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, 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 January 31, 1997 there were 292,060,000 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,
1996 1995 1996 1995
Revenue $995,575 $819,723 $1,906,305 $1,566,817
Operating
expenses 418,015 342,690 809,535 659,467
General,
administrative
and selling
expenses 261,531 210,343 522,320 425,365
Depreciation
and
amortization 55,284 48,618 108,353 93,089
Systems
development
and
programming
costs 73,065 58,867 139,128 113,046
Interest
expense 6,970 8,605 14,159 14,450
814,865 669,123 1,593,495 1,305,417
EARNINGS
BEFORE
INCOME
TAXES 180,710 150,600 312,810 261,400
Provision
for income
taxes 53,130 41,700 91,950 70,600
NET
EARNINGS 127,580 108,900 220,860 190,800
EARNINGS
PER SHARE $ .44 $ .38 $ .76 $ .66
Dividends
per share $ .12 $ .10 $ .22 $ .1875
See notes to consolidated statements.
<PAGE>
Form 10Q
Consolidated Balance Sheets
(In thousands)
December 31, June 30,
Assets 1996 1996
Cash and cash equivalents $ 462,300 $ 314,416
Short-term marketable
securities 372,687 321,743
Accounts receivable 577,787 507,198
Other current assets 246,899 310,926
Total current assets 1,659,673 1,454,283
Long-term marketable
securities 419,118 462,461
Long-term receivables 178,507 188,184
Land and buildings 352,070 322,975
Data processing equipment 621,146 578,935
Furniture, leaseholds and
other 348,345 330,610
1,321,561 1,232,520
Less accumulated
depreciation (812,174) (764,254)
509,387 468,266
Other assets 21,549 19,597
Intangibles 1,335,555 1,247,094
$ 4,123,789 $3,839,885
Liabilities and
Shareholders' Equity
Notes payable $ 132,236 $ 90,746
Accounts payable 93,377 96,351
Accrued expenses & other
current liabilities 594,208 590,355
Income taxes 62,386 52,954
Current portion of
long-term debt 1,831 5,207
Total current
liabilities 884,038 835,613
Long-term debt 418,300 403,743
Other liabilities 104,853 78,508
Deferred income taxes 89,329 112,880
Deferred revenue 100,650 93,795
Shareholders' equity:
Common stock 31,429 31,428
Capital in excess of
par value 425,821 406,200
Retained earnings 2,697,043 2,537,952
Treasury stock (627,674) (660,234)
2,526,619 2,315,346
$ 4,123,789 $3,839,885
See notes to consolidated statements.
<PAGE>
Form 10Q
Condensed Statements of Consolidated Cash Flows
(In thousands)
Six Months Ended
December 31,
1996 1995
Cash Flows From Operating
Activities:
Net earnings $ 220,860 $ 190,800
Expenses not requiring outlay
of cash 112,720 101,851
Changes in operating net assets (17,353) 23,629
Net cash flows from operating
activities 316,227 316,280
Cash Flows From Investing
Activities:
Purchase of marketable
securities (602,688) (532,254)
Proceeds from sale of marketable
securities 595,087 693,652
Capital expenditures (79,093) (79,455)
Other changes to property, plant
and equipment (752) 1,738
Additions to intangibles (32,711) -
Acquisitions of businesses (64,494) (481,915)
Net cash flows from investing
activities (184,651) (398,234)
Cash Flows From Financing
Activities:
Proceeds from issuance of
notes 41,780 50,350
Repayments of long-term debt (3,991) (9,549)
Proceeds from issuance of common
stock 78,324 69,413
Repurchases of common stock (37,358) (47,727)
Dividends paid (62,447) (54,025)
Other - (1,856)
Net cash flows from financing
activities 16,308 6,606
Net change in cash and cash
equivalents 147,884 (75,348)
Cash and cash equivalents, at
beginning of period 314,416 313,612
Cash and cash equivalents, at
end of period $ 462,300 $ 238,264
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, 1996.
Note A - The results of operations for the six months
ended December 31, 1996 may not be indicative
of the results to be expected for the year
ending June 30, 1997.
Note B - Earnings per share are based on a weighted
average number of shares outstanding, which
for the quarters ended December 31, 1996 and
1995 were 290,502,000 and 288,001,000
respectively.
The weighted average number of shares for the
six months ended December 31, 1996 and 1995
were 289,493,000 and 287,866,000 respectively.
<PAGE>
Form 10Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
OPERATING RESULTS
Revenue and earnings again reached record levels during
the quarter ended December 31, 1996.
Revenue and revenue growth by ADP's major business
groups are shown below:
Revenue
3 Months Ended 6 Months Ended
December 31, December 31,
1996 1995 1996 1995
($ in millions)
Employer Services
(a) $ 551 $ 445 $1,042 $ 843
Brokerage Services 200 169 388 338
Dealer Services 162 132 315 258
Other (a) 83 74 161 128
$ 996 $ 820 $1,906 $1,567
Revenue Growth
3 Months Ended 6 Months Ended
December 31, December 31,
1996 1995 1996 1995
Employer Services
(a) 24% 16% 24% 15%
Brokerage Services 18 22 15 23
Dealer Services 23 21 22 26
Other (a) 12 76 26 59
21% 22% 22% 21%
(a) reclassified
Consolidated revenue for the quarter grew 21% from last
year to $996 million. Revenue growth in the Company's
three largest businesses, Employer, Brokerage and
Dealer Services, was strong at 24%, 18% and 23%
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. In prior
years, this standard rate was 7.8%. In fiscal 97 the
standard rate was changed to 6.0% and, accordingly, the
previously reported balances for Employer Services and
"Other revenue" have been reclassified.
Pretax earnings for the quarter increased 20% from last
year. As expected, corporate margins were slightly
lower than in the comparable prior year's quarter
because of the impact of prior year acquisitions.
Systems development and programming investments
increased to accelerate automation, migrate to new
computing technologies, and develop new products.
<PAGE>
Net earnings for the quarter, after a higher effective
tax rate, increased 17% to $128 million. The effective
tax rate of 29.4% increased from 27.7% in the
comparable quarter last year, primarily because of the
impact of non-deductible amortization of intangibles
arising from the GSI acquisition and an increased mix
of taxable vs. non-taxable investments.
Earnings per share grew 16% to $.44 from $.38 last
year. For the full year, we continue to expect double-digit
revenue growth and about 15% earnings per share growth.
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, 1996, the
Company had cash and marketable securities in excess of
$1.2 billion. Shareholders' equity exceeded $2.5
billion and the ratio of long-term debt to equity was
17%.
Capital expenditures for fiscal 1997 are expected to
approximate $200 million, compared to $168 million in
fiscal 1996.
During the first half of fiscal 97, ADP purchased
992,000 shares of common stock for treasury at an
average price of about $38. The Company has remaining
Board authorization to purchase up to 6.6 million
additional shares to fund equity related employee
benefit plans.
<PAGE>
Form 10Q
PART II. OTHER INFORMATION
Except as noted below, all other items are inapplicable
or would result in negative responses and, therefore,
have been omitted.
Item 2. Changes in Securities
On October 4, 1996, the Company issued an aggregate
amount of 96,982 shares of its Common Stock to the
three shareholders of a company acquired by the Company
in exchange for all of the issued and outstanding
shares of capital stock of the acquired company
pursuant to the terms of a stock purchase agreement.
No underwriters were involved in the foregoing sale of
securities. The Company issued the shares without
registration under the Securities Act of 1933, as
amended, in reliance upon the exemption therefrom set
forth in Section 4(2) of such Act, relating to sales by
an issuer not involving a public offering.
Item 4. Submission of Matters to a Vote of Security
Holders
The Company's Annual Meeting of the Stockholders was
held on November 12, 1996. The following members were
elected to the Company's Board of Directors to hold
office for the ensuing year.
Nominee In Favor Withheld
Gary C. Butler 221,180,456 709,142
Joseph A. Califano Jr 221,110,149 779,449
Leon G. Cooperman 221,277,002 612,596
George H. Heilmeier 221,257,241 632,357
Ann Dibble Jordan 221,225,079 664,519
Harvey M. Krueger 221,205,991 683,607
Charles P. Lazarus 220,910,099 979,499
Frederic V. Malek 221,232,167 657,431
Henry Taub 221,252,820 636,778
Laurence A. Tisch 220,832,311 1,057,287
Arthur F. Weinbach 221,210,653 678,945
Josh S. Weston 221,177,268 712,330
The result of the voting on the following additional
item were as follows:
(a) Ratify the appointment of Deloitte & Touche LLP to
serve as the Company's independent certified public
accountants for the fiscal year which began on July 1,
1996.
The votes of the stockholders on this amendment were as
follows:
In Favor Opposed Abstained
220,987,378 423,795 478,425
<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, 1997 s/
____________________________
Richard J. Haviland
Vice President, Finance
(Principal Financial Officer)
(Title)
<PAGE>
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