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 March 31, 1996 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 May 3,1996 there were 289,750,405 shares
outstanding.
<PAGE>
Form 10Q
Part I. Financial Information
Statements of Consolidated Earnings
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
March 31, March 31,
1996 1995 1996 1995
Revenue $1,031,864 $ 798,989 $2,598,681 $2,093,872
Operating
expenses 428,360 309,574 1,087,828 830,378
General,
administrative
and selling
expenses 276,730 224,096 702,095 596,946
Depreciation
and
amortization 55,298 42,131 148,386 119,641
Systems
development
and
programming
costs 63,762 48,120 176,808 138,940
Interest
expense 7,804 5,978 22,254 18,177
831,954 629,899 2,137,371 1,704,082
EARNINGS
BEFORE
INCOME
TAXES 199,910 169,090 461,310 389,790
Provision
for income
taxes 56,010 43,820 126,610 100,900
NET
EARNINGS $ 143,900 $ 125,270 $ 334,700 $ 288,890
Earnings
Per
Share: $ .49 $ .44 $ 1.16 $ 1.02
Dividends
per
share $ .10 $ .075 $ .2875 $ .225
See notes to consolidated statements.
<PAGE>
Consolidated Balance Sheets Form10Q
(In thousands)
March 31, June 30,
Assets 1996 1995
Cash and cash equivalents $ 372,836 $ 313,612
Short-term marketable
securities 318,663 384,009
Accounts receivable 560,932 377,145
Other current assets 176,935 136,377
Total current assets 1,429,366 1,211,143
Long-term marketable
securities 547,188 594,268
Long-term receivables 183,438 189,858
Land and buildings 297,406 287,186
Data processing equipment 606,784 501,403
Furniture, leaseholds and
other 376,196 309,592
1,280,386 1,098,181
Less accumulated
depreciation (812,009) (682,222)
468,377 415,959
Other assets 86,280 84,212
Intangibles 1,231,854 705,656
$3,946,503 $3,201,096
Liabilities and Shareholders' Equity
Notes payable $ 92,378 $ -
Accounts payable 142,849 65,955
Accrued expenses & other
current liabilities 613,567 385,040
Income taxes 82,706 82,672
Current portion of long-term
debt 2,532 9,556
Total current liabilities 934,032 543,223
Long-term debt 407,965 390,177
Other liabilities 80,676 66,865
Deferred income taxes 13,527 18,844
Deferred revenue 90,373 85,372
Shareholders' equity:
Common stock 31,427 31,423
Capital in excess of par
value 414,398 351,908
Retained earnings 2,446,431 2,182,838
Treasury stock (472,326) (469,554)
2,419,930 2,096,615
$3,946,503 $3,201,096
See notes to consolidated statements.
<PAGE>
Condensed Statements of Consolidated Cash Flows Form10Q
(In thousands)
Nine Months Ended
March 31,
1996 1995
Cash Flows From Operating
Activities:
Net earnings $ 334,700 $ 288,890
Expenses not requiring
outlay of cash 158,300 129,140
Changes in operating net
assets 8,060 (97,429)
Net cash flows from operating
activities 501,060 320,601
Cash Flows From Investing
Activities:
Marketable securities 112,426 (65,410)
Capital expenditures (115,844) (81,047)
Other changes to property,
plant and equipment 6,804 1,338
Additions to intangibles (14,040) (28,274)
Acquisitions of businesses (466,105) (41,676)
Net cash flows from investing
activities (476,759) (215,069)
Cash Flows From Financing
Activities:
Proceeds from issuance of notes 92,378 -
Repayments of long-term debt (11,769) (1,837)
Proceeds from issuance of
common stock 107,952 93,546
Repurchases of common stock (55,097) (1,999)
Dividends paid (83,181) (63,993)
Other (15,360) 7,722
Net cash flows from financing
activities 34,923 33,439
Net change in cash and cash
equivalents 59,224 138,971
Cash and cash equivalents,
at beginning of period 313,612 238,626
Cash and cash equivalents,
at end of period $ 372,836 $ 377,597
See notes to consolidated statements.
<PAGE>
Notes to Consolidated Statements Form10Q
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
approximately $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 one month lag.
Accordingly, the consolidated results for the
quarter ended March 31, 1996 include GSI's
operations for the three months ended February
29, 1996.
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
9 months ended March 31, 1996, and 1995 would
have increased by approximately $173 million
and $300 million, respectively, and net
earnings would have decreased by approximately
$9 million ($.03 per share) and $23 million
($.08 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 nine months
ended March 31,1996 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 a weighted
average number of shares outstanding, which
for the quarters ended March 31, 1996 and 1995
were 291,311,000 and 287,092,000 respectively.
The weighted average number of shares for the
nine months ended March 31, 1996 and 1995 were
289,020,000 and 284,038,000 respectively.
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>
MANAGEMENT'S DISCUSSION AND ANALYSIS Form10Q
OPERATING RESULTS
Revenue and earnings again reached record levels during
the quarter ended March 31, 1996.
Revenue and revenue growth by ADP's major service
groups are shown below:
Revenue
3 Months Ended 9 Months Ended
March 31, March 31,
1995 1996 1995 1996
($ in millions)
Employer Services
(a) $ 492 $ 597 $1256 $1471
Brokerage Services 170 202 444 539
Dealer Services 112 145 317 403
Other (a) 25 88 77 186
$ 799 $1032 $2094 $2599
Revenue Growth
3 Months Ended 9 Months Ended
March 31, March 31,
1995 1996 1995 1996
Employer Services
(a) 13% 21% 13% 17%
Brokerage Services 12 19 8 21
Dealer Services 32 29 29 27
Other (a) (b) 252 (b) 141
18% 29% 16% 24%
(a) reclassified (b) not meaningful
Consolidated revenue for the quarter of $1032 million
was up an unusually strong 29% from last year, with
about half of this revenue growth coming from the
recently completed acquisition of GSI, a leading
European computer services company. The quarter was
also aided by strong Brokerage trading volume.
Revenue growth in the Company's three largest
businesses, Employer, Brokerage and Dealer services,
was strong at 21%, 19%, and 29%, respectively. Each
includes some acquisitions.
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 has been reclassified from
"Other revenue" and are now included in the Employer
Services caption, along with GSI's Employer Services
operations.
<PAGE>
Form10Q
Pre-tax earnings for the quarter increased 18% from
last year. As expected, several acquisitions currently
have low operating margins but should improve as they
are integrated into ADP's operations. Systems
development and programming investments increased to
accelerate automation, migrate to new computing
technologies, and develop new products.
Net earnings for the quarter, after a higher effective
tax rate, increased 15% to $144 million. The effective
tax rate of 28.0% increased from 25.9% in the
comparable quarter last year, primarily because of the
estimated impact of non- deductible intangibles arising
from the GSI acquisition.
Earnings per share, on increased shares outstanding,
grew 11% to $.49 from $.44 last year, after a Federal
Trade Commission settlement which reduced quarterly
earnings per share by $.01. Earnings per share for the
first nine months of fiscal 1996 increased 14% to $1.16
from $1.02 last year.
Effective November 1, 1995, ADP acquired control of
GSI, and 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 March
31, 1996 include GSI's operations for the three months
ended February 29, 1996. The GSI acquisition will
dilute ADP's fiscal 1996 earnings per share by 1% to 2%
and add $400 million in annualized revenue.
Fourth quarter revenue growth will be less than in the
third quarter as several acquisitions pass their first
anniversary. The absence of non-recurring items should
improve fourth quarter earnings per share growth. For
the full year, we continue to expect revenue growth of
over 20% and earnings per share growth close to 15%.
FINANCIAL CONDITION
The Company's financial condition and balance sheet
remain exceptionally strong, and operations continue to
generate a strong cash flow. At March 31, 1996, the
Company had cash and marketable securities of about
$1.2 billion. Shareholders' equity exceeded $2.4
billion and the ratio of long-term debt to equity was
17%.
<PAGE>
Form10Q
A portion of the GSI purchase price was funded by
borrowing approximately 466 million French francs
(equivalent to $93 million at March 31, 1996) 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 200,000
shares of common stock for treasury at an average price
of about $37. For the first three quarters, 1,625,000
shares were purchased at an average price of about $34.
The Company has remaining Board authorization to
purchase up to 12.6 million additional shares to fund
our equity related employee benefit plans.
<PAGE>
Form10Q
PART II. OTHER INFORMATION
All items are either inapplicable or would result in
negative responses and, therefore, have been omitted.
<PAGE>
Form10Q
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: May 10, 1996 /s/Richard J. Haviland
Richard J. Haviland
Corporate Controller and
Corporate Vice President
(Chief Financial Officer)
(Title)
<PAGE>
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