Automatic Data Processing, Inc., also known as ADPยฎ, is a leading global technology company providing human capital management (HCM) solutions. With over 1.1 million clients, ADP is considered a leading provider of HR services such as talent, time management, benefits and payroll.
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.
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.
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.
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.
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.
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.
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.
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
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)