<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 1999
-----------------------------------------------
Commission file number 1-1969
---------------------------------------------------------
CERIDIAN CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-0278528
- -------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) 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, former address and former fiscal year if changed from last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--
The number of shares of registrant's Common Stock, par value $.50 per share,
outstanding as of April 30, 1999, was 144,393,688.
<PAGE>
CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q
INDEX
Pages
-----
Part I. Financial Information
Item 1. Financial Statements
-----------------------------
Consolidated Statements of Operations
for the three month periods ended
March 31, 1999 and 1998 . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets as of
March 31, 1999 and December 31, 1998. . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for the three
month periods ended March 31, 1999 and 1998. . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . 6
In the opinion of the Company, the unaudited consolidated
financial statements reflect all adjustments (consisting only of
normal recurring accruals, except as set forth in the notes to
consolidated financial statements) necessary to present fairly the
financial position as of March 31, 1999, and results of operations and
cash flows for the three month periods ended March 31, 1999 and 1998.
The results of operations for the three month period ended
March 31, 1999 are not necessarily indicative of the results to be
expected for the full year.
The consolidated financial statements should be read in
conjunction with the notes to consolidated financial statements.
Item 2. Management's Discussion and Analysis of Financial
- ----------------------------------------------------------
Condition and Results of Operations . . . . . . . . . . . 9
-----------------------------------
Part II. Other Information
Item 5. Other Information. . . . . . . . . . . . . . . . .13
--------------------------
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . .13
-----------------------------------------
Signature. . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
-2-
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS Ceridian Corporation
(Unaudited) and Subsidiaries
(Dollars in millions, except per share data)
- --------------------------------------------------------------------------------------
For Periods Ended
March 31,
Three Months
- --------------------------------------------------------------------------------------
1999 1998
<S> <C> <C>
Revenue $ 321.4 $ 282.3
Costs and Expenses
Cost of revenue 144.8 128.9
Selling, general and administrative 92.6 80.5
Research and development 18.6 17.4
Other expense (income) 0.6 0.6
------- -------
Total costs and expenses 256.6 227.4
------- -------
Earnings before interest and taxes 64.8 54.9
Interest income 1.7 2.7
Interest expense (0.9) (0.7)
------- -------
Earnings before income taxes 65.6 56.9
Income tax provision 23.8 21.1
------- -------
Net earnings $ 41.8 $ 35.8
------- -------
------- -------
Basic earnings per share $ 0.29 $ 0.25
Diluted earnings per share $ 0.28 $ 0.24
Shares used in calculations (in 000's)
Weighted average shares (basic) 144,086 144,110
Other dilutive securities 5,025 3,085
------- -------
Total (diluted) 149,111 147,195
------- -------
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
FORM 10-Q
CONSOLIDATED BALANCE SHEETS Ceridian Corporation
(Unaudited) and Subsidiaries
(Dollars in millions, except per share data)
- --------------------------------------------------------------------------------------
March 31, December 31,
Assets 1999 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
Cash and equivalents $ 110.3 $ 101.8
Trade receivables, less allowance of $20.7 and $21.7 366.2 343.4
Other receivables 41.1 41.1
Current portion of deferred income taxes 127.8 127.8
Other current assets 19.9 19.6
------- -------
Total current assets 665.3 633.7
Property, plant and equipment, net 93.9 91.3
Goodwill and other intangibles, net 387.6 377.5
Software and development costs, net 27.9 26.1
Prepaid pension cost 105.4 103.4
Deferred income taxes, less current portion 32.2 53.4
Other noncurrent assets 2.3 4.3
------- -------
Total assets $ 1,314.6 $ 1,289.7
------- -------
------- -------
- --------------------------------------------------------------------------------------
Liabilities And Stockholders' Equity
- --------------------------------------------------------------------------------------
Short-term debt and current
portion of long-term obligations $ 0.3 $ 0.3
Accounts payable 51.9 65.0
Drafts and settlements payable 111.8 111.0
Customer advances 13.6 13.6
Deferred income 27.6 25.4
Accrued taxes 76.5 76.2
Employee compensation and benefits 55.6 74.4
Other accrued expenses 73.1 70.8
------- -------
Total current liabilities 410.4 436.7
Long-term obligations, less current portion 51.6 54.2
Deferred income taxes 4.8 3.6
Restructure reserves, less current portion 28.6 29.0
Employee benefit plans 74.4 74.1
Other noncurrent liabilities 41.4 41.5
Stockholders' equity 703.4 650.6
------- -------
Total liabilities and
stockholders' equity $ 1,314.6 $ 1,289.7
------- -------
------- -------
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------------
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
FORM 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS Ceridian Corporation
(Unaudited) and Subsidiaries
(Dollars in millions)
- --------------------------------------------------------------------------------------
For Periods Ended March 31,
Three Months
1999 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 41.8 $ 35.8
Adjustments to reconcile net earnings
to net cash provided by (used for)
operating activities:
Deferred income tax provision 20.6 17.9
Depreciation and amortization 14.7 11.9
Other 0.6 6.0
Net change in working capital items:
Trade and other receivables (17.3) (21.8)
Accounts payable (5.6) (12.3)
Drafts and settlements payable 0.8 31.3
Employee compensation and benefits (18.6) (12.9)
Accrued taxes 0.8 (8.2)
Other current assets and liabilities 0.4 (10.9)
------- -------
Net cash provided by (used for) operating activities 38.2 36.8
- --------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Expended for property, plant and equipment (7.2) (9.6)
Expended for software and development costs (9.4) (4.6)
Expended for business acquisitions, less
cash acquired (20.3) (140.4)
Proceeds from sales of businesses and assets 0.2 37.9
------- -------
Net cash provided by (used for) investing activities (36.7) (116.7)
- --------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Revolving credit and overdrafts, net (4.0) 79.8
Repayment of other debt (0.1) (0.1)
Repurchase of stock (0.1) (100.6)
Exercise of stock options and other 11.2 16.3
------- -------
Net cash provided by (used for) financing activities 7.0 (4.6)
- --------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) 8.5 (84.5)
Cash and equivalents at beginning of period 101.8 268.0
------- -------
Cash and equivalents at end of period $ 110.3 $ 183.5
------- -------
------- -------
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------------
</TABLE>
-5-
<PAGE>
FORM 10-Q
CERIDIAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1999
(Dollars in millions, except per share data)
(Unaudited)
STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ------------
<S> <C> <C>
Common Stock
Par value - $.50
Shares authorized - 200,000,000
Shares issued - 161,685,596 and 161,685,596 $ 80.8 $ 80.8
Shares outstanding - 144,208,016 and 143,513,976
Additional paid-in capital 1,106.8 1,110.5
Accumulated deficit (95.1) (136.8)
Treasury stock, at cost (17,477,580 and
18,171,620 common shares) (375.8) (390.8)
Accumulated other comprehensive income:
Cumulative translation adjustment (3.8) (3.6)
Pension liability adjustment (9.5) (9.5)
--------- ------------
Total stockholders' equity $ 703.4 $ 650.6
--------- ------------
--------- ------------
</TABLE>
<TABLE>
<CAPTION>
OTHER EXPENSE (INCOME)
For Periods Ended March 31,
Three Months
1999 1998
--------- --------
<S> <C> <C>
Foreign currency translation expense (income) $ 0.1 $ 0.1
Minority interest in operations of consolidated affiliates 0.7 0.5
Other expense (income) (0.2) --
--------- --------
Total $ 0.6 $ 0.6
--------- --------
--------- --------
</TABLE>
-6-
<PAGE>
FORM 10-Q
CERIDIAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1999
(Dollars in millions, except per share data)
(Unaudited)
INVESTING ACTIVITY
During first quarter 1999, Ceridian acquired a majority interest in Stored Value
Systems, Inc. (SVS), a former subsidiary of National City Corporation (NCC),
from a group of investors for its Comdata operations. SVS provides a
private-label electronic retail cash card to retailers and oil companies.
Ceridian has the option to purchase the remainder of SVS from the investor group
at a later date. The acquisition required payments by Ceridian of $7.3 to SVS
to retire an amount due to NCC and $13.0 to the investor group. Revenue of the
acquired business was approximately $15.0 in 1998.
<TABLE>
<CAPTION>
COMPREHENSIVE INCOME (LOSS)
For Periods Ended March 31,
Three Months
1999 1998
--------- --------
<S> <C> <C>
Net income $ 41.8 $ 35.8
Items of other comprehensive income:
Change in foreign currency translation adjustment (0.2) (1.4)
--------- --------
Comprehensive income $ 41.6 $ 34.4
--------- --------
--------- --------
</TABLE>
-7-
<PAGE>
FORM 10-Q
CERIDIAN CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1999
(Dollars in millions, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
CAPITAL ASSETS
- --------------------------------------------------------------------------------------
March 31, December 31,
1999 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
Property, Plant and Equipment
Land $ 0.8 $ 1.2
Machinery and equipment 199.0 189.8
Buildings and improvements 41.9 42.1
Construction in progress 7.6 4.0
--------- --------
249.3 237.1
Accumulated depreciation (155.4) (145.8)
--------- --------
Property, plant and equipment, net $ 93.9 $ 91.3
--------- --------
--------- --------
- --------------------------------------------------------------------------------------
Goodwill and Other Intangibles
Goodwill $ 371.3 $ 358.4
Accumulated amortization (41.4) (36.4)
--------- --------
Goodwill, net 329.9 322.0
--------- --------
Other intangible assets 74.5 77.0
Accumulated amortization (16.8) (21.5)
--------- --------
Other intangibles, net 57.7 55.5
--------- --------
Goodwill and other intangibles, net $ 387.6 $ 377.5
--------- --------
--------- --------
- --------------------------------------------------------------------------------------
Software and Development Costs
Purchased software $ 26.3 $ 31.9
Other software development cost 31.4 24.5
--------- --------
57.7 56.4
Accumulated amortization (29.8) (30.3)
--------- --------
Software and development costs, net $ 27.9 $ 26.1
--------- --------
--------- --------
- --------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Depreciation and Amortization For Periods Ended March 31,
Three Months
---------------------------
1999 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
Depreciation and amortization of property, plant
and equipment $ 8.8 $ 8.3
Amortization of goodwill 4.5 2.9
Amortization of other intangibles 1.8 1.2
Amortization of software and development costs 1.6 1.5
Other amortization (2.0) (2.0)
--------- --------
Total $ 14.7 $ 11.9
--------- --------
--------- --------
</TABLE>
-8-
<PAGE>
CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q
March 31, 1999
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS WITHIN
THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THE
STATEMENTS REGARDING CERIDIAN CORPORATION CONTAINED IN THIS REPORT THAT ARE NOT
HISTORICAL IN NATURE, PARTICULARLY THOSE THAT UTILIZE TERMINOLOGY SUCH AS "MAY,"
"WILL," "SHOULD," "EXPECTS," "ANTICIPATES," "ESTIMATES," "BELIEVES" OR
"PLANS, "OR COMPARABLE TERMINOLOGY, 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 CERIDIAN THAT
COULD CAUSE SUCH MATERIAL DIFFERENCES ARE IDENTIFIED AND DISCUSSED ON PAGE 15
OF CERIDIAN'S 1998 ANNUAL REPORT TO STOCKHOLDERS, WHICH IS INCORPORATED BY
REFERENCE INTO PART II, ITEM 7 OF CERIDIAN'S ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1998, WHICH DISCUSSION IS ALSO INCORPORATED HEREIN
BY REFERENCE. SUCH IMPORTANT FACTORS INCLUDE INTEREST RATE CHANGES AND
INVESTMENT INCOME FROM CUSTOMER DEPOSITS, EFFORTS TO EXPAND THE FLEET SERVICES
(LOCAL FUELING) MARKET, ABILITY TO INCREASE REVENUE FROM CROSS-SELLING EFFORTS
AND NEW PRODUCTS, ABILITY TO IMPROVE OPERATING MARGINS IN HUMAN RESOURCE
SERVICES (HRS), CUSTOMER RETENTION (PARTICULARLY IN HRS), EFFECTING SYSTEM
UPGRADES AND CONVERSIONS, REQUIRED YEAR 2000 EFFORTS, ABILITY TO ADAPT TO
CHANGING TECHNOLOGY, ACQUISITION RISKS (INCLUDING INTEGRATION OF RECENT AND
FUTURE ACQUISITIONS AND OBTAINING ANTICIPATED REVENUE SYNERGIES OR COST
REDUCTIONS), COMPETITIVE CONDITIONS AND OTHER FACTORS SUCH AS TRADE, MONETARY
AND FISCAL POLICIES AND POLITICAL AND ECONOMIC CONDITIONS.
Results of Operations
For the first quarter of 1999, Ceridian reported net earnings of $41.8 million,
or $.28 per diluted share of common stock, on revenue of $321.4 million. In the
first quarter of 1998, Ceridian reported net earnings of $35.8 million, or $.24
per diluted share of common stock, on revenue of $282.3 million. All share and
per share figures reflect a stock split announced on January 20, 1999 for
holders of record on February 10, 1999 and distributed in the form of a 100%
stock dividend on February 26, 1999.
<TABLE>
<CAPTION>
Statements of Operations Comparisons (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
- ------------------------------------ ----------------------------------------------
Amount Inc (Dec) % of Revenue
1999 1998 $ % 1999 1998
------- -------- ----- ----- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 321.4 $ 282.3 39.1 13.9 100.0 100.0
Cost of revenue 144.8 128.9 15.9 12.3 45.0 45.7
SG&A expense 92.6 80.5 12.1 15.3 28.8 28.5
R&D expense 18.6 17.4 1.2 6.7 5.8 6.2
Other expense 0.6 0.6 -- -- 0.2 0.2
Total costs 256.6 227.4 29.2 12.9 79.8 80.5
EBIT 64.8 54.9 9.9 17.9 20.1 19.5
Interest, net 0.8 2.0 (1.2) 60.0 0.3 0.7
Income taxes 23.8 21.1 2.7 12.7 7.4 7.5
Net earnings $ 41.8 $ 35.8 6.0 16.8 13.0 12.7
Diluted EPS $ 0.28 $ 0.24 0.04 16.7
</TABLE>
-9-
<PAGE>
CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q
March 31, 1999
CONSOLIDATED RESULTS
The growth in revenue benefited from business acquisitions that occurred
during 1998 as well as increased sales of products and services. Revenue
loss from business dispositions during 1998 and lower yields and average tax
filing balances reduced revenue growth. Costs directly related to revenue
showed some improvement, largely as a result of the integration of acquired
businesses into existing operations. Selling, general and administrative
expense increased due principally to the acquisition of LifeWorks in November
1998. Research and development expense increased, but fell as a percentage
of revenue. Costs for Year 2000 remediation contributed significantly to the
increase while the elimination of R&D costs for operations disposed during
1998 reduced reported costs. Interest income fell from $2.7 million to $1.7,
due to lower yields and average cash balances. Interest expense increased
slightly from $0.7 million to $0.9 million, primarily as a result of the
financing of the acquisitions of the Canadian payroll businesses in the first
quarter of 1998. The effective rate for the income tax provision declined
from 37.1% to 36.3%.
BUSINESS SEGMENT RESULTS
<TABLE>
<CAPTION>
Segment Comparisons (DOLLARS IN MILLIONS)
- ------------------------------------ ----------------------------------------------
Amount Inc (Dec) % of Revenue
1999 1998 $ % 1999 1998
------- -------- ----- ----- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Revenue
HRS $ 204.3 $ 173.4 30.9 17.9 63.6 61.4
Comdata 67.5 67.6 (0.1) 0.3 21.0 24.0
Arbitron 49.6 41.3 8.3 20.2 15.4 14.6
Total $ 321.4 $ 282.3 39.1 13.9 100.0 100.0
EBIT
HRS $ 36.7 $ 32.9 3.8 11.3 17.9 19.0
Comdata 12.3 10.1 2.2 21.5 18.2 15.0
Arbitron 15.8 11.9 3.9 32.3 31.8 28.9
Total $ 64.8 $ 54.9 9.9 17.9 20.1 19.5
</TABLE>
HUMAN RESOURCE SERVICES (HRS)
The acquisitions of the Canadian payroll businesses during the first
quarter of 1998 and the LifeWorks employee assistance business in November
1998 contributed significantly to the revenue increase. Payroll services,
software and consulting sales, including a second quarter 1998 effective
price increase for payroll services, also contributed to the revenue increase
in the quarterly comparison, along with growth in employee assistance
programs. Lower yields and average tax filing balances and the effect of
exchange rate changes on the Canadian dollar restrained revenue growth, as
did extended installation periods on the Source 500 software product. Costs
and expenses increased largely due to Year 2000 spending and training and
installation effort associated with the Source 500 product.
-10-
<PAGE>
CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q
March 31, 1999
COMDATA
Disregarding $5.8 million of gaming revenue recognized prior to the
disposition of this business in the first quarter of 1998, revenue increased 9%,
benefiting from selling more products to customers of the NTS transportation
business acquired in exchange for the gaming business. Growth in the fleet
services (local fueling) business and the acquisition of a majority interest in
Stored Value Systems in March 1999 also contributed to the revenue increase.
The expected loss of certain NTS customers, which accompanied the conversion of
NTS customers to Comdata systems, and lower average fuel prices restrained
revenue growth. The integration of NTS accounts into the Comdata transaction
processing system reduced costs and expenses through elimination of redundant
processes. Selling costs decreased due to the conclusion in mid-1998 of a
customer acquisition program in the fleet services business. Increased Year
2000 costs and an increase in provisions for fleet services bad debts offset
some of the improvement.
ARBITRON
The acquisition of Tapscan in May 1998 contributed significantly to the
revenue increase in the period comparisons. Delays in revenue recognition
related to major contract renewals in 1998 also affected the revenue comparison.
Without regard to these factors, revenue increased about 10%, due largely to
price escalators in multi-year customer contracts, increased software product
and report sales and an increased number of rating subscribers. Cost synergies
with Tapscan improved gross margin performance while other costs remained
consistent with or below the level of revenue growth.
FINANCIAL CONDITION
Cash balances increased during the first quarter of 1999 by $8.5 million as
operating cash inflows of $38.2 million and net inflows from financing
activities of $7.0 million exceeded investing outflows of $36.7 million. During
the comparable 1998 period, operating cash inflows provided $36.8 million, while
investing outflows of $116.7 million and financing outflows of $4.6 million
reduced cash balances by $84.5 million. Investing outflows during the 1999
period principally involved capital expenditures of $16.6 million, primarily for
hardware and software to be used in internal financial systems and initial costs
for a new Ceridian headquarters building. The new headquarters building is
expected to cost approximately $35.0 million and be ready for occupancy by June
2000. Also included in investing outflows is $20.3 million for the acquisition
of a majority interest in Stored Value Systems as further described in the notes
to the consolidated financial statements appearing elsewhere in this report.
Proceeds from stock option exercises and employee stock plan purchases provided
$11.2 million of financing cash inflows and repayment of debt of $4.0 million
produced the financing cash outflows. Ceridian made no open market purchases of
its common stock during the first quarter of 1999. The major factors affecting
investing and financing cash flows in the comparable 1998 period included
repurchases of Ceridian common stock and the net effect of acquisitions and
dispositions.
During the first quarter of 1999, Ceridian added two interest rate collars
related to Canadian dollar tax filing float balances. The counterparties to
these arrangements are Canadian commercial banks with a debt rating of "A" or
better. These collars have a total notional amount of $100 million in Canadian
dollars and expire in equal amounts in September 2000 and March 2001. The floor
strike level is 4.75% and the cap level averages 5.62%. In April 1999, Standard
& Poor's raised to triple "B" its corporate credit rating for Ceridian.
-11-
<PAGE>
CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q
March 31, 1999
As further described in Part II, Item 5 of this report, Ceridian announced
on May 3, 1999 an offer to purchase all outstanding voting common stock of ABR
Information Services, Inc. (ABR), a provider of comprehensive benefits
administration, payroll and human resource services to employers of all sizes,
for $25.50 per share. Financing for the transaction, which may amount to
approximately $763 million, is expected to be provided by a combination of cash
balances, borrowings under Ceridian's $250.0 million domestic revolving credit
facility ($4.9 million of which was utilized only for letters of credit at April
30, 1999) and a debt financing.
YEAR 2000 MATTERS
Ceridian's Year 2000 efforts, including status, costs, issues, risks and
contingency plans, are described on page 14 of its 1998 Annual Report to
Stockholders, which discussion is incorporated herein by reference.
Year 2000 remediation costs for Ceridian's systems, software and products,
which were expensed as incurred, amounted to $7.7 million in the first quarter
of 1999, compared to $1.0 million in the 1998 quarter. Total Year 2000
remediation costs through March 31, 1999 amounted to $25.4 million. Such costs
are estimated to be approximately $18 million for all of 1999. Year 2000
capitalizable replacement costs to date increased from $3.7 million at December
31, 1998 to $6.1 million at March 31, 1999. Such costs are estimated to be
approximately $8 million for all of 1999. Ceridian has not yet estimated Year
2000 costs for periods after 1999.
The Year 2000 remediation of customer's customized software that
facilitates the use of Ceridian's payroll services is the customer's
responsibility. As part of Ceridian's customer service efforts, it is
assisting these customers in their remediation efforts. These assistance
efforts will continue into the second half of 1999 due to the delay by some
customers in making their customized software available for remediation.
Ceridian's costs, and the related amount and percentage of cost recoveries
for these efforts, will be highly dependent on a number of factors, including
the extent to which customers utilize these services, the nature of the
required remediation, the cooperation of customers in making their customized
software available for remediation, the timing of these remediation efforts
and other alternatives available to the customer.
There has been much speculation as to whether technology-related companies
will experience a slowdown in sales in the latter part of 1999 and early 2000
due to Year 2000 matters. Although Ceridian's revenue would obviously be
impacted if companies reduce or halt spending on new services during this
period, Ceridian does not believe it will be impacted differently than its
competitors or other information services businesses in general.
-12-
<PAGE>
CERIDIAN CORPORATION AND SUBSIDIARIES
FORM 10-Q
March 31, 1999
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On May 3, 1999, Ceridian announced that pursuant to an Agreement and
Plan of Merger dated April 30, 1999 by and among it, a wholly owned
subsidiary of Ceridian and ABR Information Services, Inc. (ABR), that its
wholly owned subsidiary was offering to purchase all outstanding voting
common stock of ABR at $25.50 per share, net to the sellers in cash. The
offer will be made only pursuant to definitive offering documents filed with
the Securities and Exchange Commission. The offer is conditioned upon, among
other things, there being validly tendered and not withdrawn prior to the
expiration date a number of ABR shares which, together with shares
beneficially owned by Ceridian or its subsidiaries, represents at least a
majority of the total number of shares outstanding on a fully diluted basis.
The total amount of cash Ceridian expects to use to acquire all shares of
ABR, plus pay transaction costs, is approximately $763 million. This amount
is expected to be funded by a combination of cash balances, borrowings under
its domestic Credit Agreement and a debt financing.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit Description
------- -----------
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
None
-13-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Quarterly Report on Form 10-Q for the period
ended March 31, 1999, to be signed on its behalf by the undersigned thereunto
duly authorized.
CERIDIAN CORPORATION
Registrant
Date: May 13, 1999 /s/ L. D. Gross
-------------------
L. D. Gross
Vice President and Corporate Controller
(Principal Accounting Officer)
-14-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 110,300
<SECURITIES> 0
<RECEIVABLES> 428,000
<ALLOWANCES> 20,700
<INVENTORY> 0
<CURRENT-ASSETS> 665,300
<PP&E> 249,500
<DEPRECIATION> 155,400
<TOTAL-ASSETS> 1,314,600
<CURRENT-LIABILITIES> 410,400
<BONDS> 51,600
0
0
<COMMON> 80,000
<OTHER-SE> 662,600
<TOTAL-LIABILITY-AND-EQUITY> 1,314,600
<SALES> 0
<TOTAL-REVENUES> 321,400
<CGS> 0
<TOTAL-COSTS> 144,800
<OTHER-EXPENSES> 600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 900
<INCOME-PRETAX> 65,600
<INCOME-TAX> 23,800
<INCOME-CONTINUING> 41,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,800
<EPS-PRIMARY> 0.29<F1>
<EPS-DILUTED> 0.28<F1>
<FN>
<F1>Earnings per share reflect a 2-for-1 stock split announced January 20,
1999 for stockholders of record on February 10, 1999 and distributed in the
form of a 100% stock dividend on February 26, 1999. Financial data schedules
previously filed have not been restated.
</FN>
</TABLE>
