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, 2000 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 (973) 974-5000
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 April 30, 2000, there were 627,208,423 shares
outstanding.
<PAGE>
Form 10Q
Part I. Financial Information
STATEMENTS OF CONSOLIDATED EARNINGS
-----------------------------------
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
------------------ ------------------
2000 1999 2000 1999
---- ---- ---- ----
Revenues, other
than PEO 1,665,379 $1,469,903 $4,417,042 $3,952,320
PEO revenues (net
of pass-through
costs of $567,387,
$451,498, $1,550,005,
and $1,276,091,
respectively) 54,351 44,229 146,269 117,134
---------- ---------- ---------- ----------
1,719,730 1,514,132 4,563,311 4,069,454
---------- ---------- ---------- ----------
Operating expenses 661,935 611,234 1,826,802 1,725,336
General,
administrative and
selling expenses 446,931 379,476 1,247,017 1,023,838
Depreciation and
amortization 72,851 65,399 206,032 203,874
Systems development and
programming costs 119,747 102,543 332,627 309,336
Interest expense 2,816 3,880 9,993 15,253
---------- ---------- ---------- ----------
1,304,280 1,162,532 3,622,471 3,277,637
---------- ---------- ---------- ----------
EARNINGS BEFORE
INCOME TAXES 415,450 351,600 940,840 791,817
Provision for income
taxes 144,140 125,950 323,830 286,766
---------- ---------- ---------- ----------
NET EARNINGS $ 271,310 $ 225,650 $ 617,010 $ 505,051
========== ========== ========== ==========
BASIC EARNINGS PER
SHARE $ .43 $ .37 $ .99 $ .82
========== ========== ========== ==========
DILUTED EARNINGS
PER SHARE $ .42 $ .36 $ .96 $ .80
========== ========== ========== ==========
Dividends per
share $ .0875 $ .07625 $ .25125 $ .21875
========== ========== ========== ==========
See notes to the consolidated financial statements.
<PAGE>
Form 10Q
CONSOLIDATED BALANCE SHEETS
---------------------------
(In thousands)
(Unaudited)
March 31, June 30,
Assets 2000 1999
- - ------ ---------- ----------
Cash and cash equivalents $1,428,618 $ 861,280
Short-term marketable securities 498,288 231,214
Accounts receivable 900,601 860,836
Other current assets 200,405 240,927
---------- ----------
Total current assets 3,027,912 2,194,257
Long-term marketable securities 618,918 1,076,546
Long-term receivables 238,882 213,413
Land and buildings 423,610 400,189
Data processing equipment 592,203 550,757
Furniture, leaseholds and other 465,612 449,862
---------- ----------
1,481,425 1,400,808
Less accumulated depreciation (902,000) (821,514)
---------- ----------
579,425 579,294
Other assets 273,813 228,936
Intangibles 1,464,042 1,532,374
---------- ----------
$6,202,992 $5,824,820
========== ==========
Liabilities and Shareholders' Equity
- - ------------------------------------
Notes payable $ 41,474 $ 66,952
Accounts payable 103,155 130,456
Accrued expenses & other current
liabilities 1,055,390 952,326
Income taxes 134,587 136,659
---------- ---------
Total current liabilities 1,334,606 1,286,393
Long-term debt 138,475 145,765
Other liabilities 149,527 132,081
Deferred income taxes 132,972 138,236
Deferred revenue 102,844 114,404
Shareholders' equity:
Common stock 63,145 62,858
Capital in excess of par value 418,856 421,333
Retained earnings 4,308,357 3,848,421
Treasury stock (221,849) (189,204)
Accumulated other comprehensive income (223,941) (135,467)
---------- ----------
4,344,568 4,007,941
---------- ----------
$6,202,992 $5,824,820
========== ==========
See notes to the consolidated financial statements.
<PAGE>
Form 10Q
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
-----------------------------------------------
(In thousands)
(Unaudited)
Nine Months Ended
March 31,
2000 1999
---------- ---------
Cash Flows From Operating Activities:
- - -------------------------------------
Net earnings $ 617,010 $ 505,051
Expenses not requiring outlay of cash 230,512 138,716
Changes in operating net assets 42,162 47,560
---------- ---------
Net cash flows from operating activities 889,684 691,327
---------- ---------
Cash Flows From Investing Activities:
- - -------------------------------------
Purchase of marketable securities (662,235) (313,544)
Proceeds from sale of marketable securities 821,889 219,772
Capital expenditures (116,306) (137,115)
Additions to intangibles (55,553) (51,183)
Acquisitions of businesses (41,546) (85,607)
Dispositions of businesses 10,943 200,505
Other (12,675) 13,570
---------- ---------
Net cash flows used in investing
activities (55,483) (153,602)
---------- ---------
Cash Flows From Financing Activities:
- - -------------------------------------
Proceeds from issuance of notes 10,547 90,568
Repayments of long-term debt (35,979) (273,659)
Proceeds from issuance of common stock 117,148 74,136
Repurchases of common stock (201,007) (85,365)
Dividends paid (157,572) (133,863)
---------- ---------
Net cash flows used in financing
activities (266,863) (328,183)
---------- ---------
Net change in cash and cash equivalents 567,338 209,542
Cash and cash equivalents, at beginning
of period 861,280 763,063
---------- ---------
Cash and cash equivalents, at end of
period $1,428,618 $ 972,605
========== =========
See notes to the consolidated financial statements.
<PAGE>
Form 10Q
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
(Unaudited)
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. Adjustments are of a normal recurring
nature. These statements should be read in conjunction
with the annual financial statements and related notes of
Automatic Data Processing, Inc. (the "Company") for the
year ended June 30, 1999.
Note A - The results of operations for the nine
months ended March 31, 2000 may not be
indicative of the results to be expected for
the year ending June 30, 2000.
Note B - The calculation of basic and diluted earnings per
share is as follows:
(In thousands, except EPS)
Periods ended March 31, 2000
----------------------------------------------------
Three month period Nine month period
------------------------- ------------------------
Income Shares EPS Income Shares EPS
------ ------ --- ------ ------ ---
Basic $271,310 629,144 $ 0.43 $617,010 626,401 $ 0.99
Effect of zero
coupon
subordinated
notes 718 4,416 2,208 4,582
Effect of stock
options - 14,199 - 14,324
----------------- -----------------
Diluted $272,028 647,759 $ 0.42 $619,218 645,307 $ 0.96
========================= ========================
Periods ended March 31, 1999
----------------------------------------------------
Three month period Nine month period
------------------------- ------------------------
Income Shares EPS Income Shares EPS
------ ------ --- ------ ------ ---
Basic $225,650 617,364 $0.37 $505,051 613,927 $0.82
Effect of zero
coupon
subordinated
notes 847 5,598 2,845 6,291
Effect of stock
options - 14,140 - 14,912
----------------- -----------------
Diluted $226,497 637,102 $0.36 $507,896 635,130 $0.80
========================= ========================
<PAGE>
Form 10Q
Note C - Comprehensive income for the three and nine months
ended March 31, 2000 and 1999 is as follows:
(In thousands)
Three months ended Nine months ended
March 31 March 31
2000 1999 2000 1999
---- ---- ---- ----
Net earnings $271,310 $225,650 $617,010 $505,051
Other comprehensive
income:
Foreign currency
translation
adjustments (28,614) (73,870) (84,741) (15,815)
Unrealized gains
(losses)
on securities 1,061 31,722 (3,733) 29,679
-------- -------- -------- --------
Comprehensive
income $243,757 $183,502 $528,536 $518,915
======== ======== ======== ========
Note D - Interim financial data by segment:
The Company evaluates performance of its business
units based on recurring operating results before
interest, 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 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. Revenues on
invested client funds are credited to Employer Services
at a standard rate of 6%. Prior year's business unit
results have been restated to reflect the current year's
foreign exchange standard rates.
Results of the Company's three largest business units,
Employer Services, Brokerage Services and Dealer
Services are shown below.
Three months ended March 31,
----------------------------------------
(In millions) Employer Brokerage Dealer
Services Services Services
-------- -------- --------
2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
Revenues $1,036 $ 953 $ 402 $ 287 $ 184 $ 183
Pretax earnings $ 295 $ 271 $ 99 $ 58 $ 29 $ 30
Nine months ended March 31,
------------------------------------------
Employer Brokerage Dealer
Services Services Services
-------- --------- --------
2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
Revenues $2,718 $2,467 $ 974 $ 758 $ 562 $ 545
Pretax earnings $ 623 $ 527 $ 216 $ 125 $ 91 $ 83
<PAGE>
Form 10Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
OPERATING RESULTS
Revenues and earnings again reached record levels during the
quarter ended March 31, 2000.
Revenues and revenue growth by the Company's major business units
are shown below:
Revenues
-------------------------------------
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
------ ------ ------ ------
($ in millions)
Employer Services $1,036 $ 953 $2,718 $2,467
Brokerage Services 402 287 974 758
Dealer Services 184 183 562 545
Other 98 91 309 299
------ ------ ------ ------
$1,720 $1,514 $4,563 $4,069
====== ====== ====== ======
Revenue Growth
-------------------------------------
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
------ ------ ----- -----
Employer Services 9% 18% 10% 17%
Brokerage Services 40 3 28 3
Dealer Services 1 3 3 6
Other 8 25 3 25
------ ------ ----- ----
14% 13% 12% 13%
====== ====== ===== ====
Consolidated revenues for the quarter grew 14% from
last year to $1.7 billion. Revenue growth in Employer
Services was 9%, impacted by prior year dispositions
and slower new business sales in November and December
resulting from Year 2000 related decision deferrals.
Employer Services sales rebounded during the third
quarter. Brokerage revenue growth was 40%, supported
by strong trading volume. Dealer Services revenue
growth of 1% was affected by the impact of prior year
dispositions, slower international installations and
lower consulting activity.
The primary components of "Other" revenues are claims
services, interest income, foreign exchange differences
and miscellaneous processing services. In addition,
"Other" revenues has been reduced to adjust for the
difference between actual interest income earned on
invested client funds and income credited to Employer
Services at a standard rate of 6%. The prior year's
business unit results have been restated to reflect
the current year's budgeted foreign exchange rates.
<PAGE>
Form 10Q
In the quarter ended March 31, 1999 the Company
sold its Peachtree Software business and decided
to exit several other businesses and contracts.
The combination of these transactions and certain
other non-recurring charges resulted in approximately
$15 million of pretax income, included in selling,
general and administrative expenses, and a $15
million provision for income taxes in the quarter.
The quarter ended December 31, 1998 includes a
pretax gain of approximately $22 million, included
in selling, general and administrative expenses, a
provision for income taxes of approximately $25
million, and a net loss of approximately $3 million
resulting from the sale of the Brokerage Services
"front office" market data business. The quarter
ended December 31, 1998 also includes approximately
$21 million of transaction costs and other non-recurring
adjustments, included in selling, general and
administrative expenses ($14 million after tax)
recorded by Vincam prior to the March 1999 pooling
transaction.
Pretax earnings for the quarter increased 18% from
last year. Excluding the impact of several prior
year, non-recurring transactions pretax earnings
increased 23%.
Net earnings for the quarter, after a lower effective
tax rate, increased 20% to $271 million. The
effective tax rate of 34.7% increased from 33.0% in
the comparable quarter last year, adjusted for the
prior year non-recurring transactions. The increase
in the effective tax rate is primarily a result of a
change in the investment mix to a greater weighting
of taxable versus non-taxable investments.
Diluted earnings per share grew 17% to $.42 from $.36
last year.
For the full year, the Company expects revenue growth
to exceed 10% and expects to meet or exceed diluted
earnings per share growth of about 15% above the $1.13
reported prior to non-recurring items in fiscal 1999.
The Company has accelerated $45 million of investments
to benefit future years that were not originally planned
in fiscal 2000 expenses. These investments are primarily
new business and Internet related.
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, 2000,
the Company had cash and marketable securities of
approximately $2.5 billion. Shareholders' equity was
approximately $4.3 billion and the ratio of long-term
debt to equity was 3%.
Capital expenditures for fiscal 2000 are expected
to be approximately $200 million, compared to $178
million in fiscal 1999.
During the first nine months of fiscal 2000,
the Company purchased 4.6 million shares of common
stock for treasury at an average price per share
of approximately $43. The Company has remaining
Board authorization to purchase up to 19.9 million
additional shares to fund equity related employee
benefit plans.
The Company's investment portfolio for corporate
and client funds consists primarily of fixed income
securities subject to interest rate risk, including
<PAGE>
Form 10Q
reinvestment risk. The Company has historically
had the ability to hold these investments until
maturity and, therefore, interest rate risk has
not had an adverse impact on income or cash flows.
OTHER MATTERS
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.
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 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
Number Exhibit
------ -------
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: May 9, 2000 /s/ Richard J. Haviland
-----------------------
Richard J. Haviland
Chief Financial Officer
(Principal Financial Officer)
----------------------------
(Title)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 1,428,618
<SECURITIES> 498,288
<RECEIVABLES> 957,784
<ALLOWANCES> 57,183
<INVENTORY> 43,473
<CURRENT-ASSETS> 3,027,912
<PP&E> 1,481,425
<DEPRECIATION> 902,000
<TOTAL-ASSETS> 6,202,992
<CURRENT-LIABILITIES> 1,334,606
<BONDS> 138,475
0
0
<COMMON> 63,145
<OTHER-SE> 4,281,423
<TOTAL-LIABILITY-AND-EQUITY> 6,202,992
<SALES> 0
<TOTAL-REVENUES> 4,563,311
<CGS> 0
<TOTAL-COSTS> 3,592,235
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 20,243
<INTEREST-EXPENSE> 9,993
<INCOME-PRETAX> 940,840
<INCOME-TAX> 323,830
<INCOME-CONTINUING> 617,010
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 617,010
<EPS-BASIC> 0.99
<EPS-DILUTED> 0.96
</TABLE>
