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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 23, 1997
CERIDIAN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-1969 52-0278528
(State of other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
8100 34th Avenue South, Minneapolis, Minnesota 55425
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612-853-8100)
(Former name or former address, if changed since last report)
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Item 5. Other Events
Statements regarding Ceridian Corporation (the "Company")
contained in this Current Report on Form 8-K, in other Company
filings with the Securities and Exchange Commission, in press
releases and other Company publications, and made by Company
management that are not historical in nature, particularly those
that utilize terminology such as "expects," "anticipates,"
"believes" or "plans," are forward-looking statements based on
current expectations and assumptions, and entail various risks
and uncertainties that could cause actual results to differ
materially from those expressed in such forward-looking
statements. Important factors known to the Company that could
cause such material differences are discussed in the following
paragraphs.
The Company's earnings expectations for 1997 assume steadily
decreasing interest expense from 1996 levels as operating cash
flows reduce revolving debt. It is also assumed that no
significant borrowings would be required to finance acquisitions
during 1997 and that interest rates would remain relatively
constant during the year.
Revenue and earnings from Comdata's gaming services in 1997
could be adversely affected if the rate of decline in the number
of credit card cash advance transactions or the rate of increase
in agent commissions paid to gaming establishments is greater
than anticipated due to increasing competition in providing such
advances and from alternative sources of cash such as ATM
machines. In January 1997, a major credit card association
applied a rate increase to a majority of Comdata's credit card
advance transactions. While Comdata will seek to offset the
impact of this change, there can be no assurance as to the degree
to which it will be able to do so.
An assessment of the status of the CII payroll processing
software development project was conducted with the assistance of
an outside consultant during the fourth quarter 1996. The
assessment confirmed the viability of using the CII software as a
high volume service bureau processor, and also verified a number
of areas in which additional development efforts would be
required to enable the CII software to operate cost effectively
in such an environment. The Company is proceeding with these
development efforts as well as the beta testing of version 1.5 of
this software. The Company expects that completion of the
additional development efforts necessary to ready the CII
software for widespread release during 1998 will entail an
additional $35 to $40 million in capitalized costs. Although the
Company expects to install a limited number of customers, most
with complex processing needs, on the CII system during 1997, the
Company does not expect the CII software to contribute to margin
improvements prior to its widespread release. The potential for
CII-related margin improvements during and after widespread
release will be affected by, among other things, amortization of
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capitalized development costs, the degree to which customers opt
to upgrade to the CII software (particularly smaller customers
with less complicated processing requirements), and the Company's
ability to manage the incremental costs of moving existing
customers to the CII system. Because of the continuing role to
be played by the Company's existing payroll processing software
before and after widespread release of the CII software, the
Company expects to continue to invest in updates and enhancements
to that software and to focus on efforts, such as consolidating
existing processing centers and increasing installation
efficiencies, to reduce costs associated with its current payroll
processing system. Delays in the widespread release of the CII
software, difficulties in the transition of existing payroll
customers, unanticipated technological problems, or the inability
to reduce costs associated with the existing payroll processing
system could have an adverse effect on the revenue and
profitability of the Company's Human Resources Group ("HRG").
Because a sizeable portion of HRG's revenue is derived from
the investment of tax filing deposits temporarily held pending
remittance on behalf of customers to tax filing authorities,
changes in interest rates will affect the Company's revenue from
this source. The Company has sought to lessen the impact of
interest rate changes, particularly interest rates decreases, on
this source of revenue by entering into a series of interest rate
collar transactions with an aggregate notional amount of $700
million and an average interest rate cap and floor of 7.3% and
5.4%, respectively. Also expected to affect this source of
revenue in 1997 is the July 1 completion of the phased
introduction of IRS regulatory changes that reduce by one day the
period of time the Company may earn investment income on certain
tax filing deposits. While the Company will seek to offset the
impact of this regulatory change by increasing fees or collecting
tax filing deposits earlier, there can be no assurance as to the
degree to which it will be able to do so.
A portion of the Company's expected revenue growth,
particularly in Computing Devices and Comdata, is attributable to
the planned introduction of new or enhanced product and service
offerings or the expansion of existing products and services into
new markets, such as adapting products initially developed for
military applications to commercial markets. The degree to which
the Company is successful in these efforts depends on a variety
of factors, including product and service selection, effective
sales and marketing efforts, the level of market acceptance and
the avoidance of difficulties or delays in development or
introduction.
Continuing consolidation in the radio broadcasting industry
has tended to increase the bargaining power of large radio
groups, which could put pressure on the pricing of Arbitron's
radio ratings service, from which Arbitron derives a substantial
majority of its total revenue. While the Company will seek to
avoid or minimize price concessions in contract negotiations, and
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will seek to offset the revenue impact of any concessions that
may be granted by providing ratings to additional stations within
a radio group and by providing additional software and other
services, there can be no assurance as to the degree to which it
will be able to do so.
The Company's financial performance during 1997 could
also be significantly affected by other, more general factors.
Trade, monetary and fiscal policies, and political and economic
conditions may substantially change, with corresponding impacts
on the industries which the Company serves, particularly the
defense industry and more economically sensitive industries such
as trucking and gaming. Currency fluctuations could have an
increasing impact on the Company's revenue in light of the
increasing portion of Computing Devices' revenue derived from its
overseas operations and the Company's developing payroll
processing operations outside the U.S. Competition may become
more intense than anticipated, including as a result of industry
consolidation, such as in the defense industry, or by the entry
of new competitors, such as in the trucking services and gaming
industries. The Company's ability to effectively manage internal
growth and assimilate recent and future acquisitions could also
have an impact on its financial performance. The Company may
also be affected by unanticipated costs or other effects of legal
and administrative proceedings now pending or that may be
instituted in the future, including a state-sponsored examination
expected to begin in February 1997 of Comdata's compliance with
the unclaimed property laws of most states in connection with
funds transfer transactions that do not finally settle or clear
in the ordinary course of business.
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
CERIDIAN CORPORATION
Date: January 23, 1997 By: /s/J. R. Eickhoff
Executive Vice President
and Chief Financial
Officer
