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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED JUNE 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 Identification No.)
incorporation or organization)
ONE ADP BOULEVARD, ROSELAND, NEW JERSEY 07068
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 201-994-5000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
COMMON STOCK, $.10 PAR VALUE NEW YORK STOCK EXCHANGE
(VOTING) CHICAGO STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
LIQUID YIELD OPTION NOTES DUE 2012 NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: NONE
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 the filing
requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein and
will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [x]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of September 15, 1995 was $9,854,949,506. On September 15, 1995,
there were 143,867,876 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 1995 Annual Report to
Shareholders Parts I, II & IV
Portions of the Registrant's Proxy Statement for Annual
Meeting of Stockholders to be held Part III
on November 14, 1995.
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PART I
ITEM 1. BUSINESS
Automatic Data Processing, Inc., incorporated in Delaware in 1961, and
its subsidiaries (collectively, "ADP") are engaged in the computing services
business. The following summary describes ADP's activities.
INDUSTRY SEGMENT
All of ADP's computing services enable clients to process and/or
distribute data (their own, ADP's or that of third parties) and/or to
interactively access and utilize ADP and third party databases and information,
utilizing ADP's batch, interactive and client site systems.
EMPLOYER SERVICES
ADP's Employer Services offers a comprehensive range of payroll, tax
filing, human resource ("HR"), direct deposit, cash management, 401(k)
recordkeeping, timekeeping, and unemployment compensation management services.
These services are provided to over 300,000 clients engaged in a wide variety of
businesses. In addition to its direct marketing, ADP has marketing
relationships with many banks and accountants whereby ADP offers its services to
their business clients. Employer services are offered from 39 regional
processing centers in the United States, four centers in Western Europe
and one center in Canada. For clients who desire to do their own processing,
client site payroll and HR software is available.
Payroll and tax filing services comprise over 80% of Employer Services
revenue. Payroll services include the preparation of pay checks and direct
deposits, along with supporting journals, summaries and management reports. ADP
also supplies the quarterly and annual social security, medicare, and federal,
state and local income tax withholding reports required to be filed by employers
and employees.
ADP's tax filing service processes federal, state and local payroll
taxes on behalf of ADP clients and remits such taxes to the appropriate taxing
authorities when due.
Approximately 44% of Employer Services' payroll and payroll tax filing
services revenue for the past three fiscal years have been attributable to its
heartland accounts (companies with between 1 and 99 employees), approximately
39% to major accounts (between 100 and 1,000 employees) and approximately 17% to
national accounts (over 1,000 employees).
Autopay is ADP's most flexible and comprehensive payroll product with
over 200,000 clients. In addition, ADP offers EasyPay, a simple, low-cost
payroll solution for small clients. For small payroll clients who prefer client
site processing, ADP has a PC-based product called SoftPay. For larger clients,
ADP's new Client Server Series provides client site payroll, HR and benefits
administration processing using client server technology and fourth generation
software. ADP's Application Group installs and implements client server systems
for ADP clients and other users of server technology.
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Employer Services recently introduced Full Service Direct Deposit in
association with major bank partners. It permits employers to easily, rapidly,
and economically make electronic direct deposits to employee bank accounts.
ADP's HR services, operating in conjunction with a client's payroll
database, provide comprehensive recordkeeping HR services, including benefit
administration, applicant tracking, employee history and position control. The
various HR systems run on standalone PC's, local or wide area networks or
client/server systems.
ADP also offers 401(k) recordkeeping, benefits administration and
benefits consulting. During fiscal 1995, these services were enhanced by the
acquisition of a leading consulting and actuarial firm. ADP now offers
comprehensive 401(k) administrative services relating to defined benefit plans,
flexible spending, healthcare and other group benefits.
ADP Total Time provides a comprehensive time-keeping system fully
integrated into ADP's payroll systems. ADP's unemployment compensation service
aids clients in managing and reducing unemployment insurance costs. ADP's
Peachtree accounting package and updates are sold through retail channels.
ADP has formed a joint venture with Checkfree Corporation to provide
electronic banking and bill payment services to small businesses to help them
manage money and improve their accounts payable process.
BROKERAGE SERVICES
ADP provides front-office database, news, analytic and quotation
services for the investment and brokerage community through terminals located on
brokers' desks. ADP provides such services through interactive work stations
(utilizing client-server architecture) for all active equity securities,
commodities, currencies, and interest rate futures. ADP also offers its
institutional and international clients real-time news processing systems, real-
time fixed income, foreign exchange and money market information, and
sophisticated analytics. ADP's Power Partner service is based on state-of-the-
art "object linking and embedding technology" which allows clients to modularly
build, and seamlessly integrate, market information, securities processing
systems, broker productivity tools, client applications and third party software
into their workstations.
ADP provides back-office stock brokerage and related financial computing
services such as trade processing, cage management, stock loan accounting,
on-line inquiry and data collection, portfolio reporting, order matching and
on-line trading. All of these services are offered in the United States and
Canada. ADP's GLOSS client-server system offers global multicurrency clearance
and settlement services for international securities.
ADP provides shareholder communication services in the United States and
Canada, handling all shareholder mailings and proxy processing for shareholders
whose securities are left in "street name" in the custody of ADP's "nominee"
clients (principally brokerage firms and banks). In fiscal 1995, ADP processed
over 200 million shareholder mailings for over 11,000 publicly held corporations
and mutual funds. Shareholder ballots representing approximately 69 billion
shares were electronically processed. As part of its shareholder communication
services, ADP introduced StreetLink, a unique, quickly deliverable laser printed
alternative to expensive quarterly mailings to shareholders.
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DEALER SERVICES
ADP provides industry-specific computing services to automotive, truck
and farm equipment dealers and manufacturers in the United States, Canada,
Mexico, Germany, France, the Netherlands, the United Kingdom and Taiwan. It
offers such clients a service solution which involves ADP selling computer
hardware, licensing computer software and providing software support and
hardware maintenance services to such clients. Clients use ADP's systems to
manage their accounting, inventory, factory communications, scheduling, leasing,
sales and service activities. In addition, ADP offers more than 95 manufacturer
subsystems for pricing updates and factory ordering.
ADP establishes and maintains communications networks for its clients
which allow interactive communications between manufacturers and their
respective dealers. These communication networks are used for new vehicle
ordering, status inquiry and warranty claims, parts and vehicle locating, credit
checks, vehicle repair estimating, vehicle registration and vehicle lienholder
information.
ADP continues to automate the business processes for its clients through
value-added products such as paperless parts cataloging, repair shop pricing and
scheduling, laser printing, and data archiving and document storage. ADP's
Laser Station replaces pre-printed, multipart, carbonized forms with customized
laser-printed originals. This product allows dealers to print from a single
laser printer all types of customer communications, including customer
satisfaction surveys, service reminders, invoices and statements. ADP's
Document Storage & Data Archiving product is designed to create a paperless
office. This product uses optical disk and scanning technologies to
electronically scan, store and retrieve purchase orders, invoices, checks,
other documents and even customer signatures. Digitized records replace stored
documents and can be retrieved from any ADP workstation for viewing, faxing or
printing. ADP's New Vehicle Order System increases vehicle order accuracy,
improves vehicle management and reduces floor plan interest expense. The Used
Vehicle Network helps dealers manage their used vehicles more efficiently. ADP
also provides consulting services to its dealer clients to help them reengineer
their management processes.
CLAIMS SERVICES
ADP provides auto repair estimating and parts availability services to
insurance companies, claims adjusters, repair shops and salvage yards involved
in auto collision repair and valuation in the United States and Canada. The
services include automated collision damage repair estimating for cars and
trucks, vehicle valuation services for total losses, and parts locating and
pricing services to auto insurers and repairers to facilitate the claims
settlement and parts locating processes. ADP provides management information
and vehicle damageability and repair cost statistics to insurance companies,
government agencies and automobile manufacturers. A pen-based, mobile auto
estimating system, using state-of-the-art technology and graphical user
interfaces, was recently introduced. Satellite and voice-based trading networks
for the location and pricing of recycled parts, and ADP's salvage-related
products and services, have been significantly expanded.
ADP provides services that evaluate the appropriateness of medical
treatment and invoicing for auto accident victims. The core product, Provider
Bill Audit, is an expert system that performs fee and utilization audits of
medical provider bills involving soft tissue injury and provides auto
insurers with a consistent methodology for assessing the proper diagnoses and
treatment of automobile-related injuries.
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ADP also provides a property loss repair and replacement system to
assist in settling homeowners' claims.
ADP CREDIT CORP.
ADP Credit Corp. provides computer leasing and financing services
primarily to clients of Dealer Services in the United States and Canada who
lease on-site computers as part of ADP's total service solution.
NATURE OF SERVICES PROVIDED
In each of Employer Services, Dealer Services, Claims Services and most
of the Brokerage Services business (as well as all other smaller businesses),
ADP's services primarily involve the processing and utilization of client and/or
third party data. In the front-office component of the Brokerage Services
business, the primary service takes the form of providing securities,
commodities and currencies quotation data (which data is provided by various
exchanges) and news to clients; this front-office component represents less than
10% of consolidated revenue.
Services to all industries are generally available by the electronic
transmission (through communications lines) of computer-generated data and
information from and to clients. Services are offered through a variety of
systems and networks which run on industry-standard operating systems.
Virtually none of ADP's services require ADP-proprietary hardware and/or
operating systems.
All of ADP's services utilize somewhat similar facilities, computers,
communications networks, salesforces, and client service support personnel.
ADP's businesses share numerous facilities, selected computer rooms and
communications networks, and ADP occasionally transfers some of its employees
among business units. The input and output of all of ADP's businesses is data
and information. On occasion ADP has transferred services and products between
business units.
While the labor intensiveness of a service may vary somewhat based on
the degree of automation and complexity in providing the service, all services
use the same basic functions as described above. None of ADP's service
offerings are particularly capital intensive.
MARKETS AND MARKETING METHODS
All of ADP's services are sold broadly across the United States and
Canada. Non-North American services amounted to less than 5% of fiscal 1995
revenue. All services use common marketing techniques, including direct sales
methodologies with emphasis on referral sources.
None of ADP's major business groups have a single homogenous client base
or market. For example, while Brokerage Services primarily serves the retail
brokerage market, it also serves banks, commodity dealers, the institutional
brokerage market and individual non-brokerage corporations. Dealer Services
primarily serves automobile dealers, but also serves truck and agricultural
equipment dealers, auto repair shops, used car lots, state departments of motor
vehicles, and manufacturers of automobiles, trucks and agricultural equipment.
Claims Services has many clients who are insurance companies, but also provides
services to automobile manufacturers, body repair shops, salvage yards,
distributors of new and used automobile parts and other non-insurance clients.
Employer Services has over 300,000 clients
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from a large variety of industries and markets. Within this client base are
concentrations of clients in specific industries. While concentrations of
clients exist, no one business group is material to ADP's overall revenue.
Employer Services also sells to auto dealers, brokerage clients, and insurance
clients.
None of ADP's businesses are overly sensitive to price changes.
Economic conditions among selected clients and groups of clients may and do have
a temporary impact on demand for ADP's services.
ADP enjoys a leadership position in each of its major service offerings
and does not believe any major service or business unit in ADP is subject to
unique market risk.
COMPETITION
The computing services industry is highly competitive. ADP knows of no
reliable statistics by which it can determine the number of its competitors, but
it believes that it is one of the largest independent computing services
companies in the United States.
ADP's competitors include other independent computing services
companies, divisions of diversified enterprises and banks. Another competitive
factor in the computing services industry is the in-house computing function,
whereby a company installs and operates its own computing systems.
Competition in the computing services industry is primarily based on
service responsiveness, product quality and price. ADP believes that it is very
competitive in each of these areas and that there are no material negative
factors impacting ADP's competitive position in the computing services industry.
No one competitor or group of competitors is dominant in the computing services
industry.
CLIENTS AND CLIENT CONTRACTS
ADP provides computing services to approximately 350,000 clients.
Annual revenues attributable to large client accounts range from $1 million to
approximately $66 million per client, while thousands of small client accounts
produce annual revenues of less than $1,000 each. ADP's largest single client
accounts for approximately 2% of its annual revenue.
ADP has no material "backlog" because the period between the time a
client agrees to use ADP's services and the time the service begins is generally
very short and because no sale is considered firm until it is installed and
begins producing revenue.
ADP's average client retention is seven years in Employer Services and
is ten or more years in Brokerage, Dealer and Claims Services and does not vary
significantly from period to period.
Discounts, rebates and promotions offered by ADP to clients are not
material.
ADP's services are provided under written Price Quotations or Services
Agreements having varying terms and conditions. No one Price Quotation or
Service Agreement is material to ADP.
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SYSTEMS DEVELOPMENT AND PROGRAMMING
During the fiscal years ended June 30, 1995, 1994 and 1993, ADP spent
$193,173,000, $160,803,000 and $132,386,000, respectively, on systems
development and programming activities for the development of new and the
improvement and maintenance of existing computing services.
PRODUCT DEVELOPMENT
ADP continually upgrades, enhances and expands its existing products and
services. Generally, no new product or service has a significant effect on
ADP's revenue or negatively impacts its existing products and services, and each
existing product and service has a significant remaining life cycle.
LICENSES
ADP is the licensee under a number of agreements for computer programs
and databases. ADP's business is not dependent upon a single license or group
of licenses. Licenses, patents, trademarks and franchises are not material to
ADP's business as a whole.
COMPENSATION OF MARKETING AND SALES PERSONNEL
The compensation arrangements of ADP's marketing and sales personnel
vary significantly based on the tenure of the particular salesperson, with the
commission-based portion of total compensation averaging approximately 40%. ADP
sets minimum sales quotas on an individual basis.
COMPUTER SYSTEMS
ADP does not manufacture computer systems or act as a distributor of
computer systems. ADP may, however, be deemed to be a value-added reseller of
computer systems insofar as its services often include computer equipment as
part of the total service solution.
ADP's services are offered on a variety of computer platforms which run
various operating systems. These computer platforms include those offered by
IBM, IBM-compatibles, Digital Equipment Corporation, Apple, Motorola, Hewlett
Packard and McDonnell Douglas. The industry-standard operating systems
supporting such computer platforms include DOS, Windows, OS2, VSE, MVS, VMS,
System 7 OS, Unix, Reality and Pick.
ADP's service warranty to its clients is that if any errors or omissions
occur in its service offerings, ADP will correct them as soon as possible. In
addition, ADP provides, either directly or through third parties, maintenance
and support for the ADP-provided equipment and software which facilitates the
delivery of its services to clients.
NUMBER OF EMPLOYEES
ADP employed approximately 25,000 persons as of June 30, 1995.
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EXECUTIVE OFFICERS OF THE REGISTRANT
See Item 10 in Part III hereof.
RECENT DEVELOPMENTS
ADP has entered into an agreement to acquire for cash all outstanding
shares of GSI, a European computer services company based in Paris, France
("GSI"). The transaction is valued at FF 2.3 billion (approximately US $460
million) and is subject to GSI shareholder and various governmental approvals.
The transaction is expected to close before the end of the calendar year and may
have a slightly dilutive effect on ADP's earnings per share. GSI is the
European leader in providing payroll and human resource information services.
GSI also provides facilities management, banking, clearing and other information
services in Europe. GSI's revenues are in excess of FF 2 billion (US $400
million) and the company has over 3,000 employees, with operations in France,
Germany, Italy, Spain, Switzerland and the United Kingdom.
See "Note 2. Acquisitions" on page 22 of the Registrant's 1995 Annual
Report to Shareholders, which information is incorporated herein by reference.
ITEM 2. PROPERTIES
ADP leases space for more than 50 of its processing centers. In
addition, ADP leases numerous small processing centers and sales offices. All
of these leases, which aggregate approximately 3,700,000 square feet in the
United States, Canada, Europe and Asia, expire at various times up to the year
2016. ADP owns 23 of its processing facilities and its corporate headquarters
in Roseland, New Jersey, which aggregate approximately 2,200,000 square feet.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
See "Market Price and Dividend Data" on page 16 of the Registrant's 1995
Annual Report to Shareholders, which information is incorporated herein by
reference. As of August 25, 1995, the Registrant had 24,250 registered holders
of its Common Stock, par value $.10 per share. The Registrant's Common Stock is
traded on the New York, Chicago and Pacific Stock Exchanges.
ITEM 6. SELECTED FINANCIAL DATA
See "Selected Financial Data" on page 13 of the Registrant's 1995 Annual
Report to Shareholders, which information is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
See "Management's Discussion and Analysis" on pages 14-16 of the
Registrant's 1995 Annual Report to Shareholders, the Letter to Shareholders on
pages 2-3 of such report and the business descriptions on pages 4-12 of such
report, which information is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements described in Item 14(a) hereof are incorporated
herein.
The following supplementary data is incorporated herein by reference:
Page in 1995 Annual
Report to Shareholders
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Quarterly Financial Results (unaudited) for
the three years ended June 30, 1995 26
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Registrant, their ages, positions and the
period during which they have been employed by ADP are as follows:
Employed by
Name Age Position ADP Since
-------------------- --- --------------------- ----------
Josh S. Weston 66 Chairman of the Board 1970
and Chief Executive
Officer
Arthur F. Weinbach 52 President and 1980
Chief Operating Officer
Fred D. Anderson, Jr. 51 Vice President and 1992
Chief Financial Officer
James B. Benson 50 Vice President and 1977
General Counsel
Richard C. Berke 50 President of Benefit 1989
Services Division
Gary C. Butler 48 Group President of 1975
Employer Services
Robert J. Casale 56 Group President of 1988
Brokerage Services
G. Harry Durity 48 Vice President, 1994
Worldwide Business
Development
John R. Gaulding 50 President of Claims 1990
Services
Richard J. Haviland 49 Vice President 1982
and Controller
Michael R. Holmes 37 Vice President, 1991
Human Resources
Fred S. Lafer 66 Senior Vice President, 1967
Secretary and Counsel
to the Board
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Employed by
Name Age Position ADP Since
-------------------- --- --------------------- ----------
Peter M. Leger 44 President of 1992
Dealer Services
Joseph B. Pirret 54 President of Treasury 1974
Services and Treasurer
Michael W. Reece 50 Vice President, 1987
Corporate Development
Messrs. Weston, Weinbach, Benson, Berke, Butler, Casale, Gaulding,
Haviland, Lafer, Pirret and Reece have each been employed by ADP in senior
executive positions for more than the past five years.
Fred D. Anderson, Jr. joined ADP in August 1992 as a Corporate Vice
President and ADP's Chief Financial Officer. Prior to joining ADP he was
employed for thirteen years by MAI Systems Corporation (formerly MAI Basic Four,
Inc.) and its predecessor company, Management Assistance Inc., in various senior
executive positions.
G. Harry Durity joined ADP in August 1994 as Corporate Vice President,
Worldwide Business Development. Prior to joining ADP he was Senior Vice
President - Corporate Development of Revlon Consumer Products Company. Between
1990 and February 1993 when he joined Revlon, he was President of The Highlands
Group, Inc.
Michael R. Holmes joined ADP in March 1991 as Vice President, Human
Resources of Dealer Services. Subsequently, he held various senior executive
positions within ADP before becoming ADP's Vice President, Human Resources in
January 1995. Prior to joining ADP, he was Vice President, Human Resources for
Continental Airlines.
Peter M. Leger joined ADP in March 1992 as Executive Vice President,
North America of Dealer Services and was promoted to President of Dealer
Services in January 1995. Prior to joining ADP, he was employed by Reuters
North America in various senior executive positions.
Each of ADP's executive officers is elected for a term of one year and
until their successors are chosen and qualified or until their death,
resignation or removal.
DIRECTORS OF THE REGISTRANT
See "Election of Directors" in the Proxy Statement for Registrant's 1995
Annual Meeting of Stockholders, which information is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
See "Compensation of Executive Officers" in the Proxy Statement for
Registrant's 1995 Annual Meeting of Stockholders, which information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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See "Election of Directors--Security Ownership of Certain Beneficial
Owners and Management" in the Proxy Statement for Registrant's 1995 Annual
Meeting of Stockholders, which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Compensation of Executive Officers--Certain Transactions" in the
Proxy Statement for Registrant's 1995 Annual Meeting of Stockholders, which
information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. FINANCIAL STATEMENTS
The following consolidated financial statements of Automatic Data
Processing, Inc. and its subsidiaries are included in Part II, Item 8:
Page in 1995 Annual
Report to Shareholders
----------------------
Independent Auditors' Report 27
Consolidated Balance Sheets - June 30, 1995 and 1994 18
Statements of Consolidated Earnings - years
ended June 30, 1995, 1994 and 1993 17
Statements of Shareholders' Equity - years
ended June 30, 1995, 1994 and 1993 19
Statements of Consolidated Cash Flows - years
ended June 30, 1995, 1994 and 1993 20
Notes to Consolidated Statements 21-26
Financial information of the Registrant is omitted because the Registrant
is primarily an operating company. The Registrant's subsidiaries which are
listed on Exhibit 21 attached hereto are wholly-owned.
2. FINANCIAL STATEMENT SCHEDULES
Page in Form 10-K
-----------------
Schedule II - Valuation and Qualifying Accounts 14
All other Schedules have been omitted because they are inapplicable or are
not required or the information is included elsewhere in the financial
statements or notes thereto.
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3. The following exhibits are filed with this Form 10-K or incorporated
herein by reference to the document set forth next to the exhibit in the list
below:
(3)-#1 - Amended and Restated Certificate of Incorporation
dated December 15, 1994
(3)-#3 - By Laws as currently in effect - incorporated by
reference to Exhibit (3)-#2 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
June 30, 1991
(4)-#1 - Indenture dated as of February 20, 1992 between
Automatic Data Processing, Inc. and Bankers Trust
Company, as trustee, regarding the Liquid Yield
Option Notes due 2012 of the Registrant -
incorporated by reference to Exhibit (4)-#1 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1992
(10)(ii)(A)-#1 - Employment Agreement with Josh S. Weston -
incorporated by reference to Exhibit 10(ii) to
Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1986 (Management
Contract)
(10)(ii)(A)-#2 - Amendment to Employment Agreement with Josh S.
Weston - incorporated by reference to Exhibit
10(ii)(A)-#2 to Registrant's Annual Report on Form
10-K for the fiscal year ended June 30, 1990
(Management Contract)
(10)(ii)(A)-#3 - Amendment to Employment Agreement with Josh S.
Weston - incorporated by reference to Exhibit
10(ii)(A)-3 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended June 30, 1994
(Management Contract)
(10)(ii)(A)-#4 - Amendment to Employment Agreement with Josh S.
Weston (Management Contract)
(10)(iii)(A)-#1 - Agreements with Richard C. Berke, Robert J. Casale
and Arthur F. Weinbach - incorporated by reference
to Exhibit 10(iii)(A)-#1 to Registrant's Annual
Report on Form 10-K for the fiscal year ended June
30, 1990 (Management Contracts)
(10)(iii)(A)-#2 - Agreement with Gary C. Butler - incorporated by
reference to Exhibit 10(iii)(A)-#2 to Registrant's
Annual Report on Form 10-K for the fiscal year ended
June 30, 1991 (Management Contract)
(10)(iii)(A)-#3 - Agreement with Fred D. Anderson, Jr. -- incorporated
by reference to Exhibit 10(iii)(A)-#3 to
Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1994 (Management
Contract)
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(10)(iii)(A)-#4 - 1981 Key Employees' Stock Option Plan - incorporated
by reference to Registrant's Registration Statement
No. 2-75287 on Form S-8 (Management Compensatory
Plan)
(10)(iii)(A)-#5 - Key Employees' Restricted Stock Plan - incorporated
by reference to Registrant's Registration Statement
No. 33-25290 on Form S-8 (Management Compensatory
Plan)
(10)(iii)(A)-#6 - Supplemental Officers' Retirement Plan, as amended
and restated - incorporated by reference to Exhibit
10(iii)(A)-#5 to Registrant's Annual Report on Form
10-K for the fiscal year ended June 30, 1993
(Management Compensatory Plan)
(10)(iii)(A)-#7 - Amendment to 1981 Key Employees' Stock Option Plan -
incorporated by reference to Registrant's Annual
Report on Form 10-K for the fiscal year ended June
30, 1989 (Management Compensatory Plan)
(10)(iii)(A)-#8 - 1989 Non-Employee Director Stock Option Plan -
incorporated by reference to Exhibit 10(iii)(A)-#7
to Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1990 (Management
Compensatory Plan)
(10)(iii)(A)-#9 - 1990 Key Employees' Stock Option Plan - incorporated
by reference to Exhibit 10(iii)(A)-#8 to
Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1990 (Management
Compensatory Plan)
(10)(iii)(A)-#10 - 1994 Directors' Pension Arrangement -- incorporated
by reference to Exhibit 10(iii)(A)-#10 to
Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1994 (Management
Compensatory Plan)
(10)(iii)(A)-#11 - 1994 Executive Incentive Compensation Plan --
incorporated by reference to Exhibit A to
Registrant's Proxy Statement for its Annual
Meeting of Stockholders held November 15, 1994.
(Management Compensatory Plan)
(11) - Schedule of Computation of Earnings Per Share
(13) - Pages 2-3, 4-12 and 13-27 of the 1995 Annual Report
to Shareholders (with the exception of the pages
incorporated by reference herein, the Annual Report
is not a part of this filing)
(21) - Subsidiaries of the Registrant
(23) - Independent Auditors' Report and Consent
(27) - Financial Data Schedule
(b) None.
-13-
<PAGE>
AUTOMATIC DATA PROCESSING, INC.
AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions
-----------------------
(1) (2)
Charged to
Balance at Charged to other Balance at
beginning costs and accounts- Deductions - end of
of period expenses describe describe period
--------- --------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1995:
Allowance for doubtful accounts:
Current $20,513 $8,415 $904 (B) $6,797 (A) $23,035
Long-term $24,526 $3,916 - $2,276 (A) $26,166
Year ended June 30, 1994:
Allowance for doubtful accounts:
Current $18,112 $6,838 $492 (B) $4,929 (A) $20,513
Long-term $21,684 $4,366 - $1,524 (A) $24,526
Year ended June 30, 1993:
Allowance for doubtful accounts:
Current $14,743 $9,445 $239 (B) $6,315 (A) $18,112
Long-term $19,591 $5,850 - $3,757 (A) $21,684
<FN>
(A) Doubtful accounts written off, less recoveries on accounts previously
written off.
(B) Acquired in purchase/pooling transactions.
</TABLE>
-14-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
September 21, 1995 By /s/ Josh S. Weston
-------------------------------------
Josh S. Weston, Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Josh S. Weston Chairman of the Board September 21, 1995
-------------------------- and Director (Principal
(Josh S. Weston) Executive Officer)
/s/ Fred D. Anderson, Jr. Chief Financial Officer and September 21, 1995
-------------------------- Corporate Vice President
(Fred D. Anderson, Jr.) (Principal Financial Officer)
/s/ Richard J. Haviland Controller and Corporate September 21, 1995
-------------------------- Vice President
(Richard J. Haviland)
/s/ Joseph A. Califano, Jr. Director September 21, 1995
--------------------------
(Joseph A. Califano, Jr.)
/s/ Leon G. Cooperman Director September 21, 1995
--------------------------
(Leon G. Cooperman)
-15-
<PAGE>
/s/ Edwin D. Etherington Director September 21, 1995
--------------------------
(Edwin D. Etherington)
/s/ George H. Heilmeier Director September 21, 1995
--------------------------
(George H. Heilmeier)
/s/ Ann Dibble Jordan Director September 21, 1995
--------------------------
(Ann Dibble Jordan)
/s/ Harvey M. Krueger Director September 21, 1995
--------------------------
(Harvey M. Krueger)
Director September , 1995
--------------------------
(Charles P. Lazarus)
/s/ Frederic V. Malek Director September 21, 1995
--------------------------
(Frederic V. Malek)
/s/ Henry Taub Director September 21, 1995
--------------------------
(Henry Taub)
/s/ Laurence A. Tisch Director September 21, 1995
--------------------------
(Laurence A. Tisch)
/s/ Arthur F. Weinbach Director September 21, 1995
--------------------------
(Arthur F. Weinbach)
-16-
<PAGE>
EXHIBIT (3)-#1
--------------
AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION
OF
AUTOMATIC DATA PROCESSING, INC.
------------------------------
ADOPTED IN ACCORDANCE WITH THE PROVISIONS OF SECTIONS 242 AND 245 OF
THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
------------------------------
We, the Chairman of the Board and Chief Executive Officer and the Senior
Vice President and Secretary, respectively, of Automatic Data Processing, Inc.,
a corporation existing under the laws of the State of Delaware, do hereby
certify under the seal of said corporation as follows:
I. That the name of the corporation is AUTOMATIC DATA PROCESSING, INC.
(hereinafter called the "Corporation").
II. That the Certificate of Incorporation of the Corporation was filed by
the Secretary of State on the 12th day of June 1961.
III. That this Certificate amends the Certificate of Incorporation by
increasing the number of authorized shares of Common Stock of the Corporation to
500,000,000 shares.
IV. That the amendment and the restatement of the Certificate of
Incorporation of the Corporation have been duly adopted in accordance with the
provisions of Sections 242 and 245 of the General Corporation Law of the State
of Delaware by an affirmative vote of the holders of a majority of all
outstanding stock entitled to vote at a meeting of stockholders.
V. That the text of the Certificate of Incorporation of the Corporation,
as heretofore amended, is hereby restated, as further amended by this
Certificate, to read in its entirety as follows:
<PAGE>
CERTIFICATE OF INCORPORATION
OF
AUTOMATIC DATA PROCESSING, INC.
We, the undersigned, in order to form a corporation for the purposes
hereinafter stated, pursuant to the provisions of Chapter 1 of Title 8 of the
Delaware Code of 1953, do hereby certify as follows:
FIRST: The name of the corporation is AUTOMATIC DATA PROCESSING, INC.
(hereinafter called the "Corporation").
SECOND: The address of the Corporation's registered office is 306 South
State Street, City of Dover, County of Kent, State of Delaware; and its
registered agent at such address is United States Corporation Company.
THIRD: The nature of the business and purposes to be conducted or promoted
by the Corporation are to engage in, carry on and conduct any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware; and in addition to, and without limiting the
generality of, the foregoing, the following:
(a) To engage in the business of preparing payrolls, performing
statistical, tabulating and clerical services of all kinds, conducting
research and analytical or statistical studies, preparing business reports
and surveys, rendering consulting services to business and performing
business services of any and all kinds of a similar nature;
(b) To engage in, carry on, conduct and/or participate in any general
or specific branch or phase of the activities, enterprises, or businesses
authorized in this Certificate in the State of Delaware or in any other
state of the United States and in all foreign countries, and in all
territories, possessions and other places, and in connection with the same,
or any thereof, to be and act either as principal, agent, contractor or
otherwise;
(c) To do everything necessary, suitable, convenient or proper for
the accomplishment, attainment or furtherance of, to do every other act or
thing incidental or appurtenant to, growing out of or connected with, the
purposes set forth in this Certificate, whether alone or in association
with others; to possess all the rights, powers and privileges now or
hereafter conferred by the laws of the State of Delaware upon corporations
organized under the General Corporation Law of the State of Delaware (as
the same may be amended from time to time) or any statute which may be
enacted to supplement or replace it, and, in general, to carry on any of
the activities and to do any of the things herein set forth to the same
extent and as fully as a natural person or a partnership, association,
corporation or other entity, or any of them, might or could do;
2
<PAGE>
provided, that nothing herein set forth shall be construed as authorizing
the Corporation to possess any purpose, object, or power, or to do any act
or thing, forbidden by law to a corporation organized under the General
Corporation Law of the State of Delaware. The foregoing provisions of this
Article shall be construed as purposes, objects and powers, and each as an
independent purpose, object and power, in furtherance, and not in
limitation, of the purposes, objects and powers granted to the Corporation
by the laws of the State of Delaware; and except as otherwise specifically
provided in any such provision, no purpose, object or power herein set
forth shall be in any way limited or restricted by reference to, or
inference from, any other provision of this Certificate.
FOURTH: The total number of shares which the Corporation shall have
authority to issue is Five Hundred Million Three Hundred Thousand (500,300,000),
consisting of Three Hundred Thousand (300,000) shares of Preferred Stock, of the
par value of One Dollar ($1.00) per share (hereinafter called "Preferred
Stock"), and Five Hundred Million (500,000,000) shares of Common Stock, of the
par value of Ten Cents ($.10) per share (hereinafter called "Common Stock").
The Board of Directors is hereby authorized to issue the shares of the
Preferred Stock in one or more series, to fix by resolution, to the extent now
or hereafter permitted by the laws of the State of Delaware, the designation of
such series, the dividend rate of such series and the date or dates and other
provisions respecting the payment of dividends, the provisions, if any, for a
sinking fund for the shares of such series, the preferences of such series with
respect to dividends and in the event of the liquidation or dissolution of the
Corporation, the provisions, if any, respecting the redemption of the shares of
such series, the voting rights, if any, of the shares of such series, the terms,
if any, upon which the shares of such series shall be convertible into or
exchangeable for any other shares of stock of the Corporation and any other
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, of the shares of such series.
Subject to the payment or setting apart for payment of any preferential
dividends which the holders of shares of any series of Preferred Stock shall be
entitled to receive, the holders of the Common Stock shall be entitled to
receive such dividends as may be declared thereon from time to time by the Board
of Directors, in its discretion, from any assets legally available for the
payment of dividends.
In the event of the liquidation or dissolution of the Corporation, whether
voluntary or involuntary, after distribution to the holders of all shares of any
series of Preferred Stock which shall be entitled to a preference over the
holders of Common Stock of the full preferential amounts to which they are
entitled, the holders of Common Stock shall be entitled to share ratably in the
distribution of the remaining assets of the Corporation available for
distribution to shareholders.
Except as otherwise expressly provided in any resolution adopted by the
Board of Directors granting voting rights to the holders of shares of any series
of Preferred Stock and
3
<PAGE>
except as otherwise required by law, the entire voting power of the Corporation
shall be vested in the Common Stock, and each share of Common Stock shall have
one vote for each share thereof held.
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and it is expressly
provided that the same are intended to be in furtherance and not in limitation
or exclusion of the powers conferred by law:
1. Members of the Board of Directors may be elected either by
written ballot or by voice-vote.
2. The Board of Directors may from time to time make, alter, or
repeal the By-laws of the Corporation; provided, that any By-laws made,
amended, or repealed by the Board of Directors may be amended or repealed,
and new By-laws may be made, by the stockholders of the Corporation.
3. The Corporation shall indemnify all directors and officers of the
Corporation to the full extent permitted by the General Corporation Law of
the State of Delaware (and in particular Paragraph 145 thereof), as from
time to time amended, and may purchase and maintain insurance on behalf of
such directors and officers. In addition, the Corporation shall, in the
manner and to the extent as the By-laws of the Corporation shall provide,
indemnify to the full extent permitted by the General Corporation law of
the State of Delaware (and in particular Paragraph 145 thereof), as from
time to time amended, such other persons as the By-laws shall provide, and
may purchase and maintain insurance on behalf of such other persons.
4. A director of the Corporation shall not be held personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the General
Corporation Law of the State of Delaware, or (iv) for any transaction from
which the director derived an improper personal benefit. Any repeal or
modification of this paragraph by the stockholders of the Corporation shall
not adversely affect any right or protection of any director of the
Corporation existing at the time of, or for or with respect to any acts or
omissions occurring prior to, such repeal or modification.
SIXTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions
4
<PAGE>
of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors
or class of creditors, and/or of the stockholders or class of stockholders of
this Corporation, as the case may be, to be summoned in such a manner as the
said Court directs. If a majority in number representing three-fourths (3/4) in
value of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of this Corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of this Corporation as a
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the Court to
which the said application has been made, be binding on all creditors or class
of creditors, and/or on all the stockholders or class of stockholders, of this
Corporation, as the case may be, and also on this Corporation.
IN WITNESS WHEREOF, We, Josh S. Weston, Chairman of the Board and Chief
Executive Officer, and Fred S. Lafer, Senior Vice President and Secretary, of
AUTOMATIC DATA PROCESSING, INC., have signed this Certificate and caused the
corporate seal of the corporation to be hereunto affixed this 15th day of
December, 1994.
/s/ Josh S. Weston
---------------------------------------
Josh S. Weston
Chairman of the Board and
Chief Executive Officer
Attest: /s/ Fred S. Lafer
--------------------------------
Fred S. Lafer
Senior Vice President
and Secretary
[Corporate Seal]
<PAGE>
EXHIBIT (10(II)(A)-#4
Agreement dated as of May 19, 1995 among AUTOMATIC DATA PROCESSING, INC.
("ADP"), JOSH S. WESTON ("Weston") and ALEXANDER JOEL and SIMON LEVIN, ESQ. (the
"Trustees"), as Trustees of the Josh S. Weston 1995 Trust dated as of April 14,
1995 (the "Trust").
Pursuant to agreements with John Hancock Life Insurance Company and Pacific
Mutual Life Insurance Company, the Trust has purchased life insurance policies
on both the lives of JOSH S. WESTON and JUDY WESTON. ADP has agreed to pay a
portion of the premiums due, as set forth in Column (2) of Exhibit 1 hereto.
In furtherance of the above, the parties agree as follows:
1. ADP agrees to pay, when due, the payments enumerated in Column 2 of
Exhibit 1 for the specified ten year period; ADP has no obligation to make any
additional payments thereunder.
2. The Trustees, on behalf of the Trust, obligate the Trust to pay, when
due to the extent of Trust assets, the payments enumerated in Column 7 of
Exhibit 1; such payments are to be made to the applicable insurance companies
during the initial specified ten year period and thereafter shall be directly
made to ADP.
3. (a) Without regard to any payments described above or otherwise
described on Exhibit 1 or in any other agreement, Weston agrees that ADP's
obligations to Weston under Paragraph 5 to the JW Contract Extension - Proposed
executed June 1994 (in which a Supplemental Retirement Amount is specified as
$550,000 per year, or its actuarial equivalent) are reduced by $168,000 per
annum (i.e., leaving a net aggregate payment of $382,000 per year, or its
actuarial equivalent) for the first fifteen years ADP is obligated to make such
Supplemental Retirement Amount payments.
(b) In addition, ADP has the right to further reduce the Supplemental
Retirement Amount payments to Weston referred to in Paragraph 3(a) above if the
Trust fails to meet all or any portion of its obligations hereunder or under its
other agreements with ADP. It is understood that the obligations of the Trust
include the commitment to make ADP whole in the event the future actuarial
assumptions (including interest assumptions) which underlie Exhibit 1, are
adjusted so as to cause ADP to pay more dollars or receive fewer dollars during
the specified time-frame, in the manner, described in Columns (2) and (3) to
Exhibit 1.
4. If for any reason ADP's obligations to make the Supplemental
Retirement Amount payments to Weston (as referred to in Paragraph 3(a) above)
cease, or if such Supplemental Retirement Amount payments are insufficient to
fully satisfy Weston's obligations to ADP under Paragraph 3 above, the Trust
hereby assumes the obligation to directly pay to ADP to the extent of Trust
assets all amounts which ADP would have otherwise received under Paragraph 3(b)
above.
TRUSTEES:
/s/ Alexander Joel
------------------------------------
Alexander Joel
/s/ Simon Levin, Esq.
------------------------------------
Simon Levin
AUTOMATIC DATA PROCESSING, INC.
By:/s/ Fred V. Malek
---------------------------------
Frederic V. Malek
Chairman of the Compensation Committee
/s/ Josh S. Weston
------------------------------------
Josh S. Weston
<PAGE>
EXHIBIT 1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$10 MM SURVIVOR LIFE NET SPLIT DOLLAR BENEFIT (75% BASE/25% TERM)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CARRIER CRED RATE NET DEATH BENEFIT ANNUAL PREMIUM
------- --------- ----------------- --------------
<S> <C> <C> <C>
JOHN HANCOCK 7.54% Net $6,250,000 $193,933
PACIFIC MUTUAL 7.20% Net $3,750,000 $115,000
---------- --------
TOTAL $10,000,000 $308,933
<CAPTION>
INSURED 1: MALE 66NS
INSURED 2: FEMALE 62NS
PRESENTED BY CMS COMPANIES CORPORATION EXECUTIVE/TRUST
03/08/95 ------------------------------------------------------------------ -------------------------------
(1) (2) (3) (4) (5) (6) (7) (8) (9)
ANNUAL PREMIUM CUMULATIVE CASH DEATH ANN. CHARGE PREMIUM CASH DEATH
YEAR PREMIUM SHARE OUTLAY VALUE BENEFIT TO EARNINGS SHARE VALUE BENEFIT
---- ------- ----- ------ ----- ------- ----------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 ($308,933) ($300,320) ($300,320) $267,680 $300,320 ($32,640) ($8,613) $0 $10,005,385
2 (308,933) (298,737) (599,057) 528,847 599,057 (37,570) (10,196) 0 10,011,762
3 (308,933) (296,853) (895,909) 797,021 895,909 (28,678) (12,080) 0 10,019,321
4 (308,933) (294,627) (1,190,536) 1,122,992 1,190,536 31,344 (14,306) 0 10,028,278
5 (308,933) (291,980) (1,482,516) 1,463,567 1,482,516 48,595 (16,953) 24,331 10,038,898
6 (308,933) (288,833) (1,771,349) 1,771,349 1,771,349 18,949 (20,100) 129,531 10,051,499
7 (308,933) (285,107) (2,056,456) 2,056,456 2,056,456 0 (23,826) 286,664 10,066,449
8 (308,933) (280,677) (2,337,133) 2,337,133 2,337,133 0 (28,256) 479,202 10,084,198
9 (308,933) (275,416) (2,612,549) 2,612,549 2,612,549 0 (33,517) 709,884 10,105,277
10 (308,933) (269,172) (2,881,721) 2,881,721 2,881,721 0 (39,761) 981,307 10,130,319
11 0 47,039 (2,834,682) 2,834,682 2,834,682 0 (47,039) 1,305,284 10,177,358
12 0 55,633 (2,779,049) 2,779,049 2,779,049 0 (55,633) 1,650,686 10,232,991
13 0 65,781 (2,713,268) 2,713,268 2,713,268 0 (65,781) 2,017,911 10,298,772
14 0 77,735 (2,635,533) 2,635,533 2,635,533 0 (77,735) 2,406,676 10,376,507
15 0 91,813 (2,543,720) 2,543,720 2,543,720 0 (91,813) 2,816,181 10,468,320
(Joint
Life Exp)
16 0 108,381 (2,435,339) 2,435,339 2,435,339 0 (108,381) 3,246,451 10,576,701
17 0 127,849 (2,307,490) 2,307,490 2,307,490 0 (127,849) 3,700,072 10,704,550
18 0 150,682 (2,156,808) 2,156,808 2,156,808 0 (150,682) 4,177,814 10,855,232
19 0 177,457 (1,979,351) 1,979,351 1,979,351 0 (177,457) 4,697,892 11,032,689
20 0 208,787 (1,770,564) 1,770,564 1,770,564 0 (208,787) 5,207,711 11,241,476
21 0 245,398 (1,525,166) 1,525,166 1,525,166 0 (245,398) 5,770,524 11,486,874
22 0 288,054 (1,237,112) 1,237,112 1,237,112 0 (288,054) 6,368,396 11,774,928
23 0 337,718 (899,394) 899,394 899,394 0 (337,718) 7,007,024 12,112,647
24 0 395,357 (504,036) 504,036 504,036 0 (395,357) 7,693,544 12,508,004
25 0 462,161 (41,875) 41,875 41,875 0 (462,161) 8,434,398 12,970,165
26 0 41,875 0 0 0 0 (41,875) 8,739,589 13,012,040
---------- ------- --------- ---------
(3,089,330) 0 0 (3,089,330)
TOTAL
Present Value @ 9.0% (1,473,788)
</TABLE>
NOTE: Vanishing Premium is a Cash Flow Concept Not a Contractual Guarantee, and
is Premised on Each Carrier's Current Assumptions With Respect to Interest
Crediting Rate, Mortality and Expenses.
<PAGE>
EXHIBIT 11
AUTOMATIC DATA PROCESSING, INC
AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year ended June 30,
--------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE:
Earnings before cumulative effect of accounting changes $394,830 $334,120 $294,200 $256,180 $227,690
Cumulative effect of accounting changes - (4,800) - - -
-------- -------- -------- -------- --------
Net earnings applicable to common shares $394,830 $329,320 $294,200 $256,180 $227,690
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Average number of common shares outstanding (1) 142,556 140,890 141,327 139,045 139,936
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Primary earnings per share
before cumulative effect of accounting changes $2.77 $2.37 $2.08 $1.84 $1.63
Cumulative effect of accounting changes - (0.03) - - -
-------- -------- -------- -------- --------
Primary earnings per share (1) $2.77 $2.34 $2.08 $1.84 $1.63
----- ----- ----- ----- -----
----- ----- ----- ----- -----
FULLY DILUTED EARNINGS PER SHARE:
Net earnings used in primary earnings per share $394,830 $334,120 $294,200 $256,180 $227,690
Adjustment for interest (net of tax) -
Zero coupon convertible subordinated notes (5 1/4% yield)(1) 11,330 10,075 9,409 3,314 -
-------- -------- -------- -------- --------
Net earnings used for fully diluted earnings per share
before cumulative effect of accounting changes $406,160 $344,195 $303,609 $259,494 $227,690
Cumulative effect of accounting changes - (4,800) - - -
-------- -------- -------- -------- --------
Net earnings used for fully diluted earnings per share $406,160 $339,395 $303,609 $259,494 $227,690
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Average number of shares outstanding on a fully diluted basis:
Shares used in calculating primary earnings per share 142,556 140,890 141,327 139,045 139,936
Diluted effect of all stock options outstanding after
application of treasury stock method 2,918 2,691 2,981 3,180 2,822
Shares assumed to be issued upon conversion of Debentures-
Zero coupon convertible subordinated notes (5 1/4% yield)(2) 5,201 5,201 5,201 1,861 -
------- ------- ------- ------- -------
Average number of shares outstanding on a fully diluted basis: 150,675 148,782 149,509 144,086 142,758
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Fully diluted earnings per share before cumulative effect of
accounting changes $2.70 $2.31 $2.03 $1.80 $1.59
Cumulative effect of accounting changes 0.00 (0.03) - - -
-------- -------- -------- -------- --------
Fully diluted earnings per share $2.70 $2.28 $2.03 $1.80 $1.59
----- ----- ----- ----- -----
----- ----- ----- ----- -----
<FN>
_________________________________
(1) All share and per share information has been adjusted to reflect a
two-for-one stock split on May 1, 1991.
(2) Assumed converted at the beginning of periods reported.
</TABLE>
<PAGE>
EXHIBIT 13
1995 ADP ANNUAL REPORT
TO OUR SHAREHOLDERS
In fiscal '95, ADP achieved its forty-sixth consecutive growth year in revenue
and earnings. Our 17% growth in both revenue and earnings per share was our best
in many years.
Our success was the direct result of:
- very strong leadership positions in each of our businesses;
- accelerated growth in Employer and Dealer Services from increased market
penetration, an expanded product array, improved client retention, and several
small but strategic acquisitions; and
- productivity gains from automation.
GRAPHS:
EARNINGS PER SHARE
1995 - $2.77
1994 - $2.37
1993 - $2.08
1992 - $1.84
1991 - $1.63
REVENUE ($ IN MILLIONS)
1995 - $2,894
1994 - $2,469
1993 - $2,223
1992 - $1,941
1991 - $1,772
FINANCIAL REVIEW
Net earnings grew 18% to approximately $395 million on $2,894 million of
revenue. Earnings per share increased to $2.77 as we completed our 136th
consecutive quarter of "double-digit" growth in earnings per share.
In recognition of these strong operating results, our Board declared its
twenty-first consecutive annual dividend increase, from $.60 to $.70 per share,
effective July 1, 1995.
ADP continues to operate from a position of significant financial strength
and liquidity. Cash flow from operations exceeded $478 million and year-end cash
equivalents and marketable securities approximated $1.3 billion after spending
$121 million to acquire businesses and shares. We purchased 219,000 ADP shares
on the open market to partially service employee equity plans.
Our shareholders' equity now exceeds $2 billion. Debt-to-equity is a
comfortable .19 to 1 and return on average shareholders' equity continues to be
a very healthy 21%.
Capital expenditures for the year were $118 million compared to $111
million last year.
STRATEGIES
ADP's growth strategies continue to focus primarily on expanding the leadership
positions of our core businesses, where we have lots of remaining opportunities.
Our major priorities are:
- deliver superior client service to enhance value and increase client
retention;
- increase market penetration by broadening product lines and expanding
distribution channels;
- provide ancillary products and services that create incremental value for
existing clients;
- expand existing businesses internationally; and
- enter new markets which complement and leverage our core competencies and
businesses.
<PAGE>
NEW PRODUCTS
In fiscal '95, we substantially increased investments in new product
initiatives. Systems and programming expenditures increased by 20% last year.
For many years we have increased those developmental expenditures faster than
revenue, in order to assure an adequate flow of new offerings.
In the businesses section of this report, we discuss many of our new
products, including the following:
- Total Time is Employer Services new automated time and attendance system.
It seamlessly integrates client timeclocks directly to ADP's payroll computers
in 39 centers. Over 1,600 clients now use Total Time to eliminate clerical
processes, costs and errors by electronically entering attendance data into a
payroll system.
- Brokerage Services introduced Power Partner, the state-of-the-art "object
linking and embedding" (OLE) technology for broker's workstations. It enables
clients to more easily build applications and to seamlessly integrate separate
data and applications.
- Dealer Services introduced a Document Storage and Data Archiving product
that creates a paperless business office for auto dealerships. This product uses
optical scanning and disk technologies to electronically store and retrieve
orders, invoices, checks and other documents.
- Claims Services introduced Pen Pro, the first pen-based, mobile, auto
claims estimating system. It's CD-ROM also compresses 1.1
- 2 -
<PAGE>
billion bytes onto a single disk for easy portability and access.
CLIENT SERVICE
ADP's primary success criterion is outstanding client service. We are committed
to continual service improvement. Last year, we automated more functions,
including a new AutoPay Document Storage. It offers large clients a paperless
CD-ROM alternative to large volumes of paper -- saving paper, space, time,
shipping costs and clerical labor. We also made major investments in laptops for
all field associates to improve client service quality.
ACQUISITIONS
We continue to supplement internal growth through selective strategic
acquisitions. These acquisitions typically expand our client base, add new
products or present a new market opportunity. In fiscal '95, we completed
several acquisitions which are discussed in the businesses section.
Employer Services enhanced its benefits services capabilities by acquiring
WTR, a leading benefits consulting and actuarial firm. Brokerage Services
strengthened its international presence and capabilities by acquiring Wilco
International which provides global multi-currency clearance and settlement
services for international securities. Brokerage also enhanced its institutional
presence by acquiring Shark Information Services which provides real-time market
information and sophisticated analytics to 5,000 institutional users. Dealer
Services continued its global expansion by acquiring Turbodata's 3,000 auto
dealer clients in Benelux, France and Germany.
BOARD AND EXECUTIVE APPOINTMENTS
In January 1995, George H. Heilmeier, president and chief executive officer of
Bellcore (Bell Communications Research), was elected a director. Dr. Heilmeier
also serves on a number of corporate and technology advisory boards. He has also
received numerous awards for his many contributions to the advancement of
electronics and computer technology. After 22 years of valuable service, Edwin
D. Etherington has decided not to stand for reelection in November.
Mike Martone, Tim Lamb, Michael Holmes, John Hogan, Dante Terzo and Harry
Durity were named Corporate Vice President in recognition of their important
contributions and responsibilities.
OUTLOOK
ADP will continue to grow by providing new products and outstanding service to
clients, while making selective acquisitions that expand market share or present
new opportunities. We expect to achieve revenue and earnings per share growth of
about 15% in fiscal '96.
The most critical element in our continued growth is our team of 25,000
associates who make ADP's client service unique. We have been fortunate in
attracting and retaining exceptionally motivated, talented people who share
our vision of high quality service. We thank our ADP team, and we are
particularly pleased that 15,000 associates are also ADP shareholders.
Signature /s/ JOSH S. WESTON
JOSH S. WESTON
CHAIRMAN AND CHIEF EXECUTIVE OFFICER (ABOVE LEFT).
Signature /s/ ARTHUR F. WEINBACH
ARTHUR F. WEINBACH
PRESIDENT AND CHIEF OPERATING OFFICER (ABOVE RIGHT).
August 11, 1995
- 3 -
<PAGE>
EMPLOYER SERVICES
Employer Services (ES), our oldest and largest business, contributes 56% of
ADP's revenue. It serves 300,000 employers with payroll, HR, tax compliance, and
reporting services.
ADP pays 18 million U.S. employees and is five times the size of its
nearest competitor. With a U.S. non-farm labor market of 110 million employees,
ADP still has enormous growth opportunities.
Last year, Employer Services revenue grew by 13%. Our leading indicators
were positive as new client sales rose 15% and client retention also improved.
Three relatively small acquisitions also contributed to the strong growth.
We continue to focus on three payroll segments: the national, major and
heartland markets. The national accounts segment, firms with over 1,000
employees, experienced the fastest growth, as more large companies recognized
the potential of partial or total outsourced processings.
Employer Services expanded product array now includes extremely popular
client site servers for payroll, human resource (HR), and benefits
administration processing. Using advanced technology and fourth generation
tools, each client can mix and match many solutions that best fit their needs
and preferences.
Autopay is ADP's most popular, flexible, and comprehensive payroll product
with over 200,000 clients. It is provided and supported in 39 regional
processing centers. In addition, for small clients we offer EasyPay, a simple,
low-cost payroll solution. For small clients who prefer client site processing
on PC's, we have a software and help desk product called SoftPay. We also offer
Peachtree, a PC-based accounting package that has been sold through retail
channels to over 500,000 users.
Our most popular complement to payroll is payroll tax filing and funds
transmission for 85% of our payroll clients. Last year, ADP filed over 10.5
million quarterly payroll tax returns with the 2,000 U.S. regulatory authorities
that have income taxes.
Total Time, our automated time and attendance system seamlessly integrates
with client site timeclocks directly to ADP's payroll computers in 39 centers.
Over 1,600 clients now use Total Time to eliminate clerical processes, costs and
errors by electronically entering attendance data into a payroll system. The
potential for this rapidly growing product is substantial.
PHOTOGRAPH CAPTIONS:
ABOVE: ADP'S PC PAYROLL SYSTEM WITH CLIENT SITE REPORT WRITING IS A POWERFUL
MANAGEMENT TOOL FOR QUERY AND ANALYSIS. RUTH NALLEY (STANDING), LEAD PAYROLL
CLERK, AND DEBORAH HENLEY, PAYROLL ASSOCIATE AT MOTOROLA COMPUTER GROUP, A
DIVISION OF MOTOROLA'S GENERAL SYSTEMS SECTOR, REVIEW AUDIT REPORTS AT THEIR
TEMPE, ARIZONA FACILITY.
- 4 -
<PAGE>
Employer Services recently introduced its new Full Service Direct Deposit
(FSDD) product in association with some major bank partners. It is designed to
permit employers to very easily, rapidly, and economically make electronic
direct deposits to their employees' bank accounts. With a simplified approval
process and standardized nationwide service, we expect FSDD to become our
clients' preferred form of direct deposit.
In August 1995, ADP formed a joint venture with Checkfree Corporation to
provide electronic banking and bill payment services to small businesses to help
them manage their money and improve the efficiency of the accounts payable
process. ADP's Business Express electronic banking service and Checkfree's bill
payment processing capabilities will combine to satisfy a strong demand among
small businesses for better cash management capabilities.
ADP's services include four human resource (HR) systems, two 401K
recordkeeping systems, and various benefits administration and consulting
services. The HR systems are designed to run on standalone PC's, area networks
or client/server systems. Our human resources and 401(k) products experienced
healthy growth last year.
In January 1995, we enhanced our benefits services capabilities by
acquiring WTR, a leading benefits consulting and actuarial firm. ADP now
provides comprehensive 401K services to over 2,000 clients. Our benefits
consulting includes defined benefit plans, flexible spending plans, healthcare
plans and other group benefits.
Last year, Employer Services implemented several productivity and
automation programs aimed at improving client service and reducing costs. ADP's
new AutoPay Document Storage System offers large clients a paperless CD-ROM
alternative to large volumes of paper. Each compact disk can quickly store and
retrieve up to 80,000 pages of information, saving paper, space, shipping costs,
time, and clerical labor.
PHOTOGRAPH CAPTIONS:
LEFT: ADP EMPLOYER SERVICES PRODUCES PAYCHECKS FOR MORE THAN 18 MILLION WORKERS
EACH PAYDAY. MARY RYAN (LEFT), PAYROLL MANAGER AT DELL COMPUTER CORPORATION IN
AUSTIN, TEXAS, PRESENTS A PAYCHECK TO DON L. REESE (RIGHT), P4 SPECIALIST.
ABOVE: NEW YORK BASED J. & W. SELIGMAN & CO., AN INVESTMENT FIRM, HAS BEEN A
CLIENT OF ADP FOR OVER 20 YEARS. JOAN ACCORDINO, PAYROLL MANAGER, USES MANY OF
ADP'S SERVICES TO HELP PROCESS PAYROLL AND HUMAN RESOURCE INFORMATION. ADP'S HR
PARTNER PRODUCT HELPS FACILITATE THE INTEGRATION OF PAYROLL AND HUMAN RESOURCE
REPORTING.
- 5 -
<PAGE>
BROKERAGE SERVICES
Brokerage Services, is ADP's second-largest business. It represents over 20% of
ADP's revenue and provides securities transaction processing, market information
services, investor analytics, broker tools, and investor communication services
to the financial community worldwide. ADP processes approximately 20% of New
York Stock Exchange transactions and is the leading third-party provider of
recordkeeping services in the U.S. and Canada. ADP is also the leading U.S.
provider of retail equity information, with 96,000 broker terminals, in 1,200
firms.
During '95, ADP's new Power Partner became the first broker's workstation
to use state-of-the-art OLE (object linking and embedding) technology. This
advanced technology includes a modular way of building software applications
that seamlessly integrate market information, securities processing systems,
broker productivity tools, client applications and third party software
(spreadsheets and word processing) for workstations and servers.
ADP continues to target the institutional and international marketplaces.
During '95, several acquisitions were completed which strengthen ADP's product
offerings. Investment Software Systems specializes in the development and
integration of real-time news processing. Global Treasury Information Services
provides real-time fixed income, foreign exchange and money market information.
Shark Information Services provides real-time market information and
sophisticated analytics to 5,000 institutional users.
In July, 1995, Brokerage Services strengthened its international presence
and capabilities by acquiring Wilco International. Through its GLOSS
client/server system, Wilco offers global multi-currency clearance and
settlement services.
NatWest Markets, North America, the corporate and investment banking
division of National Westminster Bank PLC, recently became the first ADP client
to use the interface that links the ADP securities processing system to the
Wilco GLOSS system. This interface provides NatWest with an integration of the
bank's international and domestic securities transactions, enabling the bank to
create consolidated accounting records and regulatory reports.
ADP Investor Communication Services (ICS) is the largest independent
provider of shareholder communications services in the U.S. and Canada. ICS
handles annual and quarterly shareholder mailings and
PHOTOGRAPH CAPTIONS:
ABOVE: "ADP UNDERSTANDS OUR BUSINESS, AND OUR TWO ORGANIZATIONS WORK AS A
TEAM," SAYS MEL TAUB, SMITH BARNEY'S SENIOR EXECUTIVE VICE PRESIDENT AND
DIRECTOR OF OPERATIONS & SYSTEMS, FOR A VIDEO THAT ADP IS PRODUCING TO
COMMUNICATE ITS VISION OF TOMORROW'S FINANCIAL SERVICES WORKSTATION. ADP
RECENTLY PROVIDED A CUSTOMIZED VERSION OF ITS FS PARTNER SYSTEM TO OVER 500
MEMBERS OF SMITH BARNEY'S STATE-OF-THE-ART TRADING FLOOR. NOW ADP AND SMITH
BARNEY ARE WORKING TO CREATE AND IMPLEMENT A CUSTOMIZED SOLUTION FOR OVER 20,000
FINANCIAL CONSULTANTS AND SALES PERSONNEL IN SMITH BARNEY'S RETAIL BRANCH OFFICE
NETWORK.
- 6 -
<PAGE>
proxy processing for investors whose securities are left in "street name" with
their brokerage firm or bank. In '95, ICS processed over 200 million shareholder
mailings, up 17% from '94, for over 11,000 publicly held corporations and mutual
funds. We also electronically scanned and tallied shareholder ballots
representing 69 billion shares.
StreetLink is our unique laser printed alternative to expensive quarterly
shareholder mailings. More than 100 corporations signed agreements during 1995.
AT&T realizes significant cost and time savings by using StreetLink to promptly
get its quarterly information to street-name holders. Investors will soon be
able to access StreetLink via the Internet.
ICS recently acquired the remaining 50% of Proxy Edge from Fidelity
Investments. Proxy Edge is innovative software that supports electronic voting
while also providing real-time voting information to institutional shareholders
in an effective and cost-efficient manner. During 1995, the number of Proxy Edge
users has more than doubled. Future plans include electronic links to our other
financial information services such as ADP's FS Partner Product.
PHOTOGRAPH CAPTIONS:
ABOVE, LEFT TO RIGHT: PASCAL J. MERCURIO, CHAIRMAN & CEO, U.S. CLEARING CORP.,
LESLIE C. QUICK III, PRESIDENT, U.S. CLEARING CORP., PETER QUICK, PRESIDENT &
CHIEF OPERATING OFFICER, THE QUICK & REILLY GROUP, INC., AND THOMAS C. QUICK,
PRESIDENT, QUICK & REILLY INC. ADP WORKS VERY CLOSELY WITH THE QUICK & REILLY
GROUP, INC., ONE OF OUR LARGEST CLIENTS, TO DEVELOP AND INTRODUCE NEW PRODUCTS
TO THE MARKETPLACE. THIS STRATEGIC RELATIONSHIP ENABLES BOTH FIRMS TO REMAIN
COMPETITIVE IN THE FAST-PACED FINANCIAL SERVICES INDUSTRY.
LEFT: MICHAEL MEROLA, CORPORATE VICE PRESIDENT, PAINEWEBBER INCORPORATED (RIGHT)
AND EDWARD J. POWERS JR., ICS, DIRECTOR, ACCOUNT MANAGEMENT (LEFT), DISCUSS THE
IMPLEMENTATION OF ADP'S INVESTOR COMMUNICATION SERVICES' PROSPECTUS FULFILLMENT
SERVICE. PAINEWEBBER JOINS THE MANY INVESTMENT FIRMS WHO HAVE BENEFITED FROM
ICS' NEWEST SERVICE OFFERING.
- 7 -
<PAGE>
DEALER SERVICES
Dealer Services, with 13,000 clients, over 160,000 computer devices, and over
100,000 client applications is the world's largest provider of computing and
consulting services for auto and truck dealers. Dealer Services accounts for
15% of ADP's revenue.
Auto dealers use ADP's on-site systems to manage their accounting,
inventory, factory communications, scheduling, leasing, sales and service
activities. In addition, ADP offers more than 95 manufacturer subsystems for
warranty processing, pricing updates and factory ordering. ADP also provides
dealers with a communications network for parts and vehicle locating, credit
checks and electronic vehicle registration.
In '95, Dealer Services revenue grew by over 30%. This unusually rapid
growth was due to both increased market penetration and the acquisition of
value-added products, in both the U.S. and abroad.
Last year, ADP achieved record new client sales, fueled by robust auto
industry growth. Market share was also expanded by the acquisition of V-Crest
which provides dealer management systems to 500 Volkswagen clients in the U.S.
and Canada.
Our strong growth was also assisted by the sale of additional ADP products
to existing clients and the introduction of new value-added products. Dealer
Services continued to automate the business processes at our client dealerships
by incorporating paperless parts cataloging, repair pricing, shop scheduling,
laser printing, electronic data archiving and document storage, real-time lien
verification, and service merchandising.
ADP's LaserStation replaces costly pre-printed, multipart, carbonized forms
with professional looking originals. It is extremely popular with thousands of
dealers because it allows dealers to print onto blank paper at a single laser
printer all types of customer communications, including customer satisfaction
surveys, service reminders, invoices and statements. Dealers save handling time,
storage space,
PHOTOGRAPH CAPTIONS:
ABOVE: MARTY PHILLIPS (RIGHT), ADP TERRITORY MANAGER, DEMONSTRATES THE USED
VEHICLE NETWORK TO LEON W. EDWARDS, OWNER, EDWARDS CHEVROLET COMPANY,
BIRMINGHAM, AL AND PRESIDENT OF THE NATIONAL AUTOMOTIVE DEALERS ASSOCIATION
(NADA). THIS NETWORK HELPS DEALERS TO IDENTIFY USED VEHICLES IN INVENTORY THAT
THEY INTEND TO SELL, OR TO REQUEST USED VEHICLES THEY WOULD LIKE TO BUY FROM
OTHER DEALERS ON THE NETWORK.
- 8 -
<PAGE>
unnecessary copy usage and the cost of preprinted forms. ADP's clients now
utilize 12,000 LaserStations, a 50% increase over last year.
Dealer Services recently introduced a new product designed to create a new
paperless office called Document Storage & Data Archiving. It uses optical
scanning and disk technologies to electronically scan, store and retrieve
purchase orders, invoices, checks, other documents and even customer signatures.
Digitized records replace stored documents and can be retrieved from any ADP
workstation for viewing, faxing or printing. With this product, Dealers have the
opportunity to eliminate all paper, computer tape, microfiche and traditional
filing cabinets.
We also introduced a New Vehicle Order System, a Used Vehicle Locator
Network and a Reengineering Consulting Service. The New Vehicle Order System
increases vehicle order accuracy, improves vehicle management and reduces floor
plan interest expense. The Used Vehicle Network helps dealerships manage their
used vehicles more efficiently.
ADP continued its strategy of international expansion in '95 to better
satisfy auto manufacturers' desire for reliable global suppliers of dealer
systems. In March 1995, we acquired Turbodata, a leading European auto dealer
service with 3,000 clients in Benelux, France and Germany. We also acquired a
small company that gives Dealer Services a presence in Taiwan.
Major investments were made in 1995 to improve client service quality,
including laptops for all sales account executives and field engineers.
PHOTOGRAPH CAPTIONS:
ABOVE LEFT: PROCESS REENGINEERING SERVICE IS A NEW PROGRAM THAT IS DESIGNED TO
BUILD CUSTOMER LOYALTY AND PROFITABILITY THROUGH EFFECTIVE SYSTEM MANAGEMENT AND
A SERIES OF MANAGEMENT AND SERVICE ADVISOR SEMINARS. DAVID JONES (SEATED), ADP
MAJOR ACCOUNT EXECUTIVE AND CAMILLE MATTHEWS (CENTER), ADP MAJOR ACCOUNT
MANAGER, DEMONSTRATE THE SERVICE TO SHAU-WAI LAM, PRESIDENT & CEO, AND
BILL WONG, CHIEF FINANCIAL OFFICER AND DIRECTOR OF DAH CHONG HONG
(USA), NY, NY.
LEFT: BOB BENSON (LEFT), EXECUTIVE VICE PRESIDENT OF BENSON AUTOMOTIVE WORLD,
METAIRIE (NEW ORLEANS), LA AND BILL SADIN, ADP MAJOR ACCOUNT EXECUTIVE, DISCUSS
THE NEW VEHICLE ORDER SYSTEM, WHICH PROVIDES A TOOL FOR BETTER VEHICLE ORDER
ACCURACY, IMPROVES NON-PERFORMING VEHICLE MANAGEMENT AND REDUCES FLOOR PLAN
INTEREST EXPENSE.
- 9 -
<PAGE>
CLAIMS SERVICES
Our Claims Services Group (CSG) serves auto insurance companies, claims
adjusters, repair shops, and salvage yards in networked and standalone mode,
with auto repair estimating and parts availability services. In addition, CSG
provides auto insurance companies with fee and utilization audits of bodily
injury claims. Those areas experienced strong growth last year.
Estimating Services uses complex databases to determine the proper costs
and methodologies for repairing and replacing damaged vehicles.
In FY '95, CSG introduced PenPro, a pen-based, mobile, auto estimating
system, with much acclaimed state-of-the-art technology and graphical user
interfaces. PenPro recently won a bronze award in national design competition
and has been selected by three top auto insurers as their claims workstation
platform.
With strong client demand for our Shoplink and Photolink products,
estimating revenue almost doubled in the bodyshop repair market.
Parts Services also experienced dynamic growth across all products. Salvage
yard revenue increased 37% through internal growth of Hollander Yard Management
and EDEN communications systems. In addition, CSG completed the acquisition of
AutoInfo's salvage-related products and services at the end of the third
quarter. This adds important satellite and voice-based trading networks for the
location and pricing of recycled parts and also adds 1,000 clients to the CSG
installed base of salvage yards.
- 10 -
<PAGE>
CSG now has almost 3,000 automated salvage yard endpoints for inventory
management, and about 3,700 voice or data endpoints for the trading networks
that support the recycled parts industry. This installed base and its planned
enhancements should provide significant growth opportunities for the recycled
parts industry and for CSG as the largest electronic supplier of recycled parts
information.
Last year was the first full year of operations for our National BioSystems
acquisition, now known as Integrated Medical Solutions. Its core product,
Provider Bill Audit (PBA), doubled in revenue last year.
PBA is an expert system that performs fee and utilization audits of medical
provider bills involving soft tissue injury. This service to auto insurers
provides a consistent methodology for assessing the proper diagnoses and
treatment of automobile-related injuries. The clinical databases and outcomes
measuring techniques can also become a strategic platform for serving additional
health care delivery channels such as PPOs and Worker's Compensation.
PBA is now in pilot installations at seven large insurance carriers and has
continued to expand penetration in its existing client base, which represents
about 20% of all auto insurance policies in the U.S. At the end of last year,
USAA (the nation's 5th largest private automobile insurer) announced that PBA
would be implemented nationally to provide consistent review and assessment of
outpatient medical claims.
PHOTOGRAPH CAPTIONS:
LEFT: PHOTOLINK IS USED TO CAPTURE DIGITAL IMAGES OF AUTO DAMAGE, ATTACH THEM TO
A COMPUTERIZED REPAIR ESTIMATE, AND INSTANTLY TRANSMIT OR RECEIVE THIS
ELECTRONIC CLAIMS FOLDER BETWEEN INSURANCE CLAIMS OFFICES AND AUTOBODY
REPAIRERS. WHEN JEAN WEIDE, APPRAISAL OFFICE CLERK, USAA, RECEIVES IMAGES FROM A
SHOP, SHE CAN GET THE ESTIMATE VERIFIED AND APPROVED ON THE SPOT SO THAT THE
REPAIR WORK CAN START IMMEDIATELY.
OPPOSITE PAGE: ROB HOWELL, STAFF CLAIM ANALYST FOR ALLSTATE, USES PENPRO AT
THEIR TECH-COR BODYSHOP TO CREATE A DAMAGE ESTIMATE QUICKLY AND EASILY. BY
SIMPLY TOUCHING THE PEN TO THE DAMAGED PART ON THE 'SMART' PENPRO ILLUSTRATION,
ALLSTATE'S FIELD APPRAISERS CREATE EVEN THE MOST COMPLEX REPAIR ESTIMATES ON THE
INDUSTRY'S FIRST TRULY MOBILE SYSTEM. PENPRO HELPS TO KEEP THEM OUT IN THE FIELD
WITH THEIR ALLSTATE POLICYHOLDERS AND LETS THEM COMPLETE THEIR DAILY ASSIGNMENTS
WITHOUT RETURNING TO THE OFFICE.
- 11 -
<PAGE>
ADP INTERNATIONAL
ADP is committed to expansion outside the United States. Last year ADP's
international revenue was over $225 million, predominantly from our businesses
in Canada and Europe.
In Canada, each of our U.S. businesses has been very successful in
establishing a strong market presence. In 1995, our Employer Services and
Brokerage businesses each had especially strong results with over 20% revenue
growth and improved margins.
ADP offers Employer, Brokerage and Dealer services in various European
countries. In the UK and the Netherlands, ADP provides a full range of employer
services for 23,000 clients. In the UK, ADP extended its services to include
outsourced payroll administration for those companies who want to fully
outsource their payroll function. Our Dutch business added an offering for the
large government sector and acquired Infotech, the leading provider of employer
services to agencies that supply temporary workers.
Over the last two years, ADP's Brokerage front office business has been
laying the foundation for becoming a multi-national provider of market
information services. We now have 2,200 client terminals in 14 countries outside
North America.
Brokerage Services recently strengthened its international presence and
capabilities by acquiring Wilco International. With its GLOSS client server
system, Wilco offers a rapidly growing global multi-currency clearance and
settlement service for international securities and provides excellent expansion
opportunities.
Dealer Services has become a global supplier of dealer management systems.
ADP now serves over 5,000 clients outside North America. ADP-Autonom continues
to be the leading supplier to General Motors Opel dealers in Germany. In the UK,
ADP-Modems delivers systems to General Motors-Vauxhall. In March 1995, Dealer
Services expanded its European presence by acquiring Turbodata, a leading
European auto dealer service company with 3,000 clients in Benelux, France and
Germany. Last year, we also acquired a small company that gives us a presence in
Taiwan.
In recognition of the increasing global opportunities, ADP plans to
continue to expand its international presence.
ILLUSTRATION CAPTION:
ABOVE: ADP PROVIDES COMPUTERIZED TRANSACTION PROCESSING, DATA COMMUNICATIONS AND
INFORMATION SERVICES WORLDWIDE TO OVER 350,000 CLIENTS.
- 12 -
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
AUTOMATIC DATA PROCESSING, INC. AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1995 1994 1993 1992 1991
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue. . . . . . . . . . . . . . . . . . . . . . $2,893,742 $2,468,966 $2,223,374 $1,940,571 $1,771,751
----------------------------------------------------------------------
Cost of operations . . . . . . . . . . . . . . . . 2,335,122 2,001,796 1,816,995 1,586,725 1,463,952
Interest expense . . . . . . . . . . . . . . . . . 24,340 20,840 19,819 12,266 8,169
----------------------------------------------------------------------
. . . . . . . . . . . . . . . . . . . . . . . . . 2,359,462 2,022,636 1,836,814 1,598,991 1,472,121
----------------------------------------------------------------------
Earnings before income taxes
and cumulative effect of
accounting changes . . . . . . . . . . . . . . . 534,280 446,330 386,560 341,580 299,630
Provision for income taxes . . . . . . . . . . . . 139,450 112,210 92,360 85,400 71,940
----------------------------------------------------------------------
Net earnings before cumulative
effect of accounting changes . . . . . . . . . . 394,830 334,120 294,200 256,180 227,690
Cumulative effect of
accounting changes . . . . . . . . . . . . . . . -- (4,800) -- -- --
----------------------------------------------------------------------
Net earnings . . . . . . . . . . . . . . . . . . . $ 394,830 $ 329,320 $ 294,200 $ 256,180 $ 227,690
----------------------------------------------------------------------
Earnings per share:
Before cumulative effect of
accounting changes . . . . . . . . . . . . . . $2.77 $2.37 $2.08 $1.84 $1.63
Cumulative effect of
accounting changes . . . . . . . . . . . . . . -- (.03) -- -- --
----------------------------------------------------------------------
Net earnings . . . . . . . . . . . . . . . . . . . $2.77 $2.34 $2.08 $1.84 $1.63
----------------------------------------------------------------------
Average number of common
shares outstanding . . . . . . . . . . . . . . . 142,556 140,890 141,327 139,045 139,936
----------------------------------------------------------------------
Cash dividends per share . . . . . . . . . . . . . $.625 $.54 $.475 $.415 $.3625
----------------------------------------------------------------------
Return on equity (a) . . . . . . . . . . . . . . . 20.9% 21.0% 20.9% 22.1% 21.9%
----------------------------------------------------------------------
At year end:
Cash, cash equivalents and
marketable securities. . . . . . . . . . . . . . $1,291,889 $1,062,190 $ 886,452 $ 741,357 $ 432,141
Working capital. . . . . . . . . . . . . . . . . . $ 667,920 $ 507,243 $ 355,047 $ 366,752 $ 299,488
Total assets . . . . . . . . . . . . . . . . . . . $3,201,096 $2,711,751 $2,439,400 $2,169,300 $1,564,930
Long-term debt . . . . . . . . . . . . . . . . . . $ 390,177 $ 372,959 $ 347,583 $ 333,192 $ 49,052
Shareholders' equity . . . . . . . . . . . . . . . $2,096,615 $1,691,251 $1,494,456 $1,296,728 $1,052,620
----------------------------------------------------------------------
<FN>
(a) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES IN 1994 (SEE NOTE 1B.).
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
- 13 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OPERATING RESULTS
Revenue and earnings reached record levels during each of the past three fiscal
years. During fiscal '95, revenue approximated $2.9 billion and net earnings
approximated $395 million. Earnings per share increased 17% to $2.77. Fiscal '95
was ADP's 34th consecutive year of double-digit earnings per share growth since
becoming a public company in 1961.
Revenue and revenue growth by ADP's major service groups are shown below:
<TABLE>
<CAPTION>
REVENUE REVENUE GROWTH
--------------------------- --------------------------
YEARS ENDED JUNE 30, YEARS ENDED JUNE 30,
--------------------------- --------------------------
1995 1994 1993 1995 1994 1993
------------------------------------------------------------------------------------------------ --------------------------
($ IN MILLIONS)
------------------------------------------------------------------------------------------------ --------------------------
<S> <C> <C> <C> <C> <C> <C>
Employer Services. . . . . . . . . . . . . . . . . . . . . . . . $1,615 $1,424 $1,311 13% 9% 17%
Brokerage Services . . . . . . . . . . . . . . . . . . . . . . . 657 606 505 8 20 23
Dealer Services. . . . . . . . . . . . . . . . . . . . . . . . . 440 334 274 32 22 19
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 105 133 73 (21) (23)
--------------------------- --------------------------
Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . $2,894 $2,469 $2,223 17% 11% 15%
--------------------------- --------------------------
</TABLE>
Consolidated revenue grew 17% in fiscal '95, primarily from increased market
penetration, an expanded array of products and services, and acquisitions, with
relatively minor contributions from price increases.
The consolidated pretax margin was 18.5% in '95, up from 18.1% and 17.4% in
'94 and '93, respectively. Continued automation and productivity gains and the
impact of higher interest rates enabled the Company to offset the start up costs
associated with new products and acquisitions.
The Company does not prepare its financial statements in a manner that
generates the true standalone profitability for each unit and profitability
measurements are not maintained in a consistent manner between the Company's
major service groups. Certain revenues and expenses are charged to business
units at a standard rate for management and motivation reasons. Other costs are
recorded based on management responsibility. As a result, various income and
expense items are recorded at the Corporate level and certain shared costs are
not allocated. Consequently, comparisons of specific margins between groups are
not meaningful, although trend information within a service group is a useful
directional indicator.
EMPLOYER SERVICES
Employer Services' revenue grew 13% in fiscal '95 aided by three small
acquisitions. In the absence of these acquisitions, revenue growth would have
been about 10%, up from the 9% rate in '94. Revenue growth in '93 of 17% was
aided by the acquisition in May 1992 of Bank of America's payroll business. In
the absence of this transaction, '93 revenue growth would have been
approximately 8%.
As expected, the three recent acquisitions caused a slight negative impact
on overall Employer Services' operating margin, which was 26% for the year (27%
in '94 and 26% in '93). Field operating margin has increased in each of the past
three years as a result of continued productivity and operating efficiencies.
This increased field margin has enabled Employer Services to significantly
increase investments in product development, sales and marketing.
Employer Services' revenue shown above includes the pretax equivalent of
interest earned on funds collected from clients as part of the Company's
integrated payroll and payroll tax filing services. The pretax equivalent has
been calculated at a consistent standard rate of 7.8% since 1986.
- 14 -
<PAGE>
BROKERAGE SERVICES
Brokerage Services' revenue grew 8% in fiscal '95, down from increases of 20% in
'94 and 23% in '93. These previous growth rates were aided by the February 1993
acquisition of certain back-office processing and international equities
quotation services and the February 1992 acquisition of IECA, which provides
proxy distribution services. In the absence of these transactions revenue growth
for '94 and '93 would have been approximately 10% to 11% in each year.
Brokerage Services' operating margin was about 15% in fiscal '95, down from
16% in '94 (14% in '93) as a result of '95 investments to upgrade capacity and
disaster recovery capabilities.
DEALER SERVICES
Dealer Services' revenue grew 32% in '95, up from increases of 22% in '94 and
19% in '93. Revenue growth in each year was aided by several small acquisitions.
In the absence of acquisitions, '95 revenue growth would have been about 18%.
Operating margin was approximately 20% in fiscal '95 and '94, up from
approximately 15% in '93.
OTHER
The primary components of "Other revenue" are claims services, services for
wholesalers and European payroll users and interest income. 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 7.8%. Other revenue grew in '95 primarily as a
result of several small acquisitions and higher interest rates.
In each of the past three years, investments in systems development and
programming have increased at a greater rate than the Company's overall growth
rate. Investments have increased to accelerate automation, migrate to new
computing technologies and develop new products.
The impact of fluctuations in foreign currency rates on the Company's
financial statements was not material during the three year period ended June
30, 1995.
In '95, the Company's effective tax rate was approximately 26%, up from
approximately 25% in '94, primarily as a result of greater weighting of taxable
versus non-taxable earnings in '95. The '94 effective rate increased from
approximately 24% in '93, primarily as a result of the increased statutory tax
rate enacted in August 1993. Consolidated after-tax margins were 13.6% in '95,
13.5% in '94, and 13.2% in '93.
In '95, the Company adopted FASB Statement No. 115,"Accounting for Certain
Investments in Debt and Equity Securities". The impact of adopting this
statement was not material. In 1994, the Company adopted FASB Statements No.
109, "Accounting for Income Taxes", and No. 112, "Employer's Accounting for
Postemployment Benefits", effective July 1, 1993. The cumulative effect of
adopting Statement No. 109 was to increase net earnings by $2.7 million
($.02 per share). The cumulative effect of adopting Statement No. 112 was to
decrease net earnings by $7.5 million ($.05 per share).
For '96 ADP is planning another record year with around 15% growth in both
revenue and earnings per share.
Additional comments and operating results are included in the Letter to
Shareholders on pages 2 and 3 and in the business descriptions presented on
pages 4 through 12.
- 15 -
<PAGE>
FINANCIAL CONDITION
ADP's financial condition and balance sheet remain exceptionally strong. At June
30, 1995, cash and marketable securities appproximated $1.3 billion.
Shareholders' equity approximated $2.1 billion, and return on average equity for
the year was 21%. The ratio of long-term debt to equity at June 30, 1995 was
19%.
Cash flow from operating activities was $478 million in '95. We expect
another excellent year of cash flow in fiscal 1996.
In '95, as part of an on-going program, we purchased 219,000 shares of
common stock at an average price of approximately $60 to partially fund our
equity related employee benefit plans. During the past five years we have spent
about $532 million for the purchase of approximately 17 million treasury shares.
The Board of Directors has authorized the purchase of up to 6.7 million
additional shares.
During '95, the Company purchased several businesses for approximately $107
million in cash and $16 million in common stock. The cost of acquisitions in
'94, and '93 aggregated $81 million and $57 million, respectively. The Company
also acquired several businesses in '95 and '93 in pooling of interest
transactions in exchange for 1,181,000 and 348,000 shares of common stock,
respectively. The Company's historical financial statements were not restated
because these transactions were not material in the aggregate.
Capital expenditures during '95 were approximately $118 million, following
investments of $111 million in '94 and $87 million in '93. Capital spending in
fiscal '96 should approximate $150 million.
MARKET PRICE AND DIVIDEND DATA
The market price of Automatic Data Processing, Inc. (AUD) common shares based on
New York Stock Exchange composite transactions and cash dividends per share
declared during the past two years have been:
PRICE PER SHARE
---------------------- DIVIDENDS
FISCAL 1995 QUARTER ENDED . . HIGH LOW PER SHARE
---------------------------------------------------------------------------
June 30. . . . . . . . . . . . $66 $60 1/2 $.175
March 31 . . . . . . . . . . . 65 1/2 57 1/2 .15
December 31. . . . . . . . . . 59 3/4 52 1/2 .15
September 30 . . . . . . . . . 56 7/8 50 3/4 .15
FISCAL 1994 QUARTER ENDED
---------------------------------------------------------------------------
June 30. . . . . . . . . . . . $55 1/4 $47 5/8 $.15
March 31 . . . . . . . . . . . 55 1/2 50 1/4 .13
December 31. . . . . . . . . . 56 7/8 49 5/8 .13
September 30 . . . . . . . . . 52 5/8 47 .13
As of June 30, 1995 there were approximately 24,500 holders of record of
Automatic Data Processing, Inc. common stock. Over 90,000 additional holders
have their stock in "street name".
- 16 -
<PAGE>
STATEMENTS OF CONSOLIDATED EARNINGS
<TABLE>
<CAPTION>
AUTOMATIC DATA PROCESSING, INC. AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1995 1994 1993
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,893,742 $2,468,966 $2,223,374
----------------------------------------
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,177,292 1,026,354 927,181
General, administrative and selling expenses . . . . . . . . . . . . . . . . . . 792,121 666,344 617,194
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . . 172,536 148,295 140,234
Systems development and programming costs. . . . . . . . . . . . . . . . . . . . 193,173 160,803 132,386
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,340 20,840 19,819
----------------------------------------
2,359,462 2,022,636 1,836,814
----------------------------------------
Earnings before income taxes and cumulative effect
of accounting changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 534,280 446,330 386,560
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 139,450 112,210 92,360
----------------------------------------
Net earnings before cumulative effect of accounting changes. . . . . . . . . . . 394,830 334,120 294,200
Cumulative effect of accounting changes. . . . . . . . . . . . . . . . . . . . . -- (4,800) --
----------------------------------------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 394,830 $ 329,320 $ 294,200
----------------------------------------
Earnings per share:
Before cumulative effect of accounting changes . . . . . . . . . . . . . . . . $2.77 $2.37 $2.08
Cumulative effect of accounting changes. . . . . . . . . . . . . . . . . . . . -- (.03) --
----------------------------------------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2.77 $2.34 $2.08
----------------------------------------
Average number of common shares outstanding. . . . . . . . . . . . . . . . . . . 142,556 140,890 141,327
----------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
- 17 -
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AUTOMATIC DATA PROCESSING, INC. AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
---------------------------------------------------------------------------------------------------------------
JUNE 30, 1995 1994
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 313,612 $ 238,626
Short-term marketable securities . . . . . . . . . . . . . . . . . . . . . . . 384,009 351,969
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377,145 298,096
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136,377 102,912
-------------------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,211,143 991,603
-------------------------
Long-term marketable securities. . . . . . . . . . . . . . . . . . . . . . . . . 594,268 471,595
-------------------------
Long-term receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189,858 162,272
-------------------------
Property, plant and equipment -- at cost:
Land and buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287,186 275,088
Data processing equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . 501,403 433,161
Furniture, leaseholds and other. . . . . . . . . . . . . . . . . . . . . . . . 309,592 293,044
-------------------------
1,098,181 1,001,293
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . . . . 682,222 605,445
-------------------------
415,959 395,848
-------------------------
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,212 81,408
-------------------------
Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 705,656 609,025
-------------------------
$3,201,096 $2,711,751
-------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 65,955 $ 56,151
Accrued expenses and other current liabilities . . . . . . . . . . . . . . . . 385,040 346,960
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,672 79,053
Current portion of long-term debt. . . . . . . . . . . . . . . . . . . . . . . 9,556 2,196
-------------------------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 543,223 484,360
-------------------------
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 390,177 372,959
-------------------------
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,865 69,504
-------------------------
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,844 33,553
-------------------------
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,372 60,124
-------------------------
Shareholders' equity:
Preferred stock, $1.00 par value:
Authorized, 300 shares; issued, none
Common stock, $.10 par value:
Authorized, 200,000 shares; issued, 157,117 shares . . . . . . . . . . . . . 15,712 15,712
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . . . 367,619 325,029
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,182,838 1,883,423
Treasury stock -- at cost, 13,033 and 16,418 shares, respectively. . . . . . . (469,554) (532,913)
-------------------------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . 2,096,615 1,691,251
-------------------------
$3,201,096 $2,711,751
-------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
- 18 -
<PAGE>
STATEMENTS OF SHAREHOLDERS' EQUITY
AUTOMATIC DATA PROCESSING, INC. AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN
----------------------- EXCESS OF RETAINED TREASURY
SHARES AMOUNT PAR VALUE EARNINGS STOCK
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, JULY 1, 1992. . . . . . . . . . . . . . . 157,117 $15,712 $304,381 $1,405,333 $428,698
Employee stock plans and related tax benefits. . . -- -- 12,378 -- (50,757)
Treasury stock acquired (1,714 shares) . . . . . . -- -- -- -- 82,510
Acquisition (348 shares) . . . . . . . . . . . . . -- -- (9,050) (2,218) (9,050)
Net earnings . . . . . . . . . . . . . . . . . . . -- -- -- 294,200 --
Dividends ($.475 per share). . . . . . . . . . . . -- -- -- (67,184) --
Other transactions . . . . . . . . . . . . . . . . -- -- (7,699) 4 --
--------------------------------------------------------------------
BALANCE, JUNE 30, 1993 . . . . . . . . . . . . . . 157,117 15,712 300,010 1,630,135 451,401
Employee stock plans and related tax benefits. . . -- -- 23,699 -- (47,986)
Treasury stock acquired (2,579 shares) . . . . . . -- -- -- -- 129,389
Net earnings . . . . . . . . . . . . . . . . . . . -- -- -- 329,320 --
Dividends ($.54 per share) . . . . . . . . . . . . -- -- -- (76,031) --
Other transactions . . . . . . . . . . . . . . . . -- -- 1,320 (1) 109
--------------------------------------------------------------------
BALANCE, JUNE 30, 1994 . . . . . . . . . . . . . . 157,117 15,712 325,029 1,883,423 532,913
Employee stock plans and related tax benefits. . . -- -- 43,498 -- (39,384)
Treasury stock acquired (219 shares) . . . . . . . -- -- -- -- 13,146
Acquisitions (1,478 shares). . . . . . . . . . . . -- -- (13,045) (6,206) (37,225)
Net earnings . . . . . . . . . . . . . . . . . . . -- -- -- 394,830 --
Dividends ($.625 per share). . . . . . . . . . . . -- -- -- (89,224) --
Other transactions . . . . . . . . . . . . . . . . -- -- 12,137 15 104
--------------------------------------------------------------------
BALANCE, JUNE 30, 1995 . . . . . . . . . . . . . . 157,117 $15,712 $367,619 $2,182,838 $469,554
--------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
- 19 -
<PAGE>
STATEMENTS OF CONSOLIDATED CASH FLOWS
AUTOMATIC DATA PROCESSING, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(IN THOUSANDS)
---------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1995 1994 1993
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . $ 394,830 $ 329,320 $ 294,200
Depreciation and amortization. . . . . . . . . . . . . . . . . . 172,536 148,295 140,234
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . (11,050) (3,200) 12,000
Changes in operating assets and liabilities:
Receivables and other assets . . . . . . . . . . . . . . . . . (89,131) (28,922) (58,702)
Accounts payable and accrued expenses. . . . . . . . . . . . . (1,975) 17,105 53,782
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,575 46,530 (50,132)
---------------------------------------
Net cash flows from operating activities . . . . . . . . . . 478,785 509,128 391,382
---------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Marketable securities. . . . . . . . . . . . . . . . . . . . . . (154,713) (117,914) (268,314)
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . (117,698) (110,733) (87,411)
Other changes to property, plant and equipment . . . . . . . . . 3,756 12,822 6,122
Additions to intangibles . . . . . . . . . . . . . . . . . . . . (38,612) (24,460) (24,889)
Acquisitions of businesses . . . . . . . . . . . . . . . . . . . (107,457) (81,082) (56,918)
---------------------------------------
Net cash flows from investing activities . . . . . . . . . . (414,724) (321,367) (431,410)
---------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of long-term debt . . . . . . . . . . . . . . . . . . (6,217) (1,702) (8,979)
Proceeds from issuance of common stock . . . . . . . . . . . . . 99,412 77,981 72,838
Repurchases of common stock. . . . . . . . . . . . . . . . . . . (13,146) (129,389) (82,510)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . (89,224) (76,031) (67,184)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,100 (796) 2,644
---------------------------------------
Net cash flows from financing activities . . . . . . . . . . 10,925 (129,937) (83,191)
---------------------------------------
Net change in cash and cash equivalents. . . . . . . . . . . . . 74,986 57,824 (123,219)
Cash and cash equivalents, at beginning of period. . . . . . . . 238,626 180,802 304,021
---------------------------------------
Cash and cash equivalents, at end of period. . . . . . . . . . . $ 313,612 $ 238,626 $ 180,802
---------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
- 20 -
<PAGE>
NOTES TO CONSOLIDATED STATEMENTS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Principles of Consolidation. The consolidated financial statements include
the accounts of Automatic Data Processing, Inc. and its majority-owned
subsidiaries. Intercompany accounts and transactions have been eliminated in
consolidation.
B. Accounting Changes. In fiscal 1994 the Company adopted FASB Statements No.
109, "Accounting for Income Taxes", and No. 112, "Employers' Accounting for
Postemployment Benefits", effective July 1, 1993. The cumulative effect of
adopting Statement No. 109 was to increase net earnings by $2.7 million ($.02
per share). The cumulative effect of adopting Statement No. 112, which requires
certain postemployment benefits to be accrued as service is provided, was to
decrease net earnings by $7.5 million ($.05 per share), net of $5.0 million of
income tax benefits.
C. Cash and Cash Equivalents. Highly liquid investments with a maturity of three
months or less at the time of purchase are considered cash equivalents.
D. Marketable Securities. Marketable securities consist primarily of high grade
municipal investments. Effective July 1, 1994 the Company adopted FASB Statement
No. 115, "Accounting for Certain Investments in Debt and Equity Securities".
Most of the Company's marketable securities are classified under Statement No.
115 as "available-for-sale", and, accordingly, are carried on the June 30, 1995
balance sheet at fair market value which approximates cost. Gains/losses from
the sale of marketable securities during fiscal 1995 were not material and
there was no significant impact resulting from the adoption of the Statement.
Approximately $244 million of the Company's long-term marketable securities
mature in 1-2 years, $253 million in 2-3 years, and the remainder in less
than 7 years.
E. Property, Plant and Equipment. Property, plant and equipment is depreciated
over the estimated useful lives of the assets by the straight-line method.
Leasehold improvements are amortized over the shorter of the term of the lease
or the estimated useful lives of the improvements.
The estimated useful lives of assets are primarily as follows:
--------------------------------------------------------------------------------
Data processing equipment. . . . . . . . . . . . . . . . . . 2 to 3 years
Buildings. . . . . . . . . . . . . . . . . . . . . . . . . . 20 to 40 years
Furniture and fixtures . . . . . . . . . . . . . . . . . . . 3 to 7 years
--------------------------------------------------------------------------------
F. Intangibles. Intangible assets are recorded at cost and are amortized
primarily on a straight-line basis over appropriate periods ranging from 3 to 40
years. Goodwill is periodically reviewed to determine recoverability by
comparing its carrying value to expected future cash flows.
G. Revenue Recognition. Service revenue, including software license fees,
maintenance fees and other ancillary fees, is recognized as services are
provided. In those instances where hardware is sold to clients as part of a
bundled service offering, the gross profit on the sale of hardware and prepaid
software license fees, less costs of selling and installation, is deferred and
recognized on a straight-line basis over the initial contract period, which
generally is from 5 to 7 years.
H. Earnings Per Share. Earnings per share are based upon the weighted average
number of shares outstanding during the respective periods.
I. Line of Business. The Company is engaged in the computing services business.
J. Reclassification of Prior Financial Statements. Certain reclassifications
have been made to previous years' financial statements to conform to current
classifications.
- 21 -
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Automatic Data Processing, Inc. and Subsidiaries
NOTE 2. ACQUISITIONS
During '95, the Company purchased several businesses for approximately $107
million in cash and $16 million in common stock. The cost of acquisitions in '94
and '93 aggregated approximately $81 million and $57 million, respectively. The
results of acquired businesses, which were not material to the Company's
financial statements, are included in the consolidated financial statements from
the date of acquisition.
The Company acquired several businesses in '95 and '93 in pooling of
interest transactions in exchange for 1,181,000 and 348,000 shares of common
stock, respectively. The Company's historical financial statements were not
restated because in the aggregate these transactions were not material.
NOTE 3. RECEIVABLES
Trade accounts receivable is net of an allowance for doubtful accounts of $23
million and $21 million at June 30, 1995 and 1994, respectively.
The Company finances the sale of computer systems to certain of its
clients. These finance receivables, substantially all of which are due from
automobile and truck dealerships, are reflected in the consolidated balance
sheets as follows:
<TABLE>
<CAPTION>
1995 1994
-----------------------------------------------------------
(IN THOUSANDS) CURRENT LONG-TERM CURRENT LONG-TERM
------------------------------------------------------------------------------------------------------------------------------
JUNE 30,
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Receivables. . . . . . . . . . . . . . . . . . . . . . . . . $110,345 $247,145 $ 91,884 $214,815
Less:
Allowance for doubtful accounts. . . . . . . . . . . . . . (12,136) (26,166) (10,204) (24,526)
Unearned income. . . . . . . . . . . . . . . . . . . . . . (24,102) (31,121) (20,603) (28,017)
-----------------------------------------------------------
$ 74,107 $189,858 $ 61,077 $162,272
-----------------------------------------------------------
</TABLE>
Unearned income from finance receivables represents the excess of gross
receivables over the sales price of the computer systems financed. Unearned
income is amortized using the interest method to maintain a constant rate of
return on the net investment over the term of each contract.
Long-term receivables at June 30, 1995 mature as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------------------------------------------------------------------------
<S> <C>
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 96,852
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,016
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,546
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,807
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,924
--------
$247,145
--------
</TABLE>
NOTE 4. INTANGIBLE ASSETS
Components of intangible assets are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------------------------------------------------------------------------
JUNE 30, 1995 1994
--------------------------------------------------------------------------------
<S> <C> <C>
Goodwill . . . . . . . . . . . . . . . . . . . . . $ 482,076 $ 348,740
Other. . . . . . . . . . . . . . . . . . . . . . . 528,277 513,055
------------------------
1,010,353 861,795
Less accumulated amortization. . . . . . . . . . . (304,697) (252,770)
------------------------
$ 705,656 $ 609,025
------------------------
</TABLE>
Other intangibles consist primarily of purchased rights to provide data
processing services to various groups of clients. Amortization of intangibles
totalled $66 million for fiscal 1995, $61 million for 1994 and $57 million for
1993.
- 22 -
<PAGE>
NOTE 5. LONG-TERM DEBT
Components of long-term debt are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
------------------------------------------------------------------------------------------------------------------------------
JUNE 30, 1995 1994
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Zero coupon convertible subordinated notes (5 1/4% yield). . . . . . . . . . . . . . . . . . . $339,132 $319,057
Industrial revenue bonds (with fixed and variable interest rates from 3.6% to 8.3%). . . . . . 39,560 39,995
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,041 16,103
-----------------------
399,733 375,155
Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,556) (2,196)
-----------------------
$390,177 $372,959
-----------------------
</TABLE>
The zero coupon convertible subordinated notes have a $805 million face
value and mature February 20, 2012, unless converted or redeemed earlier. The
notes are convertible into approximately 5.2 million shares of the Company's
common stock. The notes are callable at the option of the Company after February
1996, and the holders of the notes can require redemption in 1997, 2002, and
2007. As of June 30, 1995 and 1994, the quoted market prices for the zero coupon
notes were approximately $360 million and $322 million, respectively. The fair
value of the other debt included above, based on available market information,
approximates its carrying value.
Long-term debt repayments are due as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------------------------------------------------------------------------
<S> <C>
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,226
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 630
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 630
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 630
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . 385,061
--------
$390,177
--------
</TABLE>
Interest payments were approximately $4 million during the years ended June
30, 1995, 1994 and 1993.
NOTE 6. PAYROLL AND PAYROLL TAX FILING SERVICES
As part of its integrated payroll and payroll tax filing services, the Company
collects funds for federal, state and local employment taxes from approximately
235,000 clients, files over 10.5 million applicable returns, handles all
regulatory correspondence and amendments, absorbs regulatory charges for certain
penalties and interest, and remits the funds to the appropriate tax agencies. In
addition to fees paid by clients for these services, the Company receives
interest during the interval between the receipt and disbursement of funds by
investing the funds primarily in AA or better rated municipal instruments, with
no more than $60 million in any single instrument. The amount of collected but
unremitted funds varies significantly during the year and averaged approximately
$3.3 billion in fiscal 1995, $2.8 billion in fiscal 1994 and $2.4 billion in
fiscal 1993. The amount of such funds as of June 30, 1995 and 1994 was $4.6
billion and $3.7 billion, respectively.
NOTE 7. EMPLOYEE BENEFIT PLANS
A. Stock Option Plans. The Company has stock option plans which provide for the
issuance to eligible employees of incentive and non-qualified stock options,
which may expire as much as 10 and 12 years, respectively, from the date of
grant, at prices not less than the fair market value on the date of grant. At
June 30, 1995, there were 4,650 participants in the plans. The aggregate
purchase price for options outstanding at June 30, 1995 was approximately $428
million. The options expire between 1995 and 2005.
- 23 -
<PAGE>
A summary of changes in the stock option plans for the three years ended
June 30, 1995 is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) NUMBER OF OPTIONS
------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1995 1994 1993
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding, beginning of year . . . . . . . . . . . . . . . . . . 9,670 8,237 8,021
Options granted ($53 to $62 per share in 1995,
$47 to $51 in 1994 and $43 to $48 in 1993) . . . . . . . . . . . . . . . 2,692 3,091 1,566
Options exercised ($8 to $49 per share in 1995,
$8 to $47 in 1994 and $6 to $43 in 1993) . . . . . . . . . . . . . . . . (1,141) (859) (886)
Options cancelled. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (882) (804) (467)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 5 3
------------------------------------
Options outstanding, end of year ($12 to $62 per share
in 1995, $9 to $51 in 1994 and $8 to $48 in 1993). . . . . . . . . . . . 10,362 9,670 8,237
------------------------------------
Options exercisable, end of year . . . . . . . . . . . . . . . . . . . . . 2,826 2,590 2,332
------------------------------------
Shares available for future grants, end of year. . . . . . . . . . . . . . 2,221 4,054 2,347
------------------------------------
Shares reserved for issuance under stock option plans. . . . . . . . . . . 12,583 13,724 10,584
------------------------------------
</TABLE>
B. Restricted Stock Plan. The Company has a restricted stock plan under which
shares of common stock have been sold for nominal consideration to certain key
employees. These shares are restricted as to transfer and in certain
circumstances must be resold to the Company at the original purchase price. The
restrictions lapse over periods of up to six years. During the years ended June
30, 1995, 1994 and 1993, the Company issued 53,150, 94,050 and 126,200
restricted shares, and repurchased 25,100, 23,100 and 6,700 shares,
respectively.
C. Employee Stock Purchase Plans. The Company has stock purchase plans under
which eligible employees have the ability to purchase shares of common stock at
85% of the lower of market value as of the date of purchase election or end of
the plan. Approximately 1.0 million shares are scheduled for issuance on
December 31, 1995 and 1.1 million on December 31, 1996. Approximately 1.0
million and 1.2 million shares were issued during the years ended June 30, 1995
and 1994, respectively. At June 30, 1995 and 1994, there were approximately 5.3
million and 6.3 million shares reserved for purchase under the plan. Included in
liabilities as of June 30, 1995 and 1994 are employee stock purchase plan
withholdings of approximately $45 million and $42 million, respectively.
D. Pension Plan. The Company has a defined benefit cash balance pension plan
covering substantially all domestic employees, under which employees are
credited with a percentage of base pay each year plus 7% interest. Employees are
fully vested on completion of five years service. The Company's policy is to
make contributions within the range determined by generally accepted actuarial
principles.
The plan's funded status is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
------------------------------------------------------------------------------------------------------------------------------
JUNE 30, 1995 1994
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Funded plan assets at market value, primarily stocks and bonds . . . . . . . . . . . . . . . . $134,200 $105,300
-----------------------
Actuarial present value of benefit obligations:
Vested benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119,000 97,700
Non-vested benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,400 7,400
-----------------------
Accumulated/projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . 126,400 105,100
-----------------------
Plan assets in excess of projected benefits. . . . . . . . . . . . . . . . . . . . . . . . . . 7,800 200
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,300) (5,200)
Transition obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,700 2,000
Unrecognized net actuarial loss due to different experience than that assumed. . . . . . . . . 31,400 32,600
-----------------------
Prepaid pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,600 $ 29,600
-----------------------
</TABLE>
- 24 -
<PAGE>
The components of net pension expense were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1995 1994 1993
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during the period . . . . . . . . . . . . . $12,600 $10,700 $ 8,700
Interest cost on projected benefits. . . . . . . . . . . . . . . . . . . . 8,400 6,800 5,400
Return on plan assets. . . . . . . . . . . . . . . . . . . . . . . . . . . (11,600) (1,500) (5,900)
Net amortization and deferral. . . . . . . . . . . . . . . . . . . . . . . 3,600 (7,300) (800)
-------------------------------------
$13,000 $ 8,700 $ 7,400
-------------------------------------
</TABLE>
Assumptions used to develop the actuarial present value of benefit obligations
for the three years ended June 30, 1995 were:
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.0% 8.0% 8.5%
Expected long-term rate of return on assets. . . . . . . . . . . . . . . . 8.5% 8.5% 8.5%
Rate of increase in compensation levels. . . . . . . . . . . . . . . . . . 6.0% 6.0% 6.0%
-------------------------------------
</TABLE>
E. Retirement and Savings Plan. The Company has a 401(k) retirement and savings
plan which allows eligible employees to contribute up to 12% of their
compensation annually. The Company matches a portion of this contribution which
amounted to approximately $11.0 million, $9.0 million and $7.0 million for
calendar years 1994, 1993 and 1992, respectively.
NOTE 8. INCOME TAXES
In accordance with FASB Statement No. 109, accounting for income taxes follows
the asset and liability approach. Deferred taxes reflect the tax consequences on
future years of differences between the financial reporting and tax bases of
assets and liabilities.
The provision for income taxes consists of the following components:
<TABLE>
<CAPTION>
(IN THOUSANDS)
------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1995 1994 1993
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $106,440 $ 87,430 $60,550
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,150 10,670 9,260
State. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,910 17,310 10,550
--------------------------------------
Total current. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,500 115,410 80,360
--------------------------------------
Deferred:
Federal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,440) (620) 9,625
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,430) (2,880) (855)
State. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,180) 300 3,230
--------------------------------------
Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,050) (3,200) 12,000
--------------------------------------
$139,450 $112,210 $92,360
--------------------------------------
</TABLE>
At June 30, 1995 and 1994, the Company had gross deferred tax assets of
approximately $78 million and $58 million, respectively, consisting primarily of
operating expenses not currently deductible for tax return purposes. Valuation
allowances were not material. Gross deferred tax liabilities of approximately
$85 million as of each date consisted primarily of depreciation and amortization
temporary differences.
Income tax payments were approximately $131 million in 1995, $90 million in
1994 and $78 million in 1993. Pretax domestic earnings approximated $505 million
in 1995, $430 million in 1994 and $360 million in 1993.
- 25 -
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Automatic Data Processing, Inc. and Subsidiaries
A reconciliation between the Company's effective tax rate and the U.S.
federal statutory rate is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PERCENTAGES)
------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1995 PERCENT 1994 PERCENT 1993 PERCENT
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Provision for taxes at statutory rate. . . . . . . . $187,000 35.0 $156,200 35.0 $131,400 34.0
Increase (decrease) in provision from:
Investments in municipals and preferred stocks . . (57,995) (10.9) (50,860) (11.4) (44,100) (11.4)
State taxes, net of federal tax benefit. . . . . . 15,425 2.9 12,540 2.8 9,100 2.4
Other. . . . . . . . . . . . . . . . . . . . . . . (4,980) (.9) (5,670) (1.3) (4,040) (1.1)
--------------------------------------------------------------------
$139,450 26.1 $112,210 25.1 $92,360 23.9
--------------------------------------------------------------------
</TABLE>
NOTE 9. LEASE OBLIGATIONS
The Company and its subsidiaries have various facilities and equipment lease
obligations. Total rental expense was approximately $152 million in 1995, $135
million in 1994 and $123 million in 1993 with minimum lease commitments under
operating leases as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------------------------------------------------------------------------
YEAR ENDING JUNE 30,
--------------------------------------------------------------------------------
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $131,000
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,000
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,000
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,000
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,000
--------
$345,000
--------
</TABLE>
In addition to fixed rentals, certain leases require payment of maintenance
and real estate taxes and contain escalation provisions based on future
adjustments in price indices.
NOTE 10. QUARTERLY FINANCIAL RESULTS (UNAUDITED)
Summarized quarterly results of operations for the three years ended June 30,
1995 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
------------------------------------------------------------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH
YEAR ENDED JUNE 30, 1995 QUARTER QUARTER QUARTER QUARTER
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $622,286 $672,597 $798,989 $799,870
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . $ 68,700 $ 94,920 $125,270 $105,940
Earnings per share . . . . . . . . . . . . . . . . . . . . . . . $ .49 $ .67 $ .87 $ .74
-----------------------------------------------------
YEAR ENDED JUNE 30, 1994
------------------------------------------------------------------------------------------------------------------------------
Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $551,983 $577,661 $674,405 $664,917
Earnings before cumulative effect of accounting changes. . . . . $ 58,510 $ 80,180 $104,990 $ 90,440
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53,710 $ 80,180 $104,990 $ 90,440
-----------------------------------------------------
Earnings per share:
Before cumulative effect of accounting changes . . . . . . . . $ .42 $ .57 $ .74 $ .64
Cumulative effect of accounting changes. . . . . . . . . . . . $ (.03) $ -- $ -- $ --
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ .39 $ .57 $ .74 $ .64
-----------------------------------------------------
YEAR ENDED JUNE 30, 1993
------------------------------------------------------------------------------------------------------------------------------
Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $495,303 $518,471 $612,956 $596,644
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . $ 51,920 $ 70,130 $ 92,480 $ 79,670
Earnings per share . . . . . . . . . . . . . . . . . . . . . . . $ .37 $ .50 $ .65 $ .56
-----------------------------------------------------
</TABLE>
Third quarter revenue and earnings have historically been positively
impacted by calendar year-end processings associated with many of the Company's
services.
- 26 -
<PAGE>
REPORT OF MANAGEMENT
Management is responsible for the preparation of the accompanying financial
statements. The financial statements, which include amounts based on the
application of business judgements, have been prepared in conformity with
generally accepted accounting principles. Deloitte & Touche LLP, independent
certified public accountants, have audited our consolidated financial statements
as described in their report.
The Company maintains financial control systems designed to provide
reasonable assurance that assets are safeguarded and that transactions are
executed and recorded in accordance with management authorization. The control
systems are supported by written policies and the control environment is
regularly evaluated by both the Company's internal auditors and Deloitte &
Touche.
The Board of Directors has an Audit Committee comprised of five outside
directors. The Audit Committee meets with both Deloitte & Touche and the
internal auditors with and without management's presence. It monitors and
reviews the Company's financial statements and internal controls, and the scope
of the internal auditors' and Deloitte & Touche's audits. Deloitte & Touche
and the internal auditors have free access to the Audit Committee.
Signature Signature Signature
/s/ JOSH S. WESTON /s/ FRED D. ANDERSON /s/ RICHARD J. HAVILAND
Josh S. Weston Fred D. Anderson, Jr. Richard J. Haviland
CHAIRMAN AND CHIEF FINANCIAL OFFICER CORPORATE CONTROLLER
CHIEF EXECUTIVE OFFICER
Roseland, New Jersey, August 11, 1995
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Automatic Data Processing, Inc.
Roseland, New Jersey
Deloitte & Touche LLP LOGO
We have audited the accompanying consolidated balance sheets of Automatic Data
Processing, Inc. and subsidiaries as of June 30, 1995 and 1994, and the related
consolidated statements of earnings, shareholders' equity, and cash flows for
each of the three years in the period ended June 30, 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Automatic Data Processing, Inc.
and subsidiaries at June 30, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended June 30,
1995, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1994
the Company changed its methods of accounting for postemployment benefits other
than pensions and for income taxes.
Signature
/S/ DELOITTE & TOUCHE LLP
New York, New York, August 11, 1995
- 27 -
<PAGE>
EXHIBIT 21
Jurisdiction of
Name of Subsidiary Incorporation
------------------ ----------------
ADP Atlantic, Inc. Delaware
ADP Claims Solutions Group, Inc. Delaware
ADP Autonom Computer GmbH Germany
ADP Nederland B.V. The Netherlands
ADP Central, Inc. Delaware
ADP Credit Corp. Delaware
ADP Dealer Services Ltd. Canada (Federal)
ADP East, Inc. Delaware
ADP Financial Information Services, Inc. Delaware
ADP Financial Information Services (UK) Limited United Kingdom
ADP, Inc. Delaware
ADP Insurance Company, Ltd. Delaware
ADP Network Services International, Inc. Delaware
ADP Network Services Limited United Kingdom
ADP of New Jersey, Inc. Delaware
ADP of North America, Inc. Delaware
ADP Pacific, Inc. Delaware
ADP Savings Association Pennsylvania
ADP Tax Services, Inc. Delaware
ADP Broker-Dealer, Inc. New Jersey
In accordance with Item 601(b)(21) of Regulation S-K, the Registrant has omitted
the names of particular subsidiaries because the unnamed subsidiaries,
considered in the aggregate as a single subsidiary, would not have constituted a
significant subsidiary as of June 30, 1995.
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' REPORT ON SCHEDULE AND CONSENT
To the Board of Directors
and Shareholders of
Automatic Data Processing, Inc.
Roseland, New Jersey
We have audited the consolidated financial statements of Automatic Data
Processing, Inc. as of June 30, 1995 and 1994, and for each of the three years
in the period ended June 30, 1995, and have issued our report thereon dated
August 11, 1995, which report includes an explanatory paragraph indicating
changes in accounting principles for postemployment benefits other than pensions
and for income taxes; such consolidated financial statements and report are
included in your 1995 Annual Report to Shareholders and are incorporated herein
by reference. Our audits also included the financial statement schedule of
Automatic Data Processing, Inc., listed in Item 14. This financial statement
schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
In addition, we consent to the incorporation by reference in Automatic Data
Processing, Inc.'s Registration Statement No. 33-45150 on Form S-3 and
Registration Statements Nos. 33-24987, 33-25290, 33-38338, 2-75287, 33-38366,
33-38365, and 33-46168 on Form S-8 of our report dated August 11, 1995, included
in your 1995 Annual Report to Shareholders and incorporated by reference in the
Annual Report on Form 10-K of Automatic Data Processing, Inc. for the year ended
June 30, 1995.
/s/ Deloitte & Touche LLP
New York, New York
August 11, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 313612
<SECURITIES> 384009
<RECEIVABLES> 400180
<ALLOWANCES> 23035
<INVENTORY> 31860
<CURRENT-ASSETS> 1211143
<PP&E> 1098181
<DEPRECIATION> 682222
<TOTAL-ASSETS> 3201096
<CURRENT-LIABILITIES> 543223
<BONDS> 390177
<COMMON> 15712
0
0
<OTHER-SE> 2080903
<TOTAL-LIABILITY-AND-EQUITY> 3201096
<SALES> 0
<TOTAL-REVENUES> 2893742
<CGS> 0
<TOTAL-COSTS> 2322791
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 12331
<INTEREST-EXPENSE> 24340
<INCOME-PRETAX> 534280
<INCOME-TAX> 139450
<INCOME-CONTINUING> 394830
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 394830
<EPS-PRIMARY> 2.77
<EPS-DILUTED> 2.70
</TABLE>
