<PAGE>
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 September 30, 1997 Commission File Number 1-5397
Automatic Data Processing, Inc
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter )
Delaware 22-1467904
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One ADP Boulevard, Roseland, New Jersey 07068
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (973) 994-5000
-----------------------------
No change
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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 November 6, 1997 there were 292,492,256 common shares outstanding.
<PAGE>
Form 10Q
Part I. Financial Information
STATEMENT OF CONSOLIDATED EARNINGS
(In thousands, except per share amounts)
Three Months Ended
-------------------------------
September 30, September 30,
1997 1996
-------- --------
Revenue $1,038,498 $910,730
---------- --------
Operating expenses 443,383 391,520
General, administrative and 289,446 260,789
selling expenses
Depreciation and amortization 57,430 53,068
Systems development and
programming costs 87,289 66,063
Interest expense 7,510 7,190
---------- --------
885,058 778,630
---------- --------
EARNINGS BEFORE INCOME TAXES 153,440 132,100
Provision for income taxes 48,030 38,820
---------- --------
NET EARNINGS $ 105,410 $ 93,280
========== ========
EARNINGS PER SHARE $ .36 $ .32
========== ========
Dividends per share $ .115 $ .10
========== ========
See notes to consolidated statements.
<PAGE>
Form 10Q
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
September 30, June 30,
1997 1996
---------- ----------
ASSETS
Cash and cash equivalents $ 664,650 $ 590,578
Short-term marketable securities 376,643 434,341
Accounts receivable 601,413 605,068
Other current assets 177,830 175,335
---------- ----------
Total current assets 1,820,536 1,805,322
---------- ----------
Long-term marketable securities 522,889 470,164
---------- ----------
Long-term receivables 169,606 176,771
---------- ----------
Land and buildings 364,871 361,594
Data processing equipment 647,776 626,013
Furniture, leaseholds and other 376,324 364,161
---------- ----------
1,388,971 1,351,768
Less accumulated depreciation (863,944) (832,423)
---------- ----------
525,027 519,345
---------- ----------
Other assets 92,730 96,383
---------- ----------
Intangibles 1,405,298 1,314,787
---------- ----------
$4,536,086 $4,382,772
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $ 206,320 $ 129,168
Accounts payable 112,918 110,266
Accrued expenses & other current
liabilities 752,709 717,868
Income taxes 105,258 61,479
Current portion of long-term debt 1,401 1,091
---------- ----------
Total current liabilities 1,178,606 1,019,872
---------- ----------
Long-term debt 405,517 401,162
---------- ----------
Other liabilities 99,480 91,685
---------- ----------
Deferred income taxes 54,279 102,751
---------- ----------
Deferred revenue 99,665 106,737
---------- ----------
Shareholders' equity:
Common stock 31,429 31,429
Capital in excess of par value 486,702 480,492
Retained earnings 2,994,021 2,922,317
Treasury stock (731,437) (697,887)
Translation adjustment (82,176) (75,786)
---------- ----------
2,698,539 2,660,565
---------- ----------
$4,536,086 $4,382,772
---------- ----------
See notes to consolidated statements.
<PAGE>
Form 10Q
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS)
Three Months Ended
September 30,
1997 1996
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $105,410 $ 93,280
Expenses not requiring outlay of cash 75,847 47,399
Changes in operating net assets 74,391 72,364
--------- --------
Net cash flows from operating activities 255,648 213,043
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (126,146) (92,880)
Proceeds from sale of marketable securities 132,961 71,079
Capital expenditures (40,442) (38,477)
Other changes to property, plant and equipment 2,874 1,656
Additions to intangibles (11,680) (4,036)
Acquisitions of businesses (154,793) (22,446)
--------- --------
Net cash flows from investing activities (197,226) (85,104)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable 90,088 -
Repayments of long-term debt (6,802) (3,557)
Proceeds from issuance of common stock 4,386 21,028
Repurchases of common stock (38,316) (28,815)
Dividends paid (33,706) (29,018)
Other - 722
--------- --------
Net cash flows from financing activities 15,650 (39,640)
--------- --------
Net change in cash and cash equivalents 74,072 88,299
Cash and cash equivalents, at beginning of
period 590,578 314,416
--------- --------
Cash and cash equivalents, at end of
period $ 664,650 $402,715
========= ========
See notes to consolidated statements.
<PAGE>
Form 10Q
NOTES TO CONSOLIDATED STATEMENTS
The information furnished herein reflects all adjustments which are, in the
opinion of management, necessary for a fair presentation of the results for the
interim periods. All adjustments are of a normal recurring nature. These
statements should be read in conjunction with the annual financial statements
and related notes of the Company for the year ended June 30, 1997.
Note A - The results of operations for the three months ended September 30,
1997 may not be indicative of the results to be expected for the year
ending June 30, 1998.
Note B - Earnings per share are based on the weighted average number of shares
outstanding, which for the quarters ended September 30, 1997 and 1996
were 292,628,000 and 288,368,000 respectively.
<PAGE>
Form 10Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
OPERATING RESULTS
Revenue and earnings again reached record levels during the quarter ended
September 30, 1997.
Revenue and revenue growth by ADP's major service groups are shown below:
Revenue Revenue Growth
----------------- -----------------
3 Months Ended 3 Months Ended
September 30, September 30,
----------------- -----------------
1997 1996 1997 1996
------- ------ ------ -------
($ in millions)
Employer Services $ 587 $490 20% 23%
Brokerage Services 223 188 19 12
Dealer Services 166 152 9 21
Other 62 81 (23) 47
------ ---- --- --
$1,038 $911 14% 22%
====== ==== === ==
Consolidated revenue for the quarter of $1,038 million was up 14% from last
year. Revenue growth in the Company's three largest businesses, Employer,
Brokerage and Dealer Services, was strong at 20%, 19%, and 9%, respectively.
Each includes some acquisitions.
The primary components of "Other revenue" are claims services, services for
wholesalers, interest income, foreign exchange differences, and miscellaneous
processing services. 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 6.0%.
Pretax earnings for the quarter increased 16% from last year. Consolidated
margins increased slightly in the quarter, due primarily to the impact of higher
trading volume on the Brokerage Services group. 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 13%
to $105 million. The effective tax rate was 31.3%,increased from 29.4% in the
comparable quarter last year, primarily as a result of the greater weighting of
taxable versus non-taxable earnings.
Earnings per share grew 13% to $.36 from $.32 last year.
For the full year, we expect close to 15% growth in revenue and pretax earnings
and earnings per share growth of 12 to 14% above 1997's $1.80 per share (which
is prior to non-recurring items in 1997).
<PAGE>
Form 10Q
FINANCIAL CONDITION
The Company's financial condition and balance sheet remain exceptionally strong,
and operations continue to generate a strong cash flow. At September 30, 1997,
the Company had cash and marketable securities of $1.6 billion. Shareholders'
equity was $2.7 billion and the ratio of long-term debt to equity was 15.0%.
Capital expenditures for fiscal 1998 are expected to approximate $225 million,
compared to $175 million in fiscal 1997.
During the quarter, ADP purchased about 842,000 shares of common stock for
treasury at an average price of about $45. The Company has remaining Board
authorization to purchase up to 8.6 million additional shares to fund equity
related employee benefit plans.
QUANTITIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The Company's market risk sensitive instruments do not subject the Company
to material market risk exposures.
PART II. OTHER INFORMATION
Except as noted below, all other items are either inapplicable or would result
in negative responses and, therefore, have been omitted.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
Number Exhibit
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27.1 Financial Data Schedule
<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: November 12, 1997 /s/ Richard J. Haviland
------------------------
Richard J. Haviland
Chief Financial Officer
(Principal Financial Officer)
-----------------------------
(Title)
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<PAGE>
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 664,650
<SECURITIES> 376,643
<RECEIVABLES> 643,412
<ALLOWANCES> 41,999
<INVENTORY> 34,503
<CURRENT-ASSETS> 1,820,536
<PP&E> 1,388,971
<DEPRECIATION> 863,944
<TOTAL-ASSETS> 4,536,086
<CURRENT-LIABILITIES> 1,178,606
<BONDS> 405,517
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<COMMON> 31,429
<OTHER-SE> 2,698,539
<TOTAL-LIABILITY-AND-EQUITY> 4,536,086
<SALES> 0
<TOTAL-REVENUES> 1,038,498
<CGS> 0
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<LOSS-PROVISION> 1,661
<INTEREST-EXPENSE> 7,510
<INCOME-PRETAX> 153,440
<INCOME-TAX> 48,030
<INCOME-CONTINUING> 105,410
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
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<EPS-PRIMARY> .36
<EPS-DILUTED> .36
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