 129,168 Accounts payable 112,918 110,266 Accrued expenses & other current liabilities 752,709 717,868 Income taxes 105,258 61,479 Current portion of long-term debt 1,401 1,091 ---------- ---------- Total current liabilities 1,178,606 1,019,872 ---------- ---------- Long-term debt 405,517 401,162 ---------- ---------- Other liabilities 99,480 91,685 ---------- ---------- Deferred income taxes 54,279 102,751 ---------- ---------- Deferred revenue 99,665 106,737 ---------- ---------- Shareholders' equity: Common stock 31,429 31,429 Capital in excess of par value 486,702 480,492 Retained earnings 2,994,021 2,922,317 Treasury stock (731,437) (697,887) Translation adjustment (82,176) (75,786) ---------- ---------- 2,698,539 2,660,565 ---------- ---------- $4,536,086 $4,382,772 ---------- ---------- See notes to consolidated statements.
Form 10Q CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (IN THOUSANDS) Three Months Ended September 30, 1997 1996 ------ ------ CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $105,410 $ 93,280 Expenses not requiring outlay of cash 75,847 47,399 Changes in operating net assets 74,391 72,364 --------- -------- Net cash flows from operating activities 255,648 213,043 --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of marketable securities (126,146) (92,880) Proceeds from sale of marketable securities 132,961 71,079 Capital expenditures (40,442) (38,477) Other changes to property, plant and equipment 2,874 1,656 Additions to intangibles (11,680) (4,036) Acquisitions of businesses (154,793) (22,446) --------- -------- Net cash flows from investing activities (197,226) (85,104) --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from note payable 90,088 - Repayments of long-term debt (6,802) (3,557) Proceeds from issuance of common stock 4,386 21,028 Repurchases of common stock (38,316) (28,815) Dividends paid (33,706) (29,018) Other - 722 --------- -------- Net cash flows from financing activities 15,650 (39,640) --------- -------- Net change in cash and cash equivalents 74,072 88,299 Cash and cash equivalents, at beginning of period 590,578 314,416 --------- -------- Cash and cash equivalents, at end of period $ 664,650 $402,715 ========= ======== See notes to consolidated statements.
Form 10Q NOTES TO CONSOLIDATED STATEMENTS The information furnished herein reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods. All adjustments are of a normal recurring nature. These statements should be read in conjunction with the annual financial statements and related notes of the Company for the year ended June 30, 1997. Note A - The results of operations for the three months ended September 30, 1997 may not be indicative of the results to be expected for the year ending June 30, 1998. Note B - Earnings per share are based on the weighted average number of shares outstanding, which for the quarters ended September 30, 1997 and 1996 were 292,628,000 and 288,368,000 respectively.
Form 10Q MANAGEMENT'S DISCUSSION AND ANALYSIS OPERATING RESULTS Revenue and earnings again reached record levels during the quarter ended September 30, 1997. Revenue and revenue growth by ADP's major service groups are shown below: Revenue Revenue Growth ----------------- ----------------- 3 Months Ended 3 Months Ended September 30, September 30, ----------------- ----------------- 1997 1996 1997 1996 ------- ------ ------ ------- ($ in millions) Employer Services $ 587 $490 20% 23% Brokerage Services 223 188 19 12 Dealer Services 166 152 9 21 Other 62 81 (23) 47 ------ ---- --- -- $1,038 $911 14% 22% ====== ==== === == Consolidated revenue for the quarter of $1,038 million was up 14% from last year. Revenue growth in the Company's three largest businesses, Employer, Brokerage and Dealer Services, was strong at 20%, 19%, and 9%, respectively. Each includes some acquisitions. 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 6.0%. Pretax earnings for the quarter increased 16% from last year. Consolidated margins increased slightly in the quarter, due primarily to the impact of higher trading volume on the Brokerage Services group. 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 13% to $105 million. The effective tax rate was 31.3%,increased from 29.4% in the comparable quarter last year, primarily as a result of the greater weighting of taxable versus non-taxable earnings. Earnings per share grew 13% to $.36 from $.32 last year. For the full year, we expect close to 15% growth in revenue and pretax earnings and earnings per share growth of 12 to 14% above 1997's $1.80 per share (which is prior to non-recurring items in 1997).
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, 1997, the Company had cash and marketable securities of $1.6 billion. Shareholders' equity was $2.7 billion and the ratio of long-term debt to equity was 15.0%. Capital expenditures for fiscal 1998 are expected to approximate $225 million, compared to $175 million in fiscal 1997. During the quarter, ADP purchased about 842,000 shares of common stock for treasury at an average price of about $45. The Company has remaining Board authorization to purchase up to 8.6 million additional shares to fund equity related employee benefit plans. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's market risk sensitive instruments do not subject the Company to material market risk exposures. 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) Date: November 12, 1997 /s/ Richard J. Haviland ------------------------ Richard J. Haviland Chief Financial Officer (Principal Financial Officer) ----------------------------- (Title)