Exhibit 13
<TABLE>
<CAPTION>
Selected Financial Data
Automatic Data Processing, Inc. and Subsidiaries
-----------------------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
Years ended June 30, 2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Total revenues $ 6,287,512 $ 5,540,141 $ 4,925,956 $ 4,193,447 $3,613,014
Earnings before income taxes $ 1,289,600 $ 1,084,500 $ 890,717 $ 726,439 $ 635,321
Net earnings $ 840,800 $ 696,840 $ 608,262 $ 515,244 $ 454,747
----------- ----------- ----------- ----------- ----------
----------- ----------- ----------- ----------- ----------
Basic earnings per share $ 1.34 $ 1.13 $ 1.01 $ .88 $ .78
Diluted earnings per share $ 1.31 $ 1.10 $ .98 $ .85 $ .76
Basic shares outstanding 626,766 615,630 600,803 588,112 582,861
Diluted shares outstanding 646,098 636,892 628,196 620,117 615,898
Cash dividends per share $ .33875 $ .295 $ .25625 $ .2225 $ .19375
Return on equity 19.7% 18.7% 20.0% 20.6% 20.3%
----------- ----------- ----------- ----------- ----------
At year end:
Cash, cash equivalents and
marketable securities $ 2,452,549 $ 2,169,040 $ 1,673,271 $ 1,516,450 $1,107,323
Working capital $ 1,767,784 $ 907,864 $ 626,063 $ 805,797 $ 618,409
Total assets before funds held
for clients $ 6,429,927 $ 5,824,820 $ 5,242,867 $ 4,439,293 $3,862,009
Total assets* $16,850,816 $12,839,553 $11,787,685 $10,249,089 $8,884,138
Long-term debt $ 132,017 $ 145,765 $ 192,063 $ 402,088 $ 405,157
Shareholders' equity $ 4,582,818 $ 4,007,941 $ 3,439,447 $ 2,689,415 $2,309,468
----------- ----------- ----------- ----------- ----------
----------- ----------- ----------- ----------- ----------
-----------------------------------------------------------------------------------------------------------
</TABLE>
1999 data includes non-recurring charges totaling approximately $17 million
(after-tax), or $.03 per share, associated with certain acquisitions and
dispositions.
*Prior years' data has been restated.
<PAGE>
Management's Discussion and Analysis
Operating Results
Revenues and earnings reached record levels during each of the past three fiscal
years. During fiscal '00 revenues increased 13% to almost $6.3 billion. Prior to
non-recurring charges in '99, pre-tax earnings increased 21% and diluted
earnings per share increased 16% to $1.31. During fiscal '99 the Company sold
several businesses and decided to exit several other businesses and contracts.
The Company also recorded transaction costs and other adjustments related to
Employer Services' acquisition of Vincam. The combination of these transactions
resulted in non-recurring charges of $0.03 in fiscal '99. Fiscal '00 was ADP's
39th consecutive year of double-digit earnings per share growth since becoming a
public company in 1961.
Revenues and revenue growth by ADP's major business units are shown below:
Revenues Revenue Growth
-------------------------------------------------------------------------------
Years Ended June 30, Years Ended June 30,
----------------------------------------------------------
(In Millions) 2000 1999 1998 2000 1999 1998
----------------------------- --------------------------
Employer Services $3,620 $3,269 $2,830 11% 16% 21%
Brokerage Services 1,479 1,150 1,096 29 5 23
Dealer Services 736 733 688 - 7 10
Other 453 388 312 17 24 (9)
----------------------------- --------------------------
Consolidated $6,288 $5,540 $4,926 13% 12% 17%
----------------------------- --------------------------
----------------------------- --------------------------
-------------------------------------------------------------------------------
Consolidated revenues grew 13% in fiscal '00 primarily from increased
market penetration, from an expanded array of products and services, and from
increased transaction volume, with relatively minor contributions from price
increases. Prior to acquisitions and dispositions, revenues increased
approximately 15%.
The consolidated pre-tax margin was 20.5% in '00, 19.3% in '99 (prior to
non-recurring charges) and 18.1% in '98. Pre-tax margin improved over the
previous year as continued automation and operating efficiencies enabled the
Company to offset accelerated investments in new products, increased spending on
systems development and programming, and the impact of transitioning the
investment portfolio from tax-exempt to taxable instruments.
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, including certain non-recurring gains and losses, are recorded at the
corporate level and certain shared costs are not allocated. The prior years'
business unit revenues and pre-tax earnings have been restated to reflect fiscal
year 2000 budgeted foreign exchange rates.
<PAGE>
Employer Services
Employer Services' revenues grew 11% in fiscal '00, and in the absence of
acquisitions and dispositions revenue growth would have been about 12% in '00,
and 15% in both '99 and '98.
Employer Services' operating margin was 21.4% in '00, 20.6% in '99 and
20.2% in `98. Employer Services' operating margin improved due to operating
efficiencies and the prior year dispositions of several businesses, slightly
offset by investments in new products and acquisitions.
Employer Services'revenues shown above include interest earned on
collected but not yet remitted funds held for clients at a standard rate of 6%.
Brokerage Services
Brokerage Services' revenue growth of 29% was impacted by the prior year
dispositions of the front-office business and several other small, non-strategic
businesses. In the absence of acquisitions and dispositions, revenue growth
would have been about 31% in '00 aided by record brokerage trade volumes,
compared to 21% in '99 and 22% in '98.
Brokerage Services' operating margin was 23% in '00 compared to 19% in '99
and 15% in '98. The improved margin resulted from the prior year dispositions of
several unprofitable businesses and strong trade processing activity.
In '99 the Company divested the $150 million revenue front-office "market
data" business and as part of the agreement took a minority investment in the
acquiring company.
Dealer Services
Dealer Services' revenues were roughly flat in '00. In the absence of
acquisitions and dispositions, '00 revenue growth would have been 3%, compared
to 7% in '99 and 8% in '98. Dealer Services' operating margin increased to 16%
in fiscal '00 compared to 15% in '99 and 14% in '98. Dealer Services' operating
margin improved primarily from operating efficiencies in North America and the
dispositions of several small businesses in '00 and '99.
Other
The primary components of "Other" revenues are Claims Services, foreign exchange
differences, and miscellaneous processing services. "Other" also includes
interest on corporate investments of $119 million, $84 million, and $82 million
in '00, '99 and '98, respectively. In addition, "Other" revenues have been
adjusted for the difference between actual interest earned on invested funds
held for clients and interest credited to Employer Services at a standard rate
of 6%.
During fiscal '00 the Company transitioned a portion of its corporate and
client fund investments from tax-exempt to taxable instruments in order to
increase liquidity of the overall portfolio. Approximately $2.6 billion of
tax-exempt investments were sold prior to maturity at a pre-tax loss of
approximately $32 million ($10 million corporate funds, $22 million funds held
for clients), and the proceeds were reinvested at higher prevailing interest
rates, which will benefit future periods.
During fiscal '99 the Company sold its Peachtree Software and Brokerage
Services front-office businesses, and decided to exit several other businesses
and contracts. The combination of these transactions and certain other charges
resulted in an approximately $37 million reduction in general, administrative
and selling expenses and a $40 million provision for income taxes.
Additionally, '99 includes approximately $21 million of transaction costs
and other adjustments in general, administrative and selling expenses, ($14
million after-tax) recorded by Vincam prior to the March 1999 pooling
transaction.
In each of the past three years, investments in systems development and
programming have increased to accelerate automation, migrate to new computing
technologies, and develop new products.
Certain member countries of the European Union have agreed to
transition to the Euro as a new common legal currency. The costs of this
transition are not expected to have a material effect on ADP.
In '00 the Company's effective tax rate was 34.8%. Excluding the impact
of non-recurring charges associated with certain acquisitions, dispositions and
other activities, the effective tax rate was 33.2% in '99, and 31.7% in '98. The
increased rate is primarily a result of non-taxable investment income declining
as a percentage of pre-tax income. The transition, referred to above, of a
portion of the Company's investment portfolio to taxable investments will
continue to increase the Company's effective tax rate in fiscal '01.
For '01 ADP is planning another record year with revenue growth of about
13% to 15% and diluted earnings per share growth of 16% to 18% over '00 results.
Financial Condition
ADP's financial condition and balance sheet remain exceptionally strong. At June
30, 2000, cash and marketable securities approximated $2.5 billion.
Shareholders' equity was almost $4.6 billion, and return on average equity for
the year was about 20%. The ratio of long-term debt to equity at June 30, 2000
was 3%.
Cash flow from operating activities approximated $1.1 billion in '00 with
another excellent year expected in '01.
In '00 4.6 million shares of common stock were purchased at an average
price of approximately $43 as part of an ongoing program to fund equity-related
employee benefits. The Board of Directors has authorized the purchase of up to
19.9 million additional shares.
In '00 zero coupon convertible subordinated notes were converted to about
0.8 million shares of common stock.
During '00 the Company purchased several businesses for approximately $200
million in cash and common stock. The cost of acquisitions in '99 and '98
aggregated $107 million and $351 million, respectively.
During '99 the Company issued 7.2 million shares of common stock to
acquire Vincam in a pooling of interests transaction, and the Company's results
were restated accordingly. The Company also acquired several businesses in
fiscal '99 (subsequent to the Vincam merger) and '98 in pooling of interests
transactions in exchange for approximately 4 million, and 1 million shares of
common stock, respectively. The Company's consolidated financial statements were
not restated because in the aggregate these transactions were not material.
Capital expenditures during '00 were $166 million following investments of
$178 million in '99 and $202 million in '98. Capital spending in fiscal '01
should approximate $225 million.
Approximately half of the Company's overall investment portfolio is
invested in overnight interest-bearing instruments, which are therefore impacted
immediately by changes in interest rates. The other half of the Company's
investment portfolio is invested in fixed-income securities, with maturities up
to five and a half years, which are also subject to interest rate risk,
including reinvestment risk. The Company has historically had the ability to
hold these investments until maturity, and therefore this has not had an adverse
impact on income or cash flows.
<PAGE>
Market Price, Dividend Data and Other
The market price of the Company's common stock (symbol: AUD) 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 2000 quarter ended High Low Per Share
---------------------- ---------
June 30 $57 15/16 $44 11/16 $.08750
March 31 55 7/16 40 .08750
December 31 54 13/16 43 .08750
September 30 44 7/8 37 3/8 .07625
------------------------------------------------------------------
Fiscal 1999 quarter ended
June 30 $46 7/8 $39 1/16 $.07625
March 31 42 5/8 36 1/4 .07625
December 31 42 5/32 32 23/32 .07625
September 30 40 7/32 31 3/4 .06625
------------------------------------------------------------------
As of June 30, 2000 there were approximately 34,000 holders of record of
the Company's common stock. Approximately 257,000 additional holders have their
stock in "street name."
This report contains "forward-looking statements" based on management's
expectations and assumptions and are subject to risks and uncertainties that may
cause actual results to differ from those expressed. Factors that could cause
differences include: ADP's success in obtaining, retaining and selling
additional services to clients; the pricing of products and services; overall
economic trends, including interest rate and foreign currency trends; stock
market activity; auto sales and related industry changes; employment levels;
changes in technology; availability of skilled technical associates; and the
impact of new acquisitions.
<PAGE>
<TABLE>
<CAPTION>
Statements of Consolidated Earnings
Automatic Data Processing, Inc. and Subsidiaries
--------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
Years ended June 30, 2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Revenues other than interest on funds held for clients
and PEO revenues $5,729,042 $5,110,262 $4,543,335
Interest on funds held for clients 348,596 269,496 245,901
PEO revenues (net of pass-through costs of $2,197,323,
$1,748,841 and $1,293,866, respectively) 209,874 160,383 136,720
---------- ---------- ----------
Total revenues 6,287,512 5,540,141 4,925,956
---------- ---------- ----------
Operating expenses 2,564,496 2,376,172 2,149,343
General, administrative and selling expenses 1,643,360 1,379,026 1,239,464
Systems development and programming costs 460,275 412,380 376,485
Depreciation and amortization 284,282 272,807 247,625
Interest expense 13,140 19,090 24,383
Realized (gains)/losses on sale of investments 32,359 (3,834) (2,061)
---------- ---------- ----------
4,997,912 4,455,641 4,035,239
---------- ---------- ----------
Earnings before income taxes 1,289,600 1,084,500 890,717
Provision for income taxes 448,800 387,660 282,455
---------- ---------- ----------
Net earnings $ 840,800 $ 696,840 $ 608,262
---------- ---------- ----------
---------- ---------- ----------
Basic earnings per share $ 1.34 $ 1.13 $ 1.01
---------- ---------- ----------
Diluted earnings per share $ 1.31 $ 1.10 $ .98
---------- ---------- ----------
Basic shares outstanding 626,766 615,630 600,803
---------- ---------- ----------
Diluted shares outstanding 646,098 636,892 628,196
---------- ---------- ----------
---------- ---------- ----------
--------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
Automatic Data Processing, Inc. and Subsidiaries
----------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
Years ended June 30, 2000 1999
----------- -----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,227,637 $ 861,280
Short-term marketable securities 596,792 231,214
Accounts receivable 899,314 860,836
Other current assets 340,709 240,927
----------- -----------
Total current assets 3,064,452 2,194,257
Long-term marketable securities 628,120 1,076,546
Long-term receivables 245,249 213,413
Property, plant and equipment:
Land and buildings 439,022 400,189
Data processing equipment 612,608 550,757
Furniture, leaseholds and other 498,354 449,862
----------- -----------
1,549,984 1,400,808
Less accumulated depreciation (952,715) (821,514)
----------- -----------
597,269 579,294
Other assets 271,136 228,936
Intangibles 1,623,701 1,532,374
----------- -----------
Total assets before funds held for clients 6,429,927 5,824,820
Funds held for clients 10,420,889 7,014,733
----------- -----------
Total assets $16,850,816 $12,839,553
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 21,523 $ 66,952
Accounts payable 129,436 130,456
Accrued expenses and other current liabilities 1,044,002 952,326
Income taxes 101,707 136,659
----------- -----------
Total current liabilities 1,296,668 1,286,393
Long-term debt 132,017 145,765
Other liabilities 171,843 132,081
Deferred income taxes 151,337 138,236
Deferred revenue 95,361 114,404
----------- -----------
Total liabilities before client funds obligations 1,847,226 1,816,879
Client fund obligations 10,420,772 7,014,733
----------- -----------
Total Liabilities 12,267,998 8,831,612
----------- -----------
Shareholders' equity:
Preferred stock, $1.00 par value:
Authorized, 300 shares; issued, none -- --
Common stock, $.10 par value:
Authorized, 1,000,000 shares; issued, 631,443 shares at
June 30, 2000 and 628,576 at June 30, 1999 63,144 62,858
Capital in excess of par value 402,767 421,333
Retained earnings 4,477,141 3,848,421
Treasury stock -- at cost 2,697 and 4,949 shares, respectively (130,800) (189,204)
Accumulated other comprehensive income (229,434) (135,467)
----------- -----------
Total shareholders' equity 4,582,818 4,007,941
----------- -----------
Total liabilities and shareholders' equity $16,850,816 $12,839,553
----------- -----------
----------- -----------
----------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Statements of Consolidated Shareholders' Equity
Automatic Data Processing, Inc. and Subsidiaries
-----------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
Accumulated
Common Stock Capital in Other
------------------- Excess of Retained Treasury Comprehensive Comprehensive
Shares Amount Par Value Earnings Stock Income Income
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1997 628,576 $62,858 $359,345 $2,917,915 $(577,164) $ (73,539)
Net earnings -- -- -- 608,262 -- $ 608,262 --
Currency translation (26,531) (26,531)
Unrealized loss on securities (1,550) (1,550)
---------
Comprehensive income $ 580,181
---------
---------
Employee stock plans and
related tax benefits -- -- 68,050 -- 61,714
Treasury stock acquired (1,792 shares) -- -- -- -- (40,907)
Acquisitions (1,911 shares) -- -- (15,841) (1,004) 29,431
Debt conversion (11,850 shares) -- -- 64,583 -- 156,202
Dividends ($.25625 per share) -- -- -- (152,888) --
Other transactions -- -- 549 (38) --
--------------------------------------------------------------------------------------------
Balance, June 30, 1998 628,576 62,858 476,686 3,372,247 (370,724) (101,620)
Net earnings -- -- -- 696,840 -- $ 696,840 --
Currency translation (47,674) (47,674)
Unrealized gain on securities 13,827 13,827
---------
Comprehensive income $ 662,993
---------
---------
Employee stock plans and
related tax benefits -- -- 44,163 -- 95,086
Treasury stock acquired (2,550 shares) -- -- -- -- (85,365)
Acquisitions (4,316 shares) -- -- (97,594) (39,533) 119,583
Debt conversion (2,623 shares) -- -- (1,922) -- 52,216
Dividends ($.295 per share) -- -- -- (181,133) --
--------------------------------------------------------------------------------------------
Balance, June 30, 1999 628,576 62,858 421,333 3,848,421 (189,204) (135,467)
Net earnings -- -- -- 840,800 -- $ 840,800 --
Currency translation (86,277) (86,277)
Unrealized loss on securities (7,690) (7,690)
---------
Comprehensive income $ 746,833
---------
---------
Employee stock plans and
related tax benefits 2,867 286 (7,841) 498 207,322
Treasury stock acquired (4,648 shares) -- -- -- -- (201,007)
Acquisitions (478 shares) -- -- 4,359 -- 20,122
Debt conversion (808 shares) -- -- (15,084) -- 31,967
Dividends ($.33875 per share) -- -- -- (212,578) --
-----------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 2000 631,443 $63,144 $402,767 $4,477,141 $(130,800) $(229,434)
------------------- --------- ---------- ---------- ---------
------------------- --------- ---------- ---------- ---------
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Statements of Consolidated Cash Flows
Automatic Data Processing, Inc. and Subsidiaries
------------------------------------------------------------------------------------------------------
(In thousands)
Years ended June 30, 2000 1999 1998
-------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net earnings $ 840,800 $ 696,840 $ 608,262
Adjustments to reconcile net earnings to net cash flows
provided by operating activities:
Depreciation and amortization 284,282 272,807 247,625
Deferred income taxes 8,885 (23,235) (3,020)
Increase in receivables and other assets (149,913) (155,132) (207,819)
Increase in accounts payable and accrued expenses 39,339 100,057 103,028
Other 46,708 (37,476) 35,277
--------- --------- ---------
Net cash flows provided by operating activities 1,070,101 853,861 783,353
--------- --------- ---------
Cash Flows From Investing Activities
Purchases of marketable securities (7,372,892) (1,882,411) (2,622,477)
Proceeds from sale of marketable securities 4,001,848 1,064,810 1,836,569
Net change in client fund obligations 3,406,039 486,293 718,644
Capital expenditures (166,012) (177,700) (202,169)
Additions to intangibles (67,303) (62,360) (95,797)
Acquisitions of businesses, net of cash acquired (175,248) (107,317) (338,436)
Disposals of businesses 14,634 276,035 59,171
Other (11,664) 10,590 13,634
--------- --------- ---------
Net cash flows used in investing activities (370,598) (392,060) (630,861)
--------- --------- ---------
Cash Flows From Financing Activities
Payments of debt (106,090) (289,141) (7,681)
Proceeds from issuance of notes 13,940 91,696 120,986
Repurchases of common stock (201,007) (85,365) (40,907)
Proceeds from issuance of common stock 172,589 100,359 81,111
Dividends paid (212,578) (181,133) (152,888)
Other -- -- (1,845)
--------- --------- ---------
Net cash flows used in financing activities (333,146) (363,584) (1,224)
--------- --------- ---------
Net change in cash and cash equivalents 366,357 98,217 151,268
Cash and cash equivalents, at beginning of period 861,280 763,063 611,795
--------- --------- ---------
Cash and cash equivalents, at end of period $1,227,637 $ 861,280 $ 763,063
--------- --------- ---------
--------- --------- ---------
------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Notes to Consolidated Financial Statements
Years ended June 30, 2000, 1999 and 1998
Note 1. Summary of Significant Accounting Policies
A. Consolidation and Basis of Preparation. The consolidated financial
statements include the financial results of Automatic Data Processing, Inc. and
its majority-owned subsidiaries. Intercompany balances and transactions have
been eliminated in consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from these
estimates.
B. Revenue Recognition. Service revenues, including monthly license, maintenance
and other fees, are recognized as services are provided. Prepaid software
licenses and the gross profit on the sale of hardware is recognized in revenue
primarily at installation and client acceptance with a portion deferred and
recognized on the straight-line basis over the initial contract period. Interest
earnings on collected but not yet remitted funds held for clients are an
integral part of certain of the Employer Services product offerings and are
recognized in revenues as earned. Professional Employer Organization (PEO)
revenues are net of pass-through costs, which include wages and taxes.
C. Cash and Cash Equivalents. Highly-liquid investments with a maturity of
ninety days or less at the time of purchase are considered cash equivalents.
D. Investments. Short-term and long-term marketable securities and funds held
for clients are primarily invested in high-grade fixed-income instruments. All
of the Company's marketable securities, including $3,363 million of funds held
for clients, are considered to be "available-for-sale" at June 30, 2000 and,
accordingly, are carried on the balance sheet at fair market value. The
remainder of the funds held for clients are cash equivalents. Approximately
$1,702 million of the "available-for-sale" investments mature in less than one
year, $1,058 million in 1-2 years, $1,060 million in 2-3 years, $284 million in
3-4 years, and $484 million in 5-6 years.
E. Property, Plant and Equipment. Property, plant and equipment is stated
at cost and 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 the straight-line basis. Goodwill is amortized over periods from 10
to 40 years, and is periodically reviewed for impairment by comparing carrying
value to undiscounted expected future cash flows. If impairment is indicated, a
write-down to fair value (normally measured by discounting estimated future cash
flows) is taken.
G. Foreign Currency Translation. The net assets of the Company's foreign
subsidiaries are translated into U.S. dollars based on exchange rates in effect
at the end of each period, and revenues and expenses are translated at average
exchange rates during the periods. Currency transaction gains or losses, which
are included in the results of operations, are immaterial for all periods
presented. Gains or losses from balance sheet translation are included in other
comprehensive income on the balance sheet.
<PAGE>
H. Earnings Per Share (EPS). The calculation of basic and diluted EPS is as
follows:
--------------------------------------------------------------------------------
(In thousands, except EPS)
Effect of
Zero Coupon Effect of
Subordinated Stock
Basic Notes Options Diluted
-------- -------- -------- --------
2000
Net earnings $840,800 $ 2,912 $ -- $843,712
Average shares 626,766 4,509 14,823 646,098
EPS $ 1.34 $ 1.31
-------- -------- -------- --------
1999
Net earnings $696,840 $ 3,607 $ -- $700,447
Average shares 615,630 5,956 15,306 636,892
EPS $ 1.13 $ 1.10
-------- -------- -------- --------
1998
Net earnings $608,262 $ 7,833 $ -- $616,095
Average shares 600,803 14,030 13,363 628,196
EPS $ 1.01 $ .98
-------- -------- -------- --------
--------------------------------------------------------------------------------
I. Restatement of Prior Financial Statements. Certain reclassifications and
restatements, including the inclusion of funds held for clients and client funds
obligations on the Consolidated Balance Sheets, have been made to previous
years' financial statements to conform to current presentation.
Note 2. Acquisitions and Dispositions
During fiscal 2000, 1999, and 1998, the Company purchased several
businesses for approximately $200 million (including $25 million in common
stock), $107 million and $351 million (including $13 million in common stock),
respectively, net of cash acquired. The results of these acquired businesses are
included from the date of acquisition.
In March 1999 the Company issued 7.2 million shares of common stock to
acquire The Vincam Group (Vincam), a leading PEO providing a suite of human
resource functions to small- and medium-sized employers on an outsourced basis,
in a pooling of interests transaction. The Company also acquired several other
businesses in fiscal 1999 (subsequent to the Vincam acquisition) and 1998 in
pooling of interests transactions in exchange for approximately 4.3 million and
0.9 million shares of common stock, respectively.
Additionally, in fiscal 2000 and 1999, the Company sold several businesses
with annual revenues of approximately $27 million and $270 million,
respectively. As part of the 1999 business dispositions, the Company received
$90 million of convertible preferred stock which is included in other assets.
The $90 million approximates fair value.
Note 3. Non-recurring Items
<PAGE>
During fiscal 1999 the Company sold its Peachtree Software and Brokerage
Services front-office "market data" businesses and decided to exit several other
businesses and contracts. The combination of these transactions and certain
other non-recurring charges resulted in a net pre-tax gain of approximately $37
million and a $40 million provision for income taxes.
Additionally, 1999 also includes approximately $21 million of transaction
costs and other non-recurring adjustments ($14 million after-tax) recorded by
Vincam prior to the March 1999 pooling transaction.
Note 4. Receivables
Accounts receivable is net of an allowance for doubtful accounts of $48 million
and $46 million at June 30, 2000 and 1999, respectively.
The Company finances the sale of computer systems to certain of its
clients. These finance receivables, most of which are due from automobile and
truck dealerships, are reflected in the consolidated balance sheets as follows:
--------------------------------------------------------------------------------
(In thousands)
June 30, 2000 1999
----------------------- -----------------------
Current Long-term Current Long-term
----------------------- -----------------------
Receivables $171,415 $293,489 $147,274 $259,585
Less:
Allowance for
doubtful accounts (13,063) (16,946) (14,196) (16,556)
Unearned income (29,980) (31,294) (26,776) (29,616)
----------------------- -----------------------
$128,372 $245,249 $106,302 $213,413
----------------------- -----------------------
----------------------- -----------------------
--------------------------------------------------------------------------------
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, 2000 mature as follows:
--------------------------------------------------------------------------------
(In thousands)
2002 $136,319
2003 91,997
2004 48,800
2005 15,280
2006 972
Thereafter 121
--------
$293,489
--------
--------
--------------------------------------------------------------------------------
<PAGE>
Note 5. Intangible Assets
Components of intangible assets are as follows:
--------------------------------------------------------------------------------
(In thousands)
June 30, 2000 1999
----------- -----------
Goodwill $ 1,378,265 $ 1,215,179
Other 1,025,610 978,240
----------- -----------
2,403,875 2,193,419
Less accumulated amortization (780,174) (661,045)
----------- -----------
$ 1,623,701 $ 1,532,374
----------- -----------
----------- -----------
--------------------------------------------------------------------------------
Other intangibles consist primarily of purchased rights (acquired directly
or through acquisitions) to provide data processing services to various groups
of clients (amortized over periods from 5 to 36 years) and purchased software
(amortized over periods from 3 to 10 years). Amortization of intangibles totaled
$133 million for fiscal 2000, $126 million for 1999 and $103 million for 1998.
Note 6. Debt
Components of long-term debt are as follows:
--------------------------------------------------------------------------------
(In thousands)
June 30, 2000 1999
--------- ---------
Zero coupon convertible subordinated
notes (5 1/4% yield) $ 86,639 $ 97,705
Industrial revenue bonds
(with fixed and variable interest rates
from 3.3% to 6.3%) 36,858 37,267
Other 11,713 11,876
--------- ---------
135,210 146,848
Less current portion (3,193) (1,083)
--------- ---------
$ 132,017 $ 145,765
--------- ---------
--------- ---------
--------------------------------------------------------------------------------
The zero coupon convertible subordinated notes have a face value of
approximately $159 million at June 30, 2000 and mature February 20, 2012, unless
converted or redeemed earlier. At June 30, 2000, the notes were convertible into
approximately 4.1 million shares of the Company's common stock. The notes are
callable at the option of the Company, and the holders of the notes can convert
into common stock at any time or require redemption in 2002 and 2007. During
fiscal 2000 and 1999, approximately $31 million and $101 million face value of
notes were converted or redeemed. <PAGE>
As of June 30, 2000 and 1999, the quoted market prices for the zero coupon
notes were approximately $208 million and $197 million, respectively. The fair
value of the other debt, included above, approximates its carrying value.
Long-term debt repayments at June 30, 2000 are due as follows:
--------------------------------------------------------------------------------
(In thousands)
2002 $ 245
2003 248
2004 268
2005 763
2006 165
Thereafter 130,328
--------
$132,017
--------
--------
--------------------------------------------------------------------------------
During fiscal 2000 and 1999, the average interest rate for notes payable
was 5.0% and 4.3%, respectively.
Interest payments were approximately $10 million in fiscal 2000 and $12
million in both fiscal 1999 and 1998.
Note 7. Funds Held for Clients and Client Funds Obligations
As part of its integrated payroll and payroll tax filing services, the Company
impounds funds for federal, state and local employment taxes from approximately
350,000 clients; files annually over 17 million returns; handles all regulatory
correspondence, amendments, and penalty and interest disputes; remits the funds
to the appropriate tax agencies; and handles other employer-related services. In
addition to fees paid by clients for these services, the Company receives
interest during the interval between the receipt and disbursement of these funds
by investing the funds primarily in fixed-income instruments. The amount of
collected but not yet remitted funds for the Company's payroll and tax filing
and certain other services varies significantly during the year and averaged
approximately $6.9 billion in fiscal 2000, $5.9 billion in fiscal 1999, and $5.2
billion in fiscal 1998.
Note 8. Employee Benefit Plans
A. Stock 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 years from the date of grant, at prices not less
than the fair market value on the date of grant. At June 30, 2000 there were
9,400 participants in the plans. The aggregate purchase price for options
outstanding at June 30, 2000 was approximately $1.3 billion. The options expire
at various points between 2000 and 2010.
A summary of changes in the stock option plans for the three years
ended June 30, 2000 is as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
Number of Options Weighted Average Price
---------------------------------- ----------------------
Years ended June 30, 2000 1999 1998 2000 1999 1998
---------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year 47,467 45,596 43,176 $24 $18 $15
Options granted 9,646 11,616 11,377 $46 $38 $29
Options exercised (6,736) (6,154) (5,970) $16 $12 $10
Options canceled (3,683) (3,591) (2,987) $32 $24 $18
----------------------------------
Options outstanding,
end of year 46,694 47,467 45,596 $29 $24 $18
----------------------------------
Options exercisable,
end of year 18,719 16,898 14,820 $19 $15 $11
----------------------------------
Shares available for
future grants,
end of year 10,478 1,691 9,358
----------------------------------
Shares reserved for
issuance under
stock option plans 57,172 49,158 54,954
----------------------------------
----------------------------------
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Summarized information about stock options outstanding as of June 30, 2000
is as follows:
---------------------------------------------------------------------------------------------
Outstanding Exercisable
---------------------------------------------------------------------------------------------
Exercise Number Remaining Average Number Average
Price of Options Life Exercise of Options Exercise
Range (In thousands) (In years) Price (In thousands) Price
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Under $15 8,898 2.9 $11 7,820 $11
$15 to $20 6,670 5.3 $18 4,264 $18
$20 to $25 4,786 6.5 $23 1,921 $23
$25 to $30 5,595 7.4 $27 2,021 $27
$30 to $35 2,533 7.9 $32 757 $32
$35 to $40 6,573 8.3 $38 1,277 $38
$40 to $45 8,360 9.1 $44 526 $44
Over $45 3,279 9.7 $51 133 $51
---------------------------------------------------------------------------------------------
</TABLE>
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 as of the end of the plans.
Approximately 2.8 million and 2.6 million shares are scheduled for issuance on
December 31, 2001 and 2000, respectively. Approximately 3.1 million and 3.2
million shares were issued during the years ended June 30, 2000 and 1999,
respectively. At June 30, 2000 and 1999, there were approximately 7.2 million
and 9.5 million shares, respectively, reserved for purchase under the plans.
Included in liabilities as of June 30, 2000 and 1999 are employee stock purchase
plan withholdings of approximately $86 million and $72 million, respectively.
The Company follows APB 25 to account for its stock plans. The pro forma
net income impact of options and stock purchase plan rights granted subsequent
to July 1, 1995 is shown below. The fair value for these instruments was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted average assumptions:
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Years ended June 30, 2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Risk-free interest rate 6.0-6.7% 4.5-5.7% 5.4-6.3%
Dividend yield .8-.9% 1.0% 1.0%
Volatility factor 22.0-26.7% 19.7-21.8% 13.9-17.4%
Expected life:
Options 6.4 6.3 6.2
Purchase rights 2.0 2.0 2.0
Weighted average fair value:
Options $16.89 $11.63 $ 7.99
Purchase rights $19.73 $12.29 $10.72
--------- --------- ---------
--------- --------- ---------
--------------------------------------------------------------------------------
</TABLE>
The Company's pro forma information, amortizing the fair value of the
stock options and stock purchase plan rights issued subsequent to July 1, 1995
over their vesting period, is as follows:
--------------------------------------------------------------------------------
(In millions, except per share amounts)
Years ended June 30, 2000 1999 1998
-------- -------- --------
Pro forma net earnings $ 762 $ 638 $ 569
Pro forma basic earnings per share $ 1.22 $ 1.04 $ .95
Pro forma diluted earnings per share $ 1.18 $ 1.01 $ .92
-------- -------- --------
-------- -------- --------
--------------------------------------------------------------------------------
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, 2000, 1999 and 1998 the Company
issued 171,900, 121,400 and 261,000 restricted shares, respectively.
B. Pension Plans. The Company has a defined benefit cash balance pension
plan covering substantially all U.S. employees, under which employees are
credited with a percentage of base pay 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. In addition, the Company has various retirement plans for its
non-U.S. employees.
<PAGE>
The plans' funded status as of June 30, 2000 and 1999 follows:
--------------------------------------------------------------------------------
(In thousands)
June 30, 2000 1999
--------- ---------
Change in plan assets:
Funded plan assets at market value at
beginning of year $ 354,500 $ 306,900
Plans of acquired employers 17,300 --
Actual return on plan assets 78,300 34,600
Employer contributions 43,000 19,200
Benefits paid (7,400) (6,200)
--------- ---------
Funded plan assets at market value at
end of year $ 485,700 $ 354,500
--------- ---------
--------- ---------
Change in benefit obligation:
Benefit obligation at beginning of year $ 256,400 $ 231,300
Plans of acquired employers 20,900 --
Service cost 29,600 23,400
Interest cost 20,000 16,400
Actuarial and other gains (2,900) (8,500)
Benefits paid (7,400) (6,200)
--------- ---------
Projected benefit obligation end of year $ 316,600 $ 256,400
--------- ---------
--------- ---------
Plan assets in excess of projected benefits $ 169,100 $ 98,100
Prior service cost -- (700)
Transition obligation 500 700
Unrecognized net actuarial gain due to
different experience than assumed (58,200) (14,900)
--------- ---------
Prepaid pension cost $ 111,400 $ 83,200
--------- ---------
--------- ---------
--------------------------------------------------------------------------------
The components of net pension expense were as follows:
--------------------------------------------------------------------------------
(In thousands)
Years ended June 30, 2000 1999 1998
-------- -------- --------
Service cost - benefits earned
during the period $ 29,600 $ 23,400 $ 18,000
Interest cost on projected benefits 20,200 16,400 14,500
Expected return on plan assets (32,900) (24,500) (21,300)
Net amortization and deferral (100) (700) (700)
-------- -------- --------
$ 16,800 $ 14,600 $ 10,500
-------- -------- --------
-------- -------- --------
--------------------------------------------------------------------------------
Assumptions used to develop the actuarial present value of benefit
obligations generally were:
--------------------------------------------------------------------------------
Years ended June 30, 2000 1999
---- ----
Discount rate 7.75% 7.50%
Expected long-term rate on assets 8.75% 8.75%
Increase in compensation levels 6.0% 6.0%
---- ----
---- ----
--------------------------------------------------------------------------------
<PAGE>
C. Retirement and Savings Plan. The Company has a 401(k) retirement and savings
plan which allows eligible employees to contribute up to 16% of their
compensation annually. The Company matches a portion of this contribution which
amounted to approximately $27 million, $26 million and $22 million for calendar
years 1999, 1998 and 1997, respectively.
Note 9. Income Taxes
The Company accounts for its income taxes using 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:
--------------------------------------------------------------------------------
(In thousands)
Years ended June 30, 2000 1999 1998
--------- --------- ---------
Current:
Federal $ 326,875 $ 296,397 $ 198,932
Non-U.S. 56,505 66,440 41,209
State 56,535 48,058 45,334
--------- --------- ---------
Total current 439,915 410,895 285,475
Deferred:
Federal 5,750 (6,045) (4,145)
Non-U.S. 1,220 (15,175) 3,115
State 1,915 (2,015) (1,990)
--------- --------- ---------
Total deferred 8,885 (23,235) (3,020)
--------- --------- ---------
$ 448,800 $ 387,660 $ 282,455
--------- --------- ---------
--------- --------- ---------
--------------------------------------------------------------------------------
At June 30, 2000 and 1999, the Company had gross deferred tax assets of
approximately $188 million and $168 million, respectively, consisting primarily
of operating expenses not currently deductible for tax return purposes.
Valuation allowances approximated $23 million as of June 30, 2000 and 1999.
Gross deferred tax liabilities approximated $294 million and $277 million, as of
June 30, 2000 and June 30, 1999, respectively, consisting primarily of
differences in the accounting and tax values of certain fixed and intangible
assets.
Income tax payments were approximately $375 million in 2000, $270 million
in 1999, and $247 million in 1998.
<TABLE>
<CAPTION>
A reconciliation between the Company's effective tax rate and the U.S.
federal statutory rate is as follows:
--------------------------------------------------------------------------------------------------------
(In thousands, except percentages)
Years ended June 30, 2000 % 1999 % 1998 %
------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Provision for taxes
at U.S. statutory rate $ 451,400 35.0 $ 379,600 35.0 $ 311,800 35.0
Increase (decrease)
in provision from:
Investments in
municipals (68,180) (5.3) (68,360) (6.3) (68,670) (7.7)
State taxes, net
of federal tax
benefit 37,990 2.9 29,930 2.8 28,119 3.2
Other* 27,590 2.2 46,490 4.2 11,206 1.2
------------------ ------------------ ------------------
$ 448,800 34.8 $ 387,660 35.7 $ 282,455 31.7
------------------ ------------------ ------------------
------------------ ------------------ ------------------
--------------------------------------------------------------------------------------------------------
</TABLE>
* Includes impact of certain fiscal '99 acquisitions, dispositions and other
non-recurring adjustments.
Note 10. Commitments and Contingencies
The Company has obligations under various facilities and equipment leases, and
software license agreements. Total expense under these agreements was
approximately $243 million in 2000, $202 million in 1999 and $174 million in
1998, with minimum commitments at June 30, 2000 as follows:
--------------------------------------------------------------------------------
(In millions)
Years ending June 30,
2001 $228
2002 179
2003 121
2004 69
2005 44
Thereafter 103
----
$744
----
----
--------------------------------------------------------------------------------
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.
In the normal course of business, the Company is subject to various claims
and litigation. The Company does not believe that the resolution of these
matters will have a material impact on the consolidated financial statements.
Note 11. Financial Data By Segment
Employer Services, Brokerage Services and Dealer Services are the Company's
largest business units. ADP evaluates performance of its business units based on
recurring operating results before interest on corporate funds, income taxes and
foreign currency gains and losses. 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, including certain non-recurring gains and losses, are
recorded at the corporate level and certain shared costs are not allocated.
Goodwill amortization is charged to business units at an accelerated rate to act
as a surrogate for the cost of capital for acquisitions. Interest on invested
funds held for clients are recorded in Employer Services revenues at a standard
rate of 6%, with the adjustment to actual revenues included in "Other". Prior
years' business unit revenues and pre-tax earnings have been restated to reflect
fiscal year 2000 budgeted foreign exchange rates. Business unit assets include
funds held for clients but exclude corporate cash, marketable securities and
goodwill. "Other" consists primarily of Claims Services, corporate expenses,
non-recurring items and the reconciling items referred to above.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
(In millions) Employer Brokerage Dealer
Year ended June 30, 2000 Services Services Services Other Total
-------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues $ 3,620 $ 1,479 $ 736 $ 453 $ 6,288
Pre-tax earnings $ 776 $ 334 $ 115 $ 65 $ 1,290
Assets $11,264 $ 522 $ 202 $ 4,863 $16,851
Capital expenditures $ 94 $ 27 $ 24 $ 21 $ 166
Depreciation and amortization $ 177 $ 81 $ 38 $ (12) $ 284
------- ------- ------- ------- -------
Year ended June 30, 1999
------- ------- ------- ------- -------
Revenues $ 3,269 $ 1,150 $ 733 $ 388 $ 5,540
Pre-tax earnings $ 674 $ 222 $ 107 $ 82 $ 1,085
Assets $ 7,813 $ 412 $ 242 $ 4,373 $12,840
Capital expenditures $ 92 $ 35 $ 25 $ 26 $ 178
Depreciation and amortization $ 175 $ 73 $ 40 $ (15) $ 273
------- ------- ------- ------- -------
Year ended June 30, 1998
------- ------- ------- ------- -------
Revenues $ 2,830 $ 1,096 $ 688 $ 312 $ 4,926
Pre-tax earnings $ 570 $ 163 $ 94 $ 64 $ 891
Assets $ 7,333 $ 400 $ 224 $ 3,831 $11,788
Capital expenditures $ 108 $ 49 $ 24 $ 21 $ 202
Depreciation and amortization $ 158 $ 80 $ 39 $ (29) $ 248
------- ------- ------- ------- -------
------- ------- ------- ------- -------
----------------------------------------------------------------------------------------------------------------
</TABLE>
Revenues and assets by geographic area are as follows:
--------------------------------------------------------------------------------
(In millions) United
Year ended June 30, 2000 States Europe Canada Other Total
------- ------ ------ ------ -------
Revenues $ 5,330 $ 645 $ 259 $ 54 $ 6,288
Assets $14,640 $1,126 $1,014 $ 71 $16,851
------- ------ ------ ------ -------
Year ended June 30, 1999
------- ------ ------ ------ -------
Revenues $ 4,564 $ 704 $ 212 $ 60 $ 5,540
Assets $10,498 $1,216 $1,043 $ 83 $12,840
------- ------ ------ ------ -------
Year ended June 30, 1998
------- ------ ------ ------ -------
Revenues $ 4,172 $ 493 $ 194 $ 67 $ 4,926
Assets $ 9,670 $1,248 $ 794 $ 76 $11,788
------- ------ ------ ------ -------
------- ------ ------ ------ -------
--------------------------------------------------------------------------------
Note 12. Quarterly Financial Results
(Unaudited)
Summarized quarterly results of operations for the two years ended June 30, 2000
are as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
First Second Third Fourth
Year ended June 30, 2000 Quarter Quarter Quarter Quarter
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $1,351,095 $1,492,486 $1,719,730 $1,724,201
Net earnings $ 146,200 $ 199,500 $ 271,310 $ 223,790
Basic earnings per share $ .23 $ .32 $ .43 $ .36
Diluted earnings per share $ .23 $ .31 $ .42 $ .35
---------- ---------- ---------- ----------
Year ended June 30, 1999 *
---------- ---------- ---------- ----------
Revenues $1,245,126 $1,310,196 $1,514,132 $1,470,687
Net earnings $ 125,424 $ 153,977 $ 225,650 $ 191,789
Basic earnings per share $ .20 $ .25 $ .37 $ .31
Diluted earnings per share $ .20 $ .24 $ .36 $ .30
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
------------------------------------------------------------------------------------------
</TABLE>
*After impact of non-recurring items. See note 3 to the consolidated financial
statements.
<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 judgments, 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 four 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.
/s/ Arthur F. Weinbach
Arthur F. Weinbach
Chairman and Chief Executive Officer
/s/ Richard J. Haviland
Richard J. Haviland
Chief Financial Officer
/s/ Karen E. Dykstra
Karen E. Dykstra
Controller
Roseland, New Jersey
August 14, 2000
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Automatic Data Processing, Inc.
Roseland, New Jersey
We have audited the accompanying consolidated balance sheets of Automatic
Data Processing, Inc. and subsidiaries as of June 30, 2000 and 1999, and the
related consolidated statements of earnings, shareholders' equity, and cash
flows for each of the three years in the period ended June 30, 2000. 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 auditing standards generally
accepted in the United States of America. 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 as of June 30, 2000 and 1999, and the results of its operations
and its cash flows for each of the three years in the period ended June 30,
2000, in conformity with accounting principles generally accepted in the United
States of America.
/s/ Deloitte & Touche LLP
New York, New York
August 14, 2000
