SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1995 Commission File
Number 1-5397
Automatic Data Processing, Inc
(Exact name of registrant as specified in its
charter )
Delaware 22-1467904
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One ADP Boulevard, Roseland, New Jersey 07068
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code
(201) 994-5000
No change
Former name, former address & former fiscal year, if
changed since last report.
Indicate by check mark whether the Registrant (1) has
filed all annual, quarterly and other reports required
to be filed with the commission and (2) has been
subject to the filing requirements for at least the
past 90 days.
X Yes No
As of January 31, 1996 there were 290,446,169 common
shares outstanding.
<PAGE> Form 10Q
Part I. Financial Information
Statements of Consolidated Earnings
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
December 31, December 31,
1995 1994 1995 1994
Revenue $819,723 $672,597 $1,566,817 $1,294,883
Operating
expenses 342,690 268,107 659,467 520,804
General,
administrative
and selling
expenses 210,343 183,923 425,365 372,852
Depreciation
and
amortization 48,618 39,751 93,089 77,509
Systems
development
and
programming
costs 58,867 46,464 113,046 90,819
Interest
expense 8,605 6,252 14,450 12,199
669,123 544,497 1,305,417 1,074,183
EARNINGS
BEFORE
INCOME
TAXES 150,600 128,100 261,400 220,700
Provision for
income taxes 41,700 33,180 70,600 57,080
NET
EARNINGS $108,900 $ 94,920 $ 190,800 $ 163,620
EARNINGS PER
SHARE: $ .38 $ .33 $ .66 $ .58
Dividends
per share $ .10 $ .075 $ .1875 $ .15
See notes to consolidated statements.
<PAGE>
Form 10Q
Consolidated Balance Sheets
(In thousands)
December 31, June 30,
Assets 1995 1995
Cash and cash equivalents $ 238,264 $ 313,612
Short-term marketable 263,300 384,009
securities
Accounts receivable 511,036 377,145
Other current assets 216,841 136,377
Total current assets 1,229,441 1,211,143
Long-term marketable 553,579 594,268
securities
Long-term receivables 185,175 189,858
Land and buildings 295,560 287,186
Data processing equipment 591,477 501,403
Furniture, leaseholds and 379,171 309,592
other
1,266,208 1,098,181
Less accumulated (797,760) (682,222)
depreciation
468,448 415,959
Other assets 79,506 84,212
Intangibles 1,211,373 705,656
$3,727,522 $3,201,096
Liabilities and Shareholders' Equity
Notes payable $ 50,350 $ -
Accounts payable 119,339 65,955
Accrued expenses 607,264 385,040
& other current
liabilities
Income taxes 77,980 82,672
Current portion of long-term 1,811 9,556
debt
Total current liabilities 856,744 543,223
Long-term debt 398,309 390,177
Other liabilities 98,451 66,865
Deferred income taxes 15,187 18,844
Deferred revenue 109,611 85,372
Shareholders' equity:
Common stock 31,423 31,423
Capital in excess of par 386,179 351,908
value
Retained earnings 2,319,612 2,182,838
Treasury stock (487,994) (469,554)
2,249,220 2,096,615
$3,727,522 $3,201,096
See notes to consolidated statements.
<PAGE>
Form 10Q
Condensed Statements of Consolidated Cash Flows
(In thousands)
Six Months Ended
December 31,
1995 1994
Cash Flows From Operating
Activities:
Net earnings $ 190,800 $ 163,620
Expenses not requiring 101,851 87,498
outlay of cash
Changes in operating net 23,629 (74,812)
assets
Net cash flows from operating 316,280 176,306
activities
Cash Flows From Investing
Activities:
Marketable securities 161,398 (56,042)
Capital expenditures (79,455) (52,230)
Other changes to property, plant 1,738 2,797
and equipment
Additions to intangibles - (8,531)
Acquisitions of businesses (481,915) (26,301)
Net cash flows from investing (398,234) (140,307)
activities
Cash Flows From Financing
Activities:
Proceeds from issuance of notes 50,350 -
(related to GSI acquisition)
Repayments of long-term debt (9,549) (364)
Proceeds from issuance of common 69,413 59,411
stock
Repurchases of common stock (47,727) (1,999)
Dividends paid (54,025) (42,543)
Other (1,856) (970)
Net cash flows from financing 6,606 13,535
activities
Net change in cash and cash (75,348) 49,534
equivalents
Cash and cash equivalents, at 313,612 238,626
beginning of period
Cash and cash equivalents, at $ 238,264 $ 288,160
end of period
See notes to consolidated statements.
<PAGE>
Form 10Q
Notes to Consolidated Statements
The information furnished herein reflects all
adjustments which are, in the opinion of management,
necessary for a fair presentation of the results for
the interim periods. All adjustments are of a normal
recurring nature. These statements should be read in
conjunction with the annual financial statements and
related notes of the Company for the year ended June
30, 1995.
Note A - Effective November 1, 1995, ADP acquired control
of GSI Participations, a leading computer services
company based in Paris, France. As of the close of
the January 15, 1996 shareholder tender period, ADP
had purchased approximately 100% of GSI for approx-
imately $460 million in cash.
Based on preliminary allocations of purchase price,
this transaction resulted in approximately $485 million
of goodwill and other intangibles. Amortization of these
intangibles in the accompanying financial statements
is based on an assumed blended amortization period
of 25 years. The allocation of purchase price as
reflected in the accompanying balance sheet is
preliminary and subject to adjustment upon receipt of
final appraisal information and management's final
estimates as to the fair value of assets acquired and
liabilities assumed.
The financial results of GSI are included in ADP's
consolidated results on a month lag. Accordingly,
the consolidated results for the quarter ended
December 31, 1995 include GSI's operations through
November 30, 1995.
On an unaudited pro forma basis, assuming that the
acquisition had been made as of July 1, 1994, the
consolidated revenues of ADP for the 6 months ended
December 31, 1995, and 1994 would have increased by
approximately $173 million and $207 million, respect-
ively, and net earnings would have decreased by approx-
imately $9 million ($.03 per share) and $18 million
($.06 per share), respectively. The Company believes
these unaudited pro forma results of operations are
not indicative of the actual results of operations
that would have occurred had the purchase been made
as of July 1, 1994 or of the results which will occur
in the future.
Note B - The results of operations for the six
months ended December 31, 1995 may not be
indicative of the results to be expected for
the year ending June 30, 1996.
Note C - Earnings per share are based on the weighted
average number of shares outstanding,
which for the quarters ended December 31,
1995 and 1994 were 288,001,000 and
283,436,000, respectively. The weighted average
number of shares for the six months ended
December 31, 1995 and 1994 were 287,866,000
and 282,500,000 respectively.
<PAGE>
Note D - As of January 1, 1996, the Company had a two-for-
one stock split. All per share earnings and
dividends and references to common stock in
this report have been retroactively restated to
reflect the increased number of common shares
outstanding.
<PAGE>
Form 10Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
OPERATING RESULTS
Revenue and earnings again reached record levels during
the quarter ended December 31, 1995.
Revenue and revenue growth by ADP's major service groups
are shown below:
Revenue
3 Months Ended 6 Months Ended
December 31, December 31,
1994 1995 1994 1995
($ in millions)
Employer Services (a) $ 397 $ 461 $ 765 $ 874
Brokerage Services 139 169 274 338
Dealer Services 109 132 204 258
Other (a) 28 58 52 97
$ 673 $ 820 $1295 $1567
Revenue Growth
3 Months Ended 6 Months Ended
December 31, December 31,
1994 1995 1994 1995
Employer Services (a) 14% 16% 13% 14%
Brokerage Services 6 22 6 23
Dealer Services 30 21 27 26
Other (a) 87 107 58 87
16% 22% 15% 21%
(a) reclassified
Consolidated revenue for the quarter of $820 million was
up 22% from last year, with approximately 25% of the
revenue growth coming from the recently completed
acquisition of GSI. Revenue growth in Employer,
Brokerage and Dealer Services, primarily from internal
sources, was 16%, 22% and 21% respectively. These growth
rates also include some acquisitions in each business
unit. New client sales in Employer Services and trading
volumes in Brokerage Services continued to be quite
strong.
The primary components of "Other revenue" are claims
services, services for wholesalers, the non-employer
services businesses of GSI 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%. The revenue from
two businesses providing payroll services in Europe have
been reclassified from Other revenue and are now included
in the Employer Services caption along with GSI's
Employer Services operations.
Pretax earnings for the quarter increased 18% from last
year. Pretax margins were slightly lower than the prior
year as a result of lower margins associated with certain
acquisitions and new products. Systems development and
programming investments increased to accelerate automation,
migrate to new computing technologies, and develop new
products.
<PAGE>
Form 10Q
Net earnings for the quarter increased 15% to $109
million. The effective tax rate of 27.7% was slightly
higher than previous periods, primarily because of
lower municipal investment balances and the estimated
impact of non-deductible intangibles arising from the
GSI acquisition.
Earnings per share for the quarter increased 15% to $.38
from $.33 last year. The Company previously announced a
two-for-one common stock split effective January 1, 1996.
All share and per share amounts are adjusted for the
split.
Effective November 1, 1995, ADP acquired control of GSI,
a leading computer services company based in Paris,
France. As of the close of the January 15, 1996
shareholder tender period, ADP had purchased virtually
100% of GSI. GSI is the leading European provider of
payroll and human resource information services. GSI
also provides facilities management, banking, clearing,
and other information services in Europe. The financial
results of GSI are included in ADP's consolidated results
on a one month lag. Accordingly, the consolidated
results for the quarter ended December 31, 1995 include
GSI's operations through November 30, 1995. The GSI
acquisition will dilute ADP's fiscal 1996 earnings per
share by 1% to 2% and add $400 million in annualized
revenue.
With the acquisition of GSI, we now expect revenue growth
of over 20% and earnings per share growth of close to 15%
for the full year.
FINANCIAL CONDITION
The Company's financial condition and balance sheet
remain exceptionally strong, and operations continue to
generate a strong cash flow. At December 31, 1995, the
Company had cash and marketable securities in excess of
$1.0 billion. Shareholders equity exceeded $2.2 billion
and the ratio of long-term debt to equity was 18%.
The GSI purchase price of approximately $460 million was
funded by borrowing approximately $93 million of short-
term debt ($50 million as of December 31, 1995) with the
remainder coming from the Company's cash and marketable
securities.
Capital expenditures for fiscal 1996 are expected to
approximate $170 million, compared to $118 million in
fiscal 1995.
During the quarter, ADP purchased approximately 680,000
shares of common stock for treasury at an average price
of about $33. The Company has remaining Board
authorization to purchase up to 12.6 million additional
shares to fund our equity related employee benefit plans.
<PAGE>
Form 10Q
PART II. OTHER INFORMATION
All items are either inapplicable or would result in
negative responses and, therefore, have been omitted.
<PAGE>
Form 10Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto
duly authorized.
AUTOMATIC DATA PROCESSING, INC.
(Registrant)
Date: February 13, 1996
/s/ Fred D. Anderson, Jr.
Fred D. Anderson, Jr.
Chief Financial Officer and
Corporate Vice President
(Principal Financial Officer)
(Title)
<PAGE>
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