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<SEC-DOCUMENT>0000008670-01-500017.txt : 20010917
<SEC-HEADER>0000008670-01-500017.hdr.sgml : 20010917
ACCESSION NUMBER: 0000008670-01-500017
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 7
CONFORMED PERIOD OF REPORT: 20010630
FILED AS OF DATE: 20010914
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: AUTOMATIC DATA PROCESSING INC
CENTRAL INDEX KEY: 0000008670
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374]
IRS NUMBER: 221467904
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0630
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-05397
FILM NUMBER: 1737166
BUSINESS ADDRESS:
STREET 1: ONE ADP BOULVARD
CITY: ROSELAND
STATE: NJ
ZIP: 07068
BUSINESS PHONE: 9739747849
MAIL ADDRESS:
STREET 1: ONE ADP BOULEVARD
CITY: ROSELAND
STATE: NJ
ZIP: 07068
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>form10k405.txt
<DESCRIPTION>FORM 10-K
<TEXT>
- -------------------------------------------------------------------------------
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 Identification No.)
incorporation or organization)
One ADP Boulevard, Roseland, New Jersey 07068
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 973-974-5000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, $.10 Par Value New York Stock Exchange
(voting) Chicago Stock Exchange
Pacific Stock Exchange
Liquid Yield Option Notes due 2012 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to the filing
requirements for the past 90 days. Yes x No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein and will
not be contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ x ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of August 31, 2001 was approximately $32,098,454,526. On August
31, 2001, there were 620,140,157 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 2001 Annual Report to Shareholders.Parts I, II & IV
Portions of the Registrant's Proxy Statement for Annual Meeting
of Stockholders to be held on November 13, 2001. Part III
- -------------------------------------------------------------------------------
<PAGE>
Part I
Item 1. Business
Automatic Data Processing, Inc., incorporated in Delaware in 1961(together
with its subsidiaries "ADP" or the "Registrant"), is one of the largest
providers of computerized transaction processing, data communication, and
information services in the world. For financial information by segment and by
geographic area, see Note 12 of the "Notes to Consolidated Financial Statements"
contained in ADP's 2001 Annual Report to Shareholders, which information is
incorporated herein by reference. The following summary describes ADP's
activities.
Employer Services
Employer Services offers a comprehensive range of payroll processing, human
resource information management ("HR"), benefits administration, time and labor
management, payroll tax filing and reporting, professional employer organization
("PEO"), regulatory compliance management (i.e., new hire reporting, wage
garnishment processing and COBRA administration), unemployment compensation
management and retirement plan services to approximately 455,000 employers in
the United States, Canada, Europe, Latin America, Australia, and the Pacific
Rim. These services are marketed through ADP's direct marketing sales forces
and through other indirect sales channels such as marketing relationships with
banks, accountants, and online companies through which ADP's services are
marketed to their customers. In fiscal 2001, North America accounted for 88% of
Employer Services' revenues, with Europe generating 11% of Employer Services'
revenues, and Latin America (primarily Brazil), Australia and the Pacific Rim
contributing the remainder.
Employer Services' approach to the market is to match a client's needs with
the product that will best meet expectations. In North America, approximately
32% of Employer Services' revenues during the past fiscal year was attributable
to its Emerging Business Services (companies with fewer than 100 employees);
approximately 35% of such revenues was attributable to Major Accounts (companies
with between 100 and 999 employees); approximately 27% of such revenues was
attributable to National Accounts Services (companies with 1,000 or more
employees); and approximately 6% of such revenues was attributable to ADP's PEO
business, called TotalSource(R).
Emerging Business Services ("EBS") processes payroll for over 370,000
clients. EBS provides these smaller companies of usually 1-99 employees with
leading solutions, including a range of value-added services that are
specifically designed for small business clients. Major Accounts (100-999
employees) offers a full suite of best-of-breed employer services solutions for
mid-sized companies, including full database and other functional integration
between payroll and HR. Many of the world's largest corporations (1,000 or more
employees) are National Accounts Services clients. In many cases, ADP provides
system solutions for its clients' entire human resource, payroll and benefits
needs and, through ADP Connection(TM), ADP can enable its largest clients to
interface their major enterprise resource planning applications with ADP's
outsourced payroll services. For those companies who choose to process these
applications in-house, ADP also delivers stand-alone services such as payroll
tax filing, check printing and distribution, and year-end statements (i.e.,
W-2's). Other large clients rely on ADP to design and deliver their own
customized human resource information systems and benefits outsourcing
solutions.
<PAGE>
In North America, ADP provides payroll services that include the
preparation of client employee paychecks and electronic direct deposits, along
with supporting journals, summaries and management reports. ADP also supplies
the quarterly and annual social security, medicare, and federal, state and local
income tax withholding reports required to be filed by employers and employees.
ADP's tax filing service processes federal, state and local payroll taxes on
behalf of ADP clients and remit such taxes to the appropriate taxing
authorities. Through service offerings such as new hire reporting, ADP
Check/full service direct deposit (in conjunction with major bank partners) and
wage garnishment payment, the ADP Tax and Financial Services Center is also
responsible for the efficient movement of funds and information to third
parties. In Europe, Latin America, Australia and the Pacific Rim, Employer
Services provides full departmental outsourcing of payroll services.
ADP's HR services, operating in conjunction with a client's payroll
database, provide comprehensive HR recordkeeping services, including benefits
administration and outsourcing, applicant tracking, employee history and
position control. ADP's benefits administration services, including management
of the open enrollment of benefits, COBRA and Flexible Spending Account
administration and 401(k) recordkeeping, provide benefits administration across
all market segments. In fiscal 2001, ADP became the tenth largest provider of
401(k) retirement plans. In fiscal 2001, ADP grew its COBRA administration
services business over 30% and introduced a new Web-based version of its
existing COBRA product.
The ADP Tax and Financial Services Center supports large, mid-sized and
small clients. It provides an electronic interface between approximately 350,000
ADP clients in the United States and Canada and about 2,000 federal, state and
local tax agencies, from the Internal Revenue Service to local town governments.
In fiscal 2001, the ADP Tax and Financial Services Center printed and delivered
over 43 million year-end tax statements in North America, and moved over $500
billion in client funds to tax authorities and its clients' employees via
electronic transfer, direct deposit and ADP Check.
TotalSource provides clients with comprehensive employment administration
outsourcing solutions, including payroll, HR, benefits administration and
workers' compensation insurance. TotalSource, the second largest PEO in the
U.S., has 18 offices located in nine states and serves over 3,000 PEO clients
and approximately 70,000 work-site employees in 50 states. TotalSource revenues
increased 12% in fiscal 2001 over the previous fiscal year.
ADP complements its payroll and HR services with additional employer
services that include products such as time and labor management and
unemployment compensation management. This fiscal year, ADP expanded its time
and labor management business by over 20%. ADP's unemployment compensation
services aid clients in managing and reducing unemployment insurance costs.
ADP is in the process of Internet-enabling existing product offerings,
while at the same time creating new products expressly designed for the
Internet. This year, for example, ADP delivered the ADP EasyPayNet(sm) Web-based
payroll service to over 4,000 EBS clients, launched its Internet-based
PayeXpert(R) solution for Major Accounts clients, and introduced the Enterprise
HRMS integrated HR, payroll and benefits solution for National Accounts Services
clients that feature Internet-based employer self-service capabilities. Further,
in fiscal 2001, ADP launched Benefits eXpert(sm), an Internet-based benefits
administration and employee self-service solution that allows mid-market
companies to manage more efficiently their employees' health and welfare
benefits.
3
<PAGE>
The continued increase in multi-national companies makes payroll and human
resource management services a global opportunity. In fiscal 2001, ADP
increased payroll sales to multi-national employers throughout Europe nearly 50%
over the previous fiscal year. ADP constantly seeks to further enhance its
presence in the global market, and in fiscal 2001 initiated a new partnership
with Exult, Inc. to expand its services for large companies to the "Global 500"
market using a new technology outsourcing model.
Brokerage Services
Brokerage Services provides transaction processing systems, desktop
productivity applications and investor communication services to the financial
services industry worldwide. ADP's products and services include: (i) global
order entry, trade processing and settlement systems including automated
inquiry, reporting and record keeping services for trading virtually all
financial instruments such as equities, fixed income, foreign currency,
commodities and derivatives; (ii) full-service investor communications services
including state-of-the-art electronic delivery and Internet solutions, financial
printing, proxy distribution and processing, regulatory mailings and fulfillment
services; (iii) real-time order entry and processing services for Web-based
brokerage firms; (iv) automated, browser-based, desktop productivity tools for
financial consultants, institutional investors and corporate secretaries; and
(v) integrated delivery of multiple products and services through ADP's Global
Processing Solution(sm). The Global Processing Solution is ADP's comprehensive
system for handling transactions in any financial instrument, in any market, at
any time.
ADP serves a diverse client base, including full-service, discount and
online brokerage firms, global banks; mutual funds; institutional investors;
specialty trading firms; clearing firms; as well as publicly traded
corporations. Brokerage Services provides securities transaction processing,
printing and electronic distribution of shareholder communications and other
services to clients in North America, Europe, Pacific Rim, Latin America and
Australia.
In fiscal 2001, ADP processed a significant portion of U.S. and
Canadian securities transactions, with average daily volumes of more than 1.3
million trades per day. In addition, ADP served the North American securities
transaction processing needs of most large global banks. In fiscal 2001, ADP
converted Lehman Brothers to Brokerage Processing Services, completing the first
phase of its implementation to ADP's Global Processing Solution. Further, ADP
signed agreements to provide the Global Processing Solution to Bank of America
and several other large institutions.
Brokerage Services also provides computerized proxy vote tabulation and
shareholder communication, distribution and fulfillment services, including
Internet-enabled products and services. ADP served approximately 14,000 publicly
traded companies and 450 mutual funds on behalf of more than 800 brokerage firms
and banks in fiscal 2001. In fiscal 2001, ADP distributed more than 780 million
shareholder communications on behalf of its clients worldwide, nearly 50% more
than fiscal 1999. This year, ADP delivered 5.3 million investor communications
via the Internet, which is 132% more than the prior fiscal year.
Internationally, Brokerage Services integrates the delivery of multiple
products and services through its Global Processing Solution. ADP now serves
brokerage and banking clients in more than 25 countries, providing global trade
processing and settlement systems for international securities in multiple
currencies. In fiscal 2001, ADP, through its subsidiary Wilco International
Limited, doubled its global product development and outsourced client services
operations in India, expanded its global trade
4
<PAGE>
processing and settlement services for international securities to Australia
and extended its reach into the global retail securities markets in the U.K.
Dealer Services
Dealer Services provides integrated dealer management systems ("DMS") and
business performance solutions for motor vehicle (automobile and truck) dealers
and their manufacturers worldwide. More than 16,000 automobile and truck dealers
throughout North America and Europe and more than 30 vehicle manufacturers use
ADP's DMS, networking solutions, data integration, consulting and/or marketing
services.
ADP offers its dealership clients a service solution that includes computer
hardware, hardware maintenance services, licensed software, software support,
system design and network consulting services. ADP also offers its dealership
clients "front-end" dealership sales process and business development training
services, consulting services, software products and customer relationship
management solutions. Clients use an ADP DMS to manage business activities such
as accounting, inventory, factory communications, scheduling, vehicle financing,
insurance, sales and service. ADP designs, establishes and maintains
communications networks for its clients that allow interactive communications
among multiple site locations (for larger dealers) as well as links between
franchised dealers and their vehicle manufacturer franchisors. These networks
are used for activities such as new vehicle ordering and status inquiry,
warranty submission and validation, parts and vehicle locating, dealership
customer credit application submission and decisioning, vehicle repair
estimating, and obtaining vehicle registration and lien holder information.
Claims Services
Claims Services offers a broad line of automated information tools to
property and casualty insurance companies, claims adjusters, repair shops and
auto parts recycling facilities. These tools help insurers to improve their
performance by accelerating the claims review and settlement process and
streamlining workflow. The products and services include the following: vehicle
repair estimating applications and total loss vehicle valuation applications and
related databases for the property and casualty, and collision repair
industries; medical cost management applications and services for the auto
casualty and workers' compensation markets; auto body shop management systems;
and parts locator systems.
Markets and Marketing Methods
All of ADP's services are sold broadly across the United States, Canada
and Europe. Some employer services and brokerage services are also offered in
Latin America (primarily Brazil), Australia and the Pacific Rim.
None of ADP's major business groups have a single homogenous client base
or market. For example, while Brokerage Services primarily serves the retail
brokerage market, it also serves banks, commodity dealers, the institutional
brokerage market and individual non-brokerage corporations. Dealer Services
primarily serves automobile dealers, but also serves truck and agricultural
equipment dealers, auto repair shops, used car lots, state departments of motor
vehicles and manufacturers of automobiles, trucks and agricultural equipment.
Claims Services has many clients who are insurance companies, but also provides
services to automobile manufacturers, body repair shops, salvage yards,
5
<PAGE>
distributors of new and used automobile parts and other non-insurance clients.
Employer Services has clients from a large variety of industries and markets.
Within this client base are concentrations of clients in specific industries.
Employer Services also sells to auto dealers, brokerage clients and insurance
clients. While concentrations of clients exist, no one business group is
material to ADP's overall revenues.
None of ADP's businesses are overly sensitive to price changes. Economic
conditions among selected clients and groups of clients may and do have a
temporary impact on demand for ADP's services.
ADP enjoys a leadership position in each of its major service offerings
and does not believe any major service or business unit in ADP is subject to
unique market risk.
Competition
The computing services industry is highly competitive. ADP knows of no
reliable statistics by which it can determine the number of its competitors, but
it believes that it is one of the largest providers of computerized transaction
processing, data communication and information services in the world.
ADP's competitors include other independent computing services companies,
divisions of diversified enterprises and banks. Another competitive factor in
the computing services industry is the in-house computing function, whereby a
company installs and operates its own computing systems.
Competition in the computing services industry is primarily based on
service responsiveness, product quality and price. ADP believes that it is very
competitive in each of these areas and that there are no material negative
factors impacting ADP's competitive position in the computing services industry.
No one competitor or group of competitors is dominant in the computing services
industry.
Clients and Client Contracts
ADP provides its services to over 500,000 clients. No single client
accounts for revenues in excess of 2% of annual consolidated revenues.
ADP has no material "backlog" because the period between the time a client
agrees to use ADP's services and the time the service begins is generally very
short and because no sale is considered firm until it is installed and begins
producing revenue.
ADP's average client retention is more than 8 years in Employer Services
and is 10 or more years in Brokerage, Dealer and Claims Services, and does not
vary significantly from period to period.
ADP's services are provided under written price quotations or service
agreements having varying terms and conditions. No one price quotation or
service agreement is material to ADP. Discounts, rebates and promotions offered
by ADP to clients are not material.
ADP offers a service warranty to its clients that if any errors or
omissions occur in its service offerings, ADP will correct them as soon as
possible. In addition, ADP provides, either directly or through third parties,
maintenance and support for the ADP provided equipment and software which
facilitates the delivery of its services to clients.
6
<PAGE>
Systems Development and Programming
During the fiscal years ended June 30, 2001, 2000 and 1999, ADP expensed
$514 million, $460 million and $412 million, respectively, on investments in
systems development and programming, migration to new computing technologies
and the development of new products.
Product Development
ADP continually upgrades, enhances and expands its existing products and
services. Generally, no new product or service has a significant effect on
ADP's revenues or negatively impacts its existing products and services, and
ADP's products and services have a significant remaining life cycle.
Licenses
ADP is the licensee under a number of agreements for computer programs
and databases. ADP's business is not dependent upon a single license or group of
licenses. Third-party licenses, patents, trademarks and franchises are not
material to ADP's business as a whole.
Number of Employees
ADP employed approximately 41,000 persons as of June 30, 2001.
Item 2. Properties
ADP leases space for 48 of its principal processing centers. In addition,
ADP leases numerous other small processing centers and sales offices. All of
these leases, which aggregate approximately 6,200,000 square feet in the United
States, Canada, Europe, Latin America (primarily Brazil), Pacific Rim,
Australia and South Africa, expire at various times up to the year 2016. ADP
owns 31 of its processing facilities and its corporate headquarters complex in
Roseland, New Jersey, which aggregate approximately 3,000,000 square feet.
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders
None
7
<PAGE>
Part II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
See "Market Price, Dividend Data and Other" contained in the Registrant's
2001 Annual Report to Shareholders, which information is incorporated herein by
reference. As of August 31, 2001, the Registrant had 33,905 registered holders
of its Common Stock, par value $.10 per share. The Registrant's Common Stock is
traded on the New York, Chicago and Pacific Stock Exchanges.
Item 6. Selected Financial Data
See "Selected Financial Data" contained in the Registrant's 2001 Annual
Report to Shareholders, which information is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
See "Management's Discussion and Analysis" contained in the Registrant's
2001 Annual Report to Shareholders, which information is incorporated herein by
reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Approximately 40% of the Registrant's overall investment portfolio is
invested in overnight interest-bearing instruments, which are therefore impacted
immediately by changes in interest rates. The other 60% of the Registrant's
investment portfolio is invested in fixed-income securities, with maturities up
to ten years, which are also subject to interest rate risk, including
reinvestment risk. The Registrant 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.
The earnings impact of future rate changes is not precisely predictable
because many factors influence the return on the Registrant's portfolio. These
factors include, among others, the overall portfolio mix between short-term and
long-term investments. The mix varies during the year and is impacted by daily
interest rate changes. A hypothetical change in interest rates of 25 basis
points applied to the June 30, 2001 balances would result in a $12 million
pre-tax earnings impact over the following twelve-month period.
8
<PAGE>
Item 8. Financial Statements and Supplementary Data
The financial statements described in Item 14(a)1. hereof are incorporated
herein.
The following supplementary data is incorporated herein by reference:
Quarterly Financial Results (unaudited) for the two years ended June
30, 2001 (see Note 13 of the "Notes to Consolidated Financial
Statements" contained in ADP's 2001 Annual Report to Shareholders)
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
9
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Registrant
Executive Officers of the Registrant
The executive officers of the Registrant, their ages, positions and the
period during which they have been employed by ADP are as follows:
<TABLE>
<CAPTION>
Employed by
Name Age Position ADP Since
- -------------------- --- -------------------------- ----------
<S> <C> <C> <C>
John D. Barfitt 48 President, Employer 1979
Services--International
James B. Benson 56 Vice President, General 1977
Counsel and Secretary
Richard C. Berke 56 Vice President, Human 1989
Resources
Gary C. Butler 54 President and Chief 1975
Operating Officer
Raymond L. Colotti 55 Vice President and 1995
Treasurer
Richard J. Daly 48 Group President, 1989
Brokerage Services
Richard A. Douville 46 Vice President, 1999
Finance
G. Harry Durity 54 Vice President, 1994
Worldwide Business
Development
Karen E. Dykstra 42 Vice President, 1981
Finance
Russell P. Fradin 46 Group President, 1996
Employer Services - North America
Eugene A. Hall 45 Senior Vice President, and 1998
President of Financial
and Technology Services,
Employer Services - North America
10
<PAGE>
John Hogan 53 Group President, 1993
Brokerage Services
Campbell Langdon 40 Vice President, 2000
Strategic Development
S. Michael Martone 53 Group President, Dealer 1987
Services
Arthur F. Weinbach 58 Chairman and 1980
Chief Executive Officer
</TABLE>
Messrs. Benson, Berke, Butler, Daly, Durity, Hogan, Martone and Weinbach
have each been employed by ADP in senior executive positions for more than the
past five years.
John D. Barfitt joined ADP in 1979. Prior to his promotion to President,
Employer Services -International he served as President, Claims Services at ADP
from 1998 to 2000 and Senior Vice President - Automotive Claims Services at ADP
from 1996 to 1998.
Raymond L. Colotti joined ADP in 1995. Prior to his promotion to Vice
President and Treasurer, he served as President of ADP Atlantic, Inc. and its
related companies from 1995 to 1997.
Karen E. Dykstra joined ADP in 1981. Prior to her promotion to Vice
President, Finance in 2001, she served as Vice President and Controller from
1998 to 2001, Assistant Corporate Controller from 1996 to 1998 and as Chief
Financial Officer of Dealer Services from 1995 to 1996.
Richard A. Douville joined ADP in 1999 as Vice President, Finance.
Prior to joining ADP, he served as Senior Vice President and Chief Financial
Officer from 1996 to 1999 and as Vice President and Treasurer from 1993 to 1996
at United States Surgical Corporation.
Russell P. Fradin joined ADP in 1996. Prior to his promotion to Group
President, Employer Services - North America, he served as Senior Vice
President. Prior to joining ADP, he was a senior partner of McKinsey & Company
and had been associated with that firm for 18 years.
Eugene A. Hall joined ADP in 1998 as Senior Vice President. In 2000, he
also became President of Financial and Technology Services of Employer Services
- - North America. Prior to joining ADP, he was a senior partner of McKinsey &
Company and had been associated with that firm for 16 years.
Campbell Langdon joined ADP in 2000 as Vice President, Strategic
Development. Prior to joining ADP, he was a partner of McKinsey & Company and
had been associated with that firm for 11 years.
Each of ADP's executive officers is elected for a term of one year and
until their successors are chosen and qualified or until their death,
resignation or removal.
Directors of the Registrant
See "Election of Directors" in the Proxy Statement for Registrant's
2001 Annual Meeting of Stockholders, which information is incorporated herein
by reference.
11
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
See "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Proxy Statement for Registrant's 2001 Annual Meeting of Stockholders, which
information is incorporated herein by reference.
Item 11. Executive Compensation
See "Compensation of Executive Officers" in the Proxy Statement for
Registrant's 2001 Annual Meeting of Stockholders, which information is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
See "Election of Directors - Security Ownership of Certain Beneficial
Owners and Managers" in the Proxy Statement for Registrant's 2001 Annual Meeting
of Stockholders, which information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
See "Compensation of Executive Officers - Certain Transactions" in the
Proxy Statement for Registrant's 2001 Annual Meeting of Stockholders, which
information is incorporated herein by reference.
12
<PAGE>
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)1. Financial Statements
The following reports and consolidated financial statements of the
Registrant contained in the Registrant's 2001 Annual Report to Shareholders are
also included in Part II, Item 8:
Statements of Consolidated Earnings - years
ended June 30, 2001, 2000 and 1999
Consolidated Balance Sheets - June 30, 2001 and 2000
Statements of Consolidated Shareholders' Equity - years ended June 30,
2001, 2000 and 1999
Statements of Consolidated Cash Flows - years ended June 30, 2001,
2000 and 1999
Notes to Consolidated Financial Statements
Report of Management
Independent Auditors' Report
Financial information of the Registrant is omitted because the
Registrant is primarily a holding company. The Registrant's subsidiaries,
which are listed on Exhibit 21 attached hereto, are wholly-owned.
2. Financial Statement Schedules
<TABLE>
<CAPTION>
Page in Form 10-K
<S> <C> <C>
Independent Auditors' Report on Schedule 16
Schedule II - Valuation and Qualifying Accounts 17
</TABLE>
All other Schedules have been omitted because they are inapplicable or
are not required or the information is included elsewhere in the financial
statements or notes thereto.
3. The following exhibits are filed with this Form 10-K or incorporated
herein by reference to the document set forth next to the exhibit in the list
below:
3.1 - Amended and Restated Certificate of Incorporation dated
November 11, 1998 - incorporated by reference to Exhibit
3.1 to Registrant's registration statement on Form S-4
filed with the Commission on February 9, 1999
13
<PAGE>
3.2 - Amended and Restated By-laws of the Registrant -
incorporated by reference to Exhibit 3.2 to Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter
ended December 31, 2000
4 - Indenture dated as of February 20, 1992 between Automatic
Data Processing, Inc. and Bankers Trust Company, as
trustee, regarding the Liquid Yield Option Notes due 2012
of the Registrant - incorporated by reference to Exhibit
(4)-#1 to Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1992
10.1 - Letter Agreement dated as of August 13, 2001 between
Automatic Data Processing, Inc. and Arthur F. Weinbach
(Management Contract)
10.2 - Letter Agreement dated September 14, 1998 between
Automatic Data Processing, Inc. and Gary Butler -
incorporated by reference to Exhibit 10.2 to Registrant's
Annual Report on Form 10-K for the fiscal year ended June
30, 1998 (Management Contract)
10.3 - Key Employees' Restricted Stock Plan - incorporated by
reference to Registrant's Registration Statement No.
33-25290 on Form S-8 (Management Compensatory Plan)
10.4 - Supplemental Officers' Retirement Plan, as amended and
restated - incorporated by reference to Exhibit
10(iii)(A)-#5 to Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993 (Management
Compensatory Plan)
10.4(a) - Amendment to Supplemental Officers' Retirement Plan -
incorporated by reference to Exhibit 10(iii)(A)- #5 to
Registrant's Annual Report on Form 10-K for the fiscal
year ended June 30, 1997 (Management Compensatory Plan)
10.5 - 1989 Non-Employee Director Stock Option Plan -
incorporated by reference to Exhibit 10(iii)(A)-#7
to Registrant's Annual Report on Form 10-K for the fiscal
year ended June 30, 1990 (Management Compensatory Plan)
10.5(a) - Amendment to 1989 Non-Employee Director Stock Option Plan
- incorporated by reference to Exhibit 10(6)(a) to
Registrant's Annual Report on Form 10-K for the fiscal
year ended June 30, 1997 (Management Compensatory Plan)
10.6 - 1990 Key Employees' Stock Option Plan - incorporated by
reference to Exhibit 10(iii)(A)-#8 to Registrant's Annual
Report on Form 10-K for the fiscal year ended June 30,
1990 (Management Compensatory Plan)
10.6(a) - Amendment to 1990 Key Employees' Stock Option Plan -
incorporated by reference to Exhibit 10(7)(a) to
Registrant's Annual Report on Form
14
<PAGE>
10-K for the fiscal year ended June 30, 1997 (Management
Compensatory Plan)
10.7 - 1994 Directors' Pension Arrangement - incorporated by
reference to Exhibit 10(iii)(A)-#10 to Registrant's
Annual Report on Form 10-K for the fiscal year ended June
30, 1994 (Management Compensatory Plan)
10.8 - 2000 Key Employees' Stock Option Plan - incorporated by
reference to Exhibit 10.10 to Registrant's Annual Report
on Form 10-K for the fiscal year ended June 30, 1999
(Management Compensatory Plan)
10.9 - 2001 Executive Incentive Compensation Plan (Management
Compensatory Plan)
10.10 - Change in Control Severance Plan for Corporate Officers -
incorporated by reference to Exhibit 10.3 to Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 2001
11 - Schedule of Calculation of Earnings Per Share
13 - Pages 20 to 35 of the 2001 Annual Report to Shareholders
(with the exception of the pages incorporated by
reference herein, the Annual Report is not a part of this
filing)
21 - Subsidiaries of the Registrant
23 - Independent Auditors' Consent
(b) None.
15
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
To the Board of Directors
and Shareholders of
Automatic Data Processing, Inc.
Roseland, New Jersey
We have audited the consolidated financial statements of Automatic Data
Processing, Inc. and subsidiaries as of June 30, 2001 and 2000, and for each of
the three years in the period ended June 30, 2001, and have issued our report
thereon dated August 13, 2001; such consolidated financial statements and report
are included in your 2001 Annual Report to Shareholders and are incorporated
herein by reference. Our audits also included the financial statement schedule
of Automatic Data Processing, Inc., listed in Item 14. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/ Deloitte & Touche LLP
New York, New York
August 13, 2001
16
<PAGE>
<TABLE>
<CAPTION>
AUTOMATIC DATA PROCESSING, INC.
AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Column A Column B Column C Column D Column E
- -------- -------- -------- -------- ---------
Additions
--------------------------
<S> <C> <C> <C> <C> <C>
(1) (2)
Charged to
Balance at Charged to other Balance at
beginning costs and accounts- Deductions- end of
of period expenses describe describe period
--------- --------- --------- ---------- ----------
Year ended June 30, 2001:
Allowance for doubtful accounts:
Current $48,448 $ 16,431 $ 114 (B) $ (22,997) (A) $ 41,996
Long-term $16,946 $ 1,369 $ -- $ (1,649) (A) $ 16,666
Deferred Tax Valuation Allowance $22,163 $ -- $ (165) (C) $ (7,750) (D) $ 14,248
Year ended June 30, 2000:
Allowance for doubtful accounts:
Current $46,357 $ 25,020 $1,663 (B) $ (24,592) (A) $ 48,448
Long-term $16,556 $ 1,942 $ -- $ (1,552) (A) $ 16,946
Deferred Tax Valuation Allowance $22,496 $ -- $ (333)(C) $ -- $ 22,163
Year ended June 30, 1999:
Allowance for doubtful accounts:
Current $45,595 $ 17,551 $1,788 (B) $ (18,577) (A) $ 46,357
Long-term $14,431 $ 2,470 $ -- $ (345) (A) $ 16,556
Deferred Tax Valuation Allowance $22,639 $ -- $ (143)(C) $ -- $ 22,496
</TABLE>
(A) Doubtful accounts written off, less recoveries on accounts previously
written off.
(B) Acquired in purchase/pooling transactions.
(C) Related to foreign exchange fluctuation.
(D) Related to the net deferred tax assets recorded in purchase accounting. The
recognition of this allowance reduces the excess purchase price over the net
assets acquired.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
September 14, 2001 By: /s/ Arthur F. Weinbach
-------------------------
Arthur F. Weinbach
Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Arthur F. Weinbach Chairman, Chief Executive September 14, 2001
----------------------------------
(Arthur F. Weinbach) Officer and Director
(Principal Executive Officer)
/s/ Karen E. Dykstra Vice President, Finance September 14, 2001
----------------------------------
(Karen E. Dykstra) (Principal Financial Officer
and Controller)
/s/ Gregory D. Brenneman Director September 14, 2001
----------------------------------
(Gregory D. Brenneman)
/s/ Gary C. Butler Director September 14, 2001
----------------------------------
(Gary C. Butler)
/s/ Joseph A. Califano, Jr. Director September 14, 2001
----------------------------------
(Joseph A. Califano, Jr.)
/s/ Leon G. Cooperman Director September 14, 2001
----------------------------------
(Leon G. Cooperman)
/s/ George H. Heilmeier Director September 14, 2001
----------------------------------
(George H. Heilmeier)
18
<PAGE>
Signature Title Date
/s/ Ann Dibble Jordan Director September 14, 2001
----------------------------------
(Ann Dibble Jordan)
/s/ Harvey M. Krueger Director September 14, 2001
----------------------------------
(Harvey M. Krueger)
/s/ Frederic V. Malek Director September 14, 2001
----------------------------------
(Frederic V. Malek)
/s/ Henry Taub Director September 14, 2001
----------------------------------
(Henry Taub)
/s/ Laurence A. Tisch Director September 14, 2001
----------------------------------
(Laurence A. Tisch)
/s/ Josh S. Weston Director September 14, 2001
----------------------------------
(Josh S. Weston)
</TABLE>
19
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<FILENAME>exhibit10-1.txt
<DESCRIPTION>EXHIBIT 10.1 WEINBACH EMPLOYMENT AGREEMENT
<TEXT>
EXHIBIT 10.1
August 13, 2001
Arthur F. Weinbach
1 Twin Oak Road
Short Hills, New Jersey 07078
Dear Art:
This letter outlines our understandings concerning your position as
Chairman and Chief Executive Officer of Automatic Data Processing, Inc. ("ADP").
1. Employment. You shall be employed by ADP as its Chairman and Chief
----------
Executive Officer, subject to the direction and control of its Board
of Directors. You shall also be a member of ADP's Board of Directors
and a member of the Board's Executive Committee.
2. Compensation.
------------
a) ADP shall pay you a salary of at least $750,000 per annum.
b) Your target bonus for each fiscal year (i.e. July 1 to June 30)
shall be at least $485,000. The actual bonus paid for each fiscal
year shall be based upon your accomplishments in relation to pre-
established goals (including business growth, increased
profitability and other significant items) pursuant to the terms
of ADP's 2001 Executive Incentive Compensation Plan (the
"Incentive Plan").
c) ADP will continue to sell you restricted stock under the Incentive
Plan, such that restrictions will lapse during each fiscal year on
the number of shares of restricted stock which had, on the date
you originally purchased them, an aggregate market value of at
least $1 million. You will also, at all times, own sufficient
shares of ADP restricted stock on which restrictions will lapse
during each of the following two fiscal years which satisfy the
foregoing fiscal year minimum market value test. The Compensation
Committee of ADP's Board of Directors (the "Compensation
Committee") may, at its sole discretion, require that lapsing of
restrictions on your restricted stock in any fiscal year will only
occur upon the attainment of pre-established performance goals
pursuant to the Incentive Plan.
<PAGE>
d) You will be granted stock options on an annual basis. The option
grants will be for a minimum of 170,000 shares per year. Vesting
will be determined by the Compensation Committee; however, all of
your stock options will vest on your retirement. Upon your
retirement or termination of employment with ADP, you will have
210 days to exercise your vested options.
e) The above salary, bonus and stock arrangements will be reviewed
annually by ADP's Board of Directors and may be increased in its
sole discretion.
3. Term. The initial term of this letter agreement shall be for a period
----
of one year. This letter agreement shall automatically continue after
its initial term for successive one-year periods, unless and until
either of us gives the other written notice at least six months prior
to the end of the applicable one-year term that this letter agreement
shall terminate as at the end of such term.
4. Termination. If your employment with ADP is terminated, you will
-----------
receive the following compensation:
a) If you are discharged for cause, ADP's obligation to make payments
to you shall cease on the date of such discharge. As used herein,
the term "for cause" shall cover circumstances where ADP elects to
terminate your employment because you have (i) been convicted of a
criminal act, (ii) failed or refused to perform your obligations
as Chairman and Chief Executive Officer, (iii) committed any act
of negligence in the performance of your duties hereunder and
failed to take appropriate corrective action, or (iv) committed
any act of willful misconduct.
b) If ADP terminates your employment for any reason other than "for
cause", for permanent or serious disability or on account of a
"Change in Control", you will, for 18 months after such
termination date, (i) receive the compensation provided for under
Paragraph 2(a) above, (ii) have the restrictions on your
restricted stock continue to lapse (without regard to any
performance goals), and (iii) have your Company stock options
continue to vest.
c) If you become permanently and seriously disabled, either
physically or mentally, so that you are absent from your office
due to such disability and otherwise unable substantially to
perform your services hereunder, ADP may terminate your
employment. ADP shall continue to pay you your full compensation
up to and including the effective date of your termination for
disability. For 36 months after such termination date, you will
receive the compensation provided for under Paragraph 2(a) above
and have the restrictions on your restricted stock continue to
lapse (without regard to any performance goals). All of your
outstanding and unvested ADP stock options shall automatically
vest on the date of your termination for disability.
2
<PAGE>
d) If you elect to voluntarily leave ADP in the absence of a Change
in Control, ADP's obligation to make payment to you shall cease on
the date your employment ends.
e) If a Change in Control occurs and if your employment is terminated
(other than for cause) or you resign for "Good Reason" within two
years after such Change in Control event, you will receive a
termination payment equal to 300% of your "Current Total Annual
Compensation". This termination payment will be reduced to either
200% or 100% of your Current Total Annual Compensation if such
termination or resignation occurs during the third year, or more
than three years, after such Change in Control event, whichever is
applicable. In addition, all of your ADP stock options will
become fully vested, and all of your ADP restricted stock having
restrictions lapsing within three years after the date of such
termination or resignation shall have such restrictions
automatically removed (without regard to any performance goals).
ADP will also pay you a tax equalization payment in an amount
which when added to the other amounts payable to you under
Paragraph 4(e) will place you in the same after-tax position as if
the excise tax penalty of Section 4999 of the Internal Revenue
Code of 1986 or any successor statute of similar import did not
apply.
f) The termination of this letter agreement or your employment shall
not affect those provisions of this letter agreement that apply to
any period or periods subsequent to such termination.
5. For purposed of this Agreement, the following definitions shall apply:
a) "Change in Control" shall mean the occurrence of any of the
following: (A) any "Person" (as defined in Section 3(a)(9) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), excluding ADP, any subsidiary of ADP, or any employee
benefit plan sponsored or maintained by ADP (including any trustee
of any such plan acting in his capacity as trustee), becoming the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act) of securities of ADP representing 25% or more of the total
combined voting power of ADP's then outstanding securities; (B)
the merger, consolidation or other business combination of ADP (a
"Transaction"), other than a Transaction immediately following
which the stockholders of ADP immediately prior to the Transaction
continue to be the beneficial owners of securities of the
resulting entity representing more than 65% of the voting power in
the resulting entity, in substantially the same proportions as
their ownership of ADP voting securities immediately prior to the
Transaction; or (C) the sale of all or substantially all of ADP's
assets, other than a sale immediately following which the
stockholders of ADP immediately prior to the sale are the
beneficial owners of securities of the purchasing entity
representing more than 65% of the voting power in the purchasing
entity, in substantially the same proportions as their ownership
of ADP voting securities immediately prior to the Transaction.
3
<PAGE>
b) "Good Reason" shall mean: (A) any action which results in a
diminution in any respect in your current position, authority,
duties or responsibilities as ADP's Chairman and Chief Executive
Officer; or (B) a reduction in the overall level of your
compensation or benefits.
c) "Current Total Annual Compensation" shall be the total of the
following amounts: (A) the greater of your current annual salary
for the calendar year in which your employment terminates or for
the calendar year immediately prior to the year of such
termination; and (B) the average of your annual bonus compensation
(prior to any bonus deferral election), for the two most recent
calendar years immediately preceding the year in which your
employment terminates.
6. SORP. As at July 1, 2001, under the Automatic Data Processing, Inc.
----
Supplemental Officers Retirement Plan (the "SORP"), if your employment
hereunder terminates other than for cause: (i) your "Future Service"
period shall be deemed to be 17 years as of the date of your
termination; (ii) your "Final Average Annual Pay" shall, to the extent
applicable, be deemed to include the applicable compensation
attributable to the periods covered by the termination payments made to
you hereunder; and (iii) if the Compensation Committee deems it to be
in ADP's best interests that you retire prior to your 65th birthday,
any early retirement benefit payable under the SORP will not be
actuarially reduced to reflect the payment of benefits before your
"Normal Retirement Date". Your Final Average Annual Pay will not, in
any event, be less than the aggregate of the minimum annual salary,
bonus and restricted stock amounts payable to you under Paragraph 2
above.
This letter supersedes and replaces the letter dated as of August 1, 1996
between us.
If the foregoing correctly sets forth our understandings, please sign this
letter agreement where indicated, whereupon it will become a binding agreement
between us.
Very truly yours,
AUTOMATIC DATA PROCESSING, INC.
By: _____________________________
JAMES B. BENSON
CORPORATE VICE PRESIDENT
ACCEPTED AND AGREED:
- ---------------------------------
ARTHUR F. WEINBACH
4
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>exhibit10-9.txt
<DESCRIPTION>EXHIBIT 10.9 2001 EXEC INCENTIVE COMP PLAN
<TEXT>
EXHIBIT 10.9
AUTOMATIC DATA PROCESSING, INC.
2001 EXECUTIVE INCENTIVE COMPENSATION PLAN
I. Purpose
-------
The purpose of the Automatic Data Processing, Inc. 2001 Executive Incentive
Compensation Plan (the "Plan") is to establish an incentive compensation program
for certain executive employees of Automatic Data Processing, Inc. (the
"Company") and its subsidiaries and divisions who have significant
responsibility for the success and growth of the Company and to assist in
attracting, motivating and retaining key employees on a competitive basis. The
Plan permits the Company to grant annual incentives and performance-based
restricted stock awards (respectively "Bonus Awards" and "Performance-Based
Restricted Stock Awards") to certain executive employees who make substantial
contributions to the Company and/or its subsidiaries and divisions, as
determined by the "Committee" (as defined below).
II. Definitions
-----------
"Award" means a Bonus Award or a Performance-Based Restricted Stock
Award.
"Board" means the Board of Directors of the Company or the Executive
Committee thereof.
"Bonus Award" has the meaning ascribed to it in Section I.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means a committee selected by the Board to administer the
Plan and composed of not less than two directors, each of whom is a
"non-employee director" (within the meaning of Rule 16b-3 of the Securities and
Exchange Commission under the Exchange Act if and as such Rule is in effect) and
an "outside director" (within the meaning of Section 162(m) of the Code).
"Common Stock" means the common stock of the Company, par value $.10
per share.
"Company" has the meaning ascribed to it in Section I.
"Designated Beneficiary" has the meaning ascribed to it in Section XII.
"Effective Date" shall mean July 1, 2001, subject to approval by the
Company's shareholders in a manner which complies with the shareholder approval
requirements of Section 162(m) of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Participant" has the meaning ascribed to it in Section III.
<PAGE>
"Performance-Based Restricted Stock Award" has the meaning ascribed to
it in Section I.
"Performance Criteria" has the meaning ascribed to it in Section V.A.2.
"Performance Period" means the period during which performance is
measured to determine the level of attainment or vesting of an Award.
"Plan" has the meaning ascribed to it in Section I.
"Restricted Shares" means shares of restricted Common Stock granted to a
Participant in accordance with Section VII.
"Restricted Stock Vesting Percentage" means the percentage of a
Participant's Target Restricted Stock Award, which vests, based upon the level
of attainment of Performance Criteria.
"Target Restricted Stock Award" means number of Restricted Shares
granted under the Plan to a Participant at the beginning of a Performance Period
in the form of a Performance-Based Restricted Stock Award.
III. Eligibility
-----------
Any executive employee of the Company or any of its subsidiaries or
divisions is eligible to be selected to participate in the Plan. The Committee
shall select in its sole discretion those persons from among such employees who
shall participate in the Plan in respect of any Performance Period
("Participants"). No person shall at any time have the right to be selected as
a Participant nor, having been selected as a Participant for one Performance
Period, to be selected as a Participant in any other Performance Period.
IV. Administration
--------------
A. The Committee, in its sole discretion, will determine eligibility
for participation, establish the maximum Award which may be earned by each
Participant, establish Performance Criteria for each Participant, calculate and
determine each Participant's level of attainment of such Performance Criteria,
and calculate the Bonus Award and Restricted Stock Vesting Percentage for each
Participant based upon such level of attainment. In addition to the authority
otherwise prescribed in the Plan, the Committee shall have the authority in its
sole discretion to prescribe such limitations, restrictions, and conditions
upon, provisions for vesting and acceleration of, provisions prescribing the
nature and amount of legal consideration to be received upon the grant of a
Performance-Based Restricted Stock Award and all other terms and conditions of
any Award as the Committee deems appropriate, provided that none of the
foregoing conflicts with any of the express terms or limitations of the Plan.
B. Except as otherwise herein expressly provided, full power and
authority to construe, interpret, and administer the Plan shall be vested in the
Committee, including the power to amend or terminate the Plan as further
described in Section XV. The Committee may at any time adopt such rules,
regulations, policies, or practices as, in its sole discretion, it shall
2
<PAGE>
determine to be necessary or appropriate for the administration of, or the
performance of its respective responsibilities under, the Plan. The Committee
may at any time amend, modify, suspend, or terminate such rules, regulations,
policies, or practices. All actions taken and all interpretations and
determinations made by the Committee (and by the Company's executive officers in
furtherance of such interpretations and determinations) shall be binding upon
all affected persons.
C. All expenses and liabilities incurred by members of the Committee in
connection with the administration of the Plan shall be borne by the Company.
The Committee may employ attorneys, consultants, accountants, appraisers, or
other persons to assist it in the discharge of its duties hereunder. The
Committee, the Company and its officers and directors shall be entitled to rely
upon the advice, opinions or valuations of any such persons.
D. Notwithstanding the foregoing or any other provision of the Plan,
the Board may at any time or from time to time resolve to administer the Plan
and in such case, references herein to the Committee shall mean the Board when
so acting.
V. Performance Criteria and Section 162(m)
---------------------------------------
A. Awards granted under the Plan are intended to qualify for the
exception to Section 162(m) of the Code applicable to "performance-based
compensation," and will be subject to the following requirements,
notwithstanding any other provision of the Plan to the contrary:
1. No Bonus Award may be paid or Performance-Based Restricted
Stock Award vest unless and until the shareholders of the
Company have approved the Plan in a manner which complies with
the shareholder approval requirements of Section 162(m) of the
Code and the Treasury Regulations promulgated thereunder.
2. The performance goals to which the payment or vesting, as
applicable, of an Award is subject must be based solely on
objective performance criteria established by the Committee,
in accordance with this Section V ("Performance Criteria").
Such Performance Criteria must be established by the Committee
within the time limits required in order for the Award to
qualify for the performance-based compensation exception to
Section 162(m) of the Code.
3. No Award may be paid or vested, as applicable, until the
Committee has certified the level of attainment of the
applicable Performance Criteria.
B. Performance Criteria shall be measured in terms of one or more of
the following objectives, described as they relate to Company-wide objectives or
of a subsidiary, division, department or function of the Company:
(i) Earnings per share;
(ii) Stock price;
3
<PAGE>
(iii) Shareholder return;
(iv) Return on investment;
(v) Return on capital;
(vi) Earnings before interest, taxes, depreciation and
amortization;
(vii) Gross or net profits;
(viii) Gross or net revenues;
(ix) Client retention; or
(x) Any combination of the foregoing.
In computing any of the foregoing, unless determined otherwise by
the Committee in respect of any particular Performance Criteria no later than
the time that such Performance Criteria is established, there shall be excluded,
o the extent applicable, the following:
(i) all items of gain, loss or expense determined to be
extraordinary or unusual in nature or infrequent in
occurrence or related to the disposal of a segment of
a business or related to a change in accounting
principles, all as determined in accordance with
standards established by opinion No. 30 of the
Accounting Principles Board ("APB Opinion No. 30");
(ii) all items of gain, loss or expense related to
restructuring charges of subsidiaries whose operations
are not included in operating income for the
Performance Period;
(iii) all items of gain, loss or expense related to
discontinued operations that do not qualify as a
segment of a business as defined under APB Opinion No.
30; and
(iv) any profit or loss attributable to the business
operations of any entity acquired by either the
Company or any consolidated subsidiary during the
Performance Period.
C. As to each Award, the Committee shall specify the Performance
Criteria to be achieved, a minimum acceptable level of achievement below which
no payment or vesting will occur, and a formula for determining the amount of
any payment or vesting to occur if performance is at or above the minimum
acceptable level but falls short of full achievement of the specified
Performance Criteria.
D. If the Committee determines that a change in the business,
operations, corporate structure or capital structure of the Company, or
4
<PAGE>
the manner in which it conducts its business, or other events or circumstances
render the Performance Criteria to be unsuitable, the Committee may modify such
Performance Criteria or the related minimum acceptable level of achievement, in
whole or in part, as the Committee deems appropriate and equitable; provided,
however, that no such modification shall be made if the effect would be to cause
an Award to fail to qualify for the performance-based compensation exception to
Section 162(m) of the Code. In addition, at the time Performance Criteria are
established as to an Award, the Committee is authorized to determine the manner
in which the Performance Criteria related thereto will be calculated or measured
to take into account certain factors over which the Participant has no control
or limited control including changes in industry margins, general economic
conditions, interest rate movements and changes in accounting principles.
VI. Bonus Awards
------------
A. The Committee, based upon information to be supplied by management
of the Company and, where determined as necessary by the Board, the ratification
of the Board, will establish for each Performance Period a target Bonus Award
(and, if the Committee deems appropriate, a threshold Award) and Performance
Criteria for each Participant selected by the Committee to receive a Bonus Award
and communicate such Award levels and Performance Criteria to such Participant
prior to or during the Performance Period for which such Bonus Award may be
made. Bonus Awards will be earned by Participants based upon the level of
attainment of the applicable Performance Criteria during the applicable
Performance Period; provided that the Committee may reduce the amount of any
Bonus Award in its sole and absolute discretion. As soon as practicable after
the end of the applicable Performance Period, the Committee shall determine and
certify the level of attainment of the Performance Criteria for each applicable
Participant and the Bonus Award to be made to each applicable Participant.
B. Bonus Awards earned during any Performance Period shall be paid as
soon as practicable following the end of such Performance Period, unless payment
is deferred at the election of a Participant pursuant to a deferred compensation
arrangement maintained by the Company. Payment of Bonus Awards shall be made in
the form of cash. Bonus Awards earned but not yet paid will not accrue interest.
C. Notwithstanding the above, unless determined otherwise by the
Committee, a Participant shall not be eligible to receive payment of his or her
Bonus Award earned during a Performance Period unless the Participant is
employed on the day such Bonus Award otherwise would be paid; provided that in
the event of a Participant's death prior to the payment of a Bonus Award which
has been earned, such payment shall be made to the Participant's Designated
Beneficiary.
D. Notwithstanding anything in the Plan to the contrary, the maximum
amount of any single Bonus Award for any single Performance Period shall be
$2,000,000.
VII. Performance-Based Restricted Stock Awards
-----------------------------------------
A. Subject to adjustment pursuant to Section VII.D, the number of
shares of Common Stock that may be the subject of Performance-Based Restricted
Stock Awards under this Plan is 3,500,000. Such shares may be treasury shares or
shares of original issue or a combination of the
5
<PAGE>
foregoing. In the event that any Performance-Based Restricted Stock Award under
the Plan expires, terminates or is canceled for any reason whatsoever without
the Participant having received any benefit therefrom, the shares of Common
Stock covered by such Performance-Based Restricted Stock Award shall again
become available for future Performance-Based Restricted Stock Awards under the
Plan. For purposes of the foregoing sentence, a Participant shall not be deemed
to have received any "benefit" in the case of forfeited Restricted Shares by
reason of having enjoyed voting rights and dividend rights prior to the date of
forfeiture.
B. Each Performance-Based Restricted Stock Award shall be comprised of
that number of actual shares of restricted Common Stock equal to the
Participant's Target Restricted Stock Award and subject to the terms and
conditions of this Plan. For each Participant granted a Performance-Based
Restricted Stock Award, the Committee shall establish (i) the Performance
Period, (ii) the Target Restricted Stock Award, (iii) the level of Performance
Criteria used to determine the Restricted Stock Vesting Percentage and (iv) the
level of the Restricted Stock Vesting Percentage determined by the attainment of
the Performance Criteria. Each of these items, as well as any other terms and
conditions of a Participant's Performance-Based Restricted Stock Award, shall be
described in detail in an agreement delivered to the Participant. Each
Performance-Based Restricted Stock Award shall vest based upon the level of
attainment of the applicable Performance Criteria during the Performance Period
and the resulting Restricted Stock Vesting Percentage, as well as, if determined
by the Committee, upon the continued employment of the Participant (subject to
the terms and conditions of the Participant's Award agreement). As soon as
practicable after the end of each applicable Performance Period, the Committee
shall determine the level of attainment of the Performance Criteria for each
Participant, the associated Restricted Stock Vesting Percentage and the number
of Restricted Shares, if any, as to which the restrictions thereon shall lapse
at the end of the Performance Period if any other vesting conditions contained
in the Participant's Award agreement are satisfied.
C. If determined by the Committee and set forth in an Award agreement,
a Participant shall be entitled to payment of dividends on the Restricted Shares
comprising his Performance-Based Restricted Stock Award, whether or not such
Restricted Shares have vested.
D. In the event of any stock dividend, extraordinary cash dividend,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase shares
of Common Stock at a price substantially below fair market value, or other
similar corporate event that affects the shares of Common Stock granted or made
available for issuance under the Plan such that an adjustment is required in
order to preserve the benefits or potential benefits intended to be made
available under this Plan, then the Committee shall in such manner as the
Committee may deem equitable, adjust the number and kind of shares made the
subject of Performance-Based Restricted Stock Awards; provided, however, that
the number of shares of Common Stock subject to any Performance-Based Restricted
Stock Award shall always be a whole number.
E. Performance-Based Restricted Stock Awards shall be granted only
pursuant to an Award agreement, which shall be executed by the Participant and a
duly authorized officer of the Company and which shall contain such terms and
conditions as the Committee shall determine, consistent with the Plan, including
the following
6
<PAGE>
1. Price.
-----
The purchase price of Restricted Shares shall be determined by
the Committee, in its sole discretion, and may be zero.
2. Restrictions and Conditions
---------------------------
(i) The Performance-Based Restricted Stock Awards shall be
subject to Performance Criteria as a condition for the
vesting of the Restricted Shares, as provided in the
Award agreement. Prior to vesting, no Restricted Share
may be assigned, alienated, pledged, attached, sold or
otherwise transferred or encumbered by a Participant.
Any Restricted Share as to which the applicable
Performance Period has lapsed without becoming vested
shall be forfeited and returned to the Company and
treated in accordance with the third sentence of Section
VII.A.
(ii) Except as provided in clause (i), the Participant shall
have, with respect to the Restricted Shares, all of the
rights of a stockholder of the Company, including the
right to vote the shares of Common Stock and to receive
any cash dividends.
(iii) The Committee may, in its sole discretion, provide that
Restricted Shares be held in escrow or trust pending
delivery to the Participant upon vesting or delivery to
the Company upon forfeiture. The escrow agent may be the
Company, at the discretion of the Committee.
(iv) Subject to adjustment pursuant to Section VII.D, the
maximum number of Restricted Shares that may be granted
to any Participant in a single fiscal year of the
Company shall be 200,000.
F. A Participant may make an election pursuant to Section 83(b) of the
Code in respect of his or her Restricted Shares and, if he or she does so, he or
she shall timely notify the Company of such election and send the Company a copy
thereof. The Participant shall be solely responsible for properly and timely
completing and filing any such election.
G. Each certificate representing Restricted Shares shall bear an
appropriate legend, as determined by the Company, until the lapse of all
restrictions with respect to such Restricted Shares.
H. The obligation of the Company to grant or sell Restricted Shares,
and to honor the vesting conditions thereof, shall be subject to all applicable
laws, rules, and regulations, and to such approvals by governmental agencies as
may be required. Notwithstanding any terms or conditions of any Performance-
Based Restricted Stock Award to the contrary, the Company shall be under no
obligation to grant or to sell and shall be prohibited from granting or selling
any Restricted Shares unless such Restricted Shares have been properly
registered for sale pursuant to the Securities Act with the Securities and
Exchange Commission or unless the Company has received an opinion of counsel,
satisfactory to the Company, that such shares may be granted or sold without
such registration pursuant to an available exemption therefrom and the terms and
7
<PAGE>
conditions of such exemption have been fully complied with. The Company shall be
under no obligation to register for sale under the Securities Act any of the
Restricted Shares. If the Restricted Shares are granted or sold pursuant to an
exemption from registration under the Securities Act, the Company may restrict
the transfer of such Restricted Shares and may legend the certificates
representing such Restricted Shares in such manner as it deems advisable to
ensure the availability of any such exemption.
VIII. Reorganization or Discontinuance
--------------------------------
The obligations of the Company under the Plan shall be binding upon any
successor corporation or organization resulting from merger, consolidation or
other reorganization of the Company, or upon any successor corporation or
organization succeeding to substantially all of the assets and business of the
Company. The Company will make appropriate provision for the preservation of
Participants' rights under the Plan in any agreement or plan which it may enter
into or adopt to effect any such merger, consolidation, reorganization or
transfer of assets.
IX. Non-Alienation of Benefits
--------------------------
A Participant may not assign, sell, encumber, transfer or otherwise
dispose of any rights or interests under the Plan except by will or the laws of
descent and distribution. Any attempted disposition in contravention of the
preceding sentence shall be null and void.
X. No Claim or Right to Plan Participation
---------------------------------------
No employee or other person shall have any claim or right to be
selected as a Participant under the Plan. Neither the Plan nor any action taken
pursuant to the Plan shall be construed as giving any employee any right to be
retained in the employ of the Company.
XI. Taxes
-----
The Company shall deduct from all amounts paid under the Plan all
federal, state, local and other payroll taxes and income tax withholding
required by law to be withheld with respect to such payments.
XII. Designation and Change of Beneficiary
-------------------------------------
Each Participant may indicate upon notice to him or her by the Committee
of his or her right to receive an Award a designation of one or more persons who
shall be entitled to receive the amount, if any, payable under the Plan upon the
death of the Participant ("Designated Beneficiary"). Such designation shall be
in writing to the Committee. A Participant may, from time to time, revoke or
change his or her Designated Beneficiary without the consent of any prior
Designated Beneficiary by filing a written designation with the Committee. The
last such designation received by the Committee shall be controlling; provided,
however, that no designation, or change or revocation thereof, shall be
effective unless received by the Committee prior to the Participant's death, and
in no event shall it be effective as of a date prior to such receipt. If no
Designated Beneficiary of a Participant is living at the time of the
Participant's
8
<PAGE>
death, or if the Participant has not designated a Designated Beneficiary, then
the Participant's Designated Beneficiary shall be his or her estate.
XIII. Payments to Persons Other Than the Participant
----------------------------------------------
If the Committee shall find that any person to whom any amount is
payable under the Plan is unable to care for his or her affairs because of
incapacity, illness or accident, or is a minor, or has died, then any payment
due to such person or his or her estate (unless a prior claim therefor has been
made by a duly appointed legal representative) may, if the Committee so directs,
be paid to his or her spouse, a child, a relative, an institution maintaining or
having custody of such person, or any other person deemed by the Committee, in
its sole discretion, to be a proper recipient on behalf of such person otherwise
entitled to payment. Any such payment shall be a complete discharge of the
liability of the Company therefor.
XIV. No Liability of Committee Members
---------------------------------
No member of the Committee shall be personally liable by reason of any
contract or other instrument related to the Plan executed by such member or on
his or her behalf in his or her capacity as a member of the Committee, nor for
any mistake of judgment made in good faith, and the Company shall indemnify and
hold harmless each employee, officer, or director of the Company to whom any
duty or power relating to the administration or interpretation of the Plan may
be allocated or delegated, against any cost or expense (including legal fees,
disbursements and other related charges) or liability (including any sum paid in
settlement of a claim with the approval of the Board) arising out of any act or
omission to act in connection with the Plan unless arising out of such person's
own fraud or bad faith.
XV. Termination or Amendment
------------------------
The Committee may amend, suspend or terminate the Plan at any time;
provided that no amendment may be made without the approval of the Company's
shareholders if the effect of such amendment would be to cause outstanding or
pending Awards to cease to qualify for the performance-based compensation
exception to Section 162(m) of the Code.
XVI. Unfunded Plan
-------------
Participants shall have no right, title, or interest whatsoever in or to
any investments, which the Company may make to aid it in meeting its obligations
under the Plan. Nothing contained in the Plan, and no action taken pursuant to
its provisions, shall create or be construed to create a trust of any kind, or a
fiduciary relationship between the Company and any Participant, Designated
Beneficiary, legal representative or any other person. To the extent that any
person acquires a right to receive payments from the Company under the Plan,
such right shall be no greater than the right of an unsecured general creditor
of the Company. All payments to be made hereunder shall be paid from the general
funds of the Company and no special or separate fund shall be established and
no segregation of assets shall be made to assure payment of such amounts except
as expressly set forth in the Plan.
The Plan is not intended to be subject to the Employee Retirement Income
Security Act of 1974, as amended.
9
<PAGE>
XVII. Governing Law
-------------
The terms of the Plan and all rights thereunder shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws.
XVIII. Severability
------------
If any provision of the Plan or any award made hereunder is, becomes or
is deemed to be invalid, illegal or unenforceable in any jurisdiction or as to
any person or award, or would disqualify the Plan or any award under any law
deemed applicable by the Committee, such provision shall be construed or deemed
amended to conform to the applicable laws, or if it cannot be construed or
deemed amended without, in the determination of the Committee, materially
altering the intent of the Plan or the award, such provision shall be stricken
as to such jurisdiction, person or award and the remainder of the Plan and any
such award shall remain in full force and effect.
XIX. Headings
--------
Headings are used herein solely as a convenience to facilitate reference
and shall not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
XX. Expiration Date
---------------
No award shall be made under the Plan after the tenth anniversary of the
Effective Date; provided, however, that the Plan shall be resubmitted to the
Company's shareholders as necessary to ensure that Awards continue to qualify as
"performance-based compensation" for purposes of Section 162(m) of the Code. As
of the Effective Date, pursuant to Treasury Regulation ss.1.167-27(e)(4)(vi),
the proviso to the preceding sentence requires the Plan to be resubmitted to the
Company's shareholders no later than the first shareholder meeting that occurs
in the fifth year following the year in which shareholders previously approved
the Plan.
As adopted by the Company pursuant to action
of the Board of Directors at a meeting
held on August 13, 2001.
By:
----------------------------
Corporate Secretary
10
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-11
<SEQUENCE>4
<FILENAME>exhibit11.txt
<DESCRIPTION>EXHIBIT 11 CALCULATION OF EPS
<TEXT>
<TABLE>
<CAPTION>
EXHIBIT 11
AUTOMATIC DATA PROCESSING, INC.
AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
Year ended June 30,
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2001 2000 1999 1998 1997
-----------------------------------------------------------------
BASIC EARNINGS PER SHARE:
Net earnings applicable to common shares $924,720 $840,800 $696,840 $608,262 $515,244
======== ======== ======== ======== ========
Average number of common shares outstanding 629,035 626,766 615,630 600,803 588,112
======== ======== ======= ======== ========
Basic earnings per share $ 1.47 $ 1.34 $ 1.13 $ 1.01 $ 0.88
======== ======== ======= ======== ========
DILUTED EARNINGS PER SHARE:
Net earnings used in basic earnings per share $924,720 $840,800 $696,840 $608,262 $515,244
Adjustment for interest (net of tax) - zero coupon
convertible subordinated notes (5.25% yield) 2,341 2,912 3,607 7,833 11,302
-------- -------- ------- -------- --------
Net earnings used for diluted earnings per share $927,061 $843,712 $700,447 $616,095 $526,546
======== ======== ======== ======== ========
Average number of shares outstanding on a diluted basis:
Shares used in calculating basic earnings per share 629,035 626,766 615,630 600,803 588,112
Diluted effect of all stock options outstanding
after application of treasury stock method 13,482 14,823 15,306 13,363 12,633
Shares assumed to be issued upon conversion of
Debentures-Zero coupon convertible
subordinated notes (5.25% yield) 3,472 4,509 5,956 14,030 19,372
-------- -------- ------- -------- --------
Average number of shares outstanding on a
diluted basis 645,989 646,098 636,892 628,196 620,117
======== ======== ======= ======== ========
Diluted earnings per share $ 1.44 $ 1.31 $ 1.10 $ 0.98 $ 0.85
======== ======== ======= ======== ========
</TABLE>
20
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>5
<FILENAME>exhibit13.txt
<DESCRIPTION>EXHIBIT 13 ANNUAL REPORT
<TEXT>
EXHIBIT 13
Selected Financial Data
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
Years ended June 30, 2001 2000 1999 1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenues $ 7,017,570 $ 6,287,512 $ 5,540,141 $ 4,925,956 $ 4,193,447
Earnings before income taxes $ 1,525,010 $ 1,289,600 $ 1,084,500 $ 890,717 $ 726,439
Net earnings $ 924,720 $ 840,800 $ 696,840 $ 608,262 $ 515,244
- -----------------------------------------------------------------------------------------------------
Basic earnings per share $ 1.47 $ 1.34 $ 1.13 $ 1.01 $ .88
Diluted earnings per share $ 1.44 $ 1.31 $ 1.10 $ .98 $ .85
Basic shares outstanding 629,035 626,766 615,630 600,803 588,112
Diluted shares outstanding 645,989 646,098 636,892 628,196 620,117
Cash dividends per share $ .395 $ .33875 $ .295 $ .25625 $ .2225
Return on equity 19.9% 19.7% 18.7% 20.0% 20.6%
- -----------------------------------------------------------------------------------------------------
At year end:
Cash, cash equivalents and
marketable securities $ 2,596,964 $ 2,452,549 $ 2,169,040 $ 1,673,271 $ 1,516,450
Working capital $ 1,747,187 $ 1,767,784 $ 907,864 $ 626,063 $ 805,797
Total assets before funds
held for clients $ 6,549,980 $ 6,429,927 $ 5,824,820 $ 5,242,867 $ 4,439,293
Total assets $17,889,090 $16,850,816 $12,839,553 $11,787,685 $10,249,089
Long-term debt $ 110,227 $ 132,017 $ 145,765 $ 192,063 $ 402,088
Shareholders' equity $ 4,700,997 $ 4,582,818 $ 4,007,941 $ 3,439,447 $ 2,689,415
- -----------------------------------------------------------------------------------------------------
</TABLE>
2001 data includes a $90 million ($54 million after-tax) non-cash, non-recurring
write-off of the Company's investment in Bridge Information Systems, Inc.
1999 data includes non-recurring charges totaling approximately $17 million
(after-tax), associated with certain acquisitions and dispositions.
<PAGE>
Management's Discussion and Analysis
Operating Results
Revenues and earnings reached record levels during each of the past three fiscal
years. Despite a difficult economic environment, fiscal '01 revenues increased
12% to $7.0 billion. Prior to the non-cash, non-recurring charge in '01, pre-tax
earnings increased 25% and diluted earnings per share increased 16% to $1.52. In
fiscal '00, pre-tax earnings increased 21% and diluted earnings per share
increased 16% to $1.31 (prior to the non-recurring charges in '99). Fiscal '01
was ADP's 40th 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) 2001 2000 1999 2001 2000 1999
----------------------------- --------------------------
Employer Services $4,018 $3,579 $3,232 12% 11% 16%
Brokerage Services 1,756 1,477 1,147 19 29 5
Dealer Services 691 725 723 (5) - 7
Other 553 507 438 9 16 23
----------------------------- --------------------------
Consolidated $7,018 $6,288 $5,540 12% 13% 12%
----------------------------- --------------------------
----------------------------- --------------------------
- -------------------------------------------------------------------------------
Consolidated revenues grew 12% in fiscal '01 primarily from increased
market penetration, from an expanded array of products and services, with
relatively minor contributions from price increases. Prior to acquisitions and
dispositions, revenues increased approximately 11%.
As a result of the weaker economic conditions and the decreases in interest
rates during fiscal `01, we instituted a series of initiatives in the latter
part of the year to bring our expense structure in line with lower revenue
expectations. These actions have resulted in approximately $150 million of lower
annual expense run rate as of June 30, 2001 than would otherwise have been the
case.
The consolidated pre-tax margin was 23.0% in '01 (prior to the
non-recurring charge), 20.5% in '00, and 19.3% in '99 (prior to non-recurring
charges). Pre-tax margin improved over the previous year as continued automation
and operating efficiencies enabled the Company to offset accelerated investments
in new products, and increased spending on systems development and programming.
The impact of transitioning the investment portfolio from tax-exempt to taxable
instruments also contributed to the margin improvement.
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 2001
budgeted foreign exchange rates.
<PAGE>
Employer Services
Employer Services' revenues grew 12% in fiscal '01, and in the absence of
acquisitions and dispositions, revenue growth would have been about 11% in '01,
12% in '00, and 15% in '99.
Employer Services' operating margin was 23.3% in '01, 21.4% in '00, and
20.6% in '99. Employer Services' operating margin improved due to operating
efficiencies, cost containment initiatives and also improvements in Europe,
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 was 19%. In the absence of acquisitions and
dispositions, revenue growth would have been about 7% in '01, compared to 31% in
'00 and 21% in '99.
Brokerage Services' operating margin was 19% in '01 compared to 23% in '00
and 19% in '99. The lower margins in fiscal '01 resulted from the prior year
fourth quarter acquisition of Cunningham Graphics, investments made in data
center capacity to support higher trading volumes and the extraordinarily high
level of trading activity in '00.
Dealer Services
Dealer Services' revenues decreased 5% in '01. In the absence of acquisitions
and dispositions, '01 revenues would have decreased 3%, compared to flat
revenues in '00 and 7% revenue growth in '99. Dealer Services' operating margin
was 15% in fiscal '01 compared to 16% in '00 and 15% in '99. Dealer Services'
operating margin declined due to investments in new products and acquisitions.
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 $164 million, $119 million, and $84 million
in '01, `00, and '99, 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 '01 the Company recorded a $90 million ($54 million net of
tax) write-off of its investment in Bridge Information Systems, Inc. (Bridge),
which is reflected in "realized (gains)/losses on investments." This non-cash,
non-recurring write-off represented the Company's total recorded investment in
Bridge.
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.
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.
<PAGE>
Additionally, '99 includes approximately $21 million ($14 million
after-tax) of transaction costs and other adjustments in general, administrative
and selling expenses, 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 transitioned to
the Euro as a new common legal currency. The costs of this transition have not
had a material effect on ADP.
In '01 the Company's effective tax rate was 39.4%. Excluding the impact of
non-recurring charges associated with certain acquisitions, dispositions and
other activities, the effective tax rate was 34.8% in '00 and 33.2% in '99. The
increased rate in '01 is primarily a result of the transition, referred to
above, of a portion of the Company's investment portfolio to taxable
investments.
For '02 ADP is planning another record year with revenue growth in the
high single digits. In '02 the Company will adopt Statement of Financial
Accounting Standard (SFAS) No. 142 "Goodwill and Intangible Assets," which will
eliminate goodwill amortization and will require pro forma footnote disclosure
of fiscal 2001 results. ADP is also planning diluted earnings per share growth
of 13% to 15% over the pro forma fiscal '01 results prior to the non-cash,
non-recurring item.
Financial Condition
ADP's financial condition and balance sheet remain exceptionally strong.
At June 30, 2001, cash and marketable securities approximated $2.6 billion.
Shareholders' equity was approximately $4.7 billion, and return on average
equity for the year was approximately 20%. The ratio of long-term debt to equity
at June 30, 2001 was 2%.
Cash flow from operating activities approximated $1.5 billion in '01 with
another excellent year expected in '02.
In '01 16.6 million shares of common stock were purchased at an average
price of approximately $56. The Board of Directors has authorized the purchase
of up to 53 million additional shares.
In '01 zero coupon convertible subordinated notes were converted to 1.3
million shares of common stock.
In `01 the Company entered into an unsecured revolving credit agreement
with certain financial institutions, which provides for borrowings up to $2.5
billion. Borrowings under the agreement bear interest tied to LIBOR or prime
rate depending on the number of days the borrowings are outstanding. The
agreement, which expires in October 2001, has no borrowings to date.
During '01 the Company purchased several businesses for approximately $75
million in cash. The cost of acquisitions in '00 and '99 aggregated $200 million
and $107 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) in pooling of interests
transactions in exchange for approximately 4 million shares of common stock. The
Company's consolidated financial statements were not restated because in the
aggregate these transactions were not material.
Capital expenditures during '01 were $185 million following investments of
$166 million in '00 and $178 million in '99. Capital spending in fiscal '02
should approximate $200 million.
<PAGE>
Approximately forty-percent 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 sixty-percent of
the Company's investment portfolio is invested in fixed-income securities, with
maturities up to ten years. 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.
The earnings impact of future rate changes is not precisely predictable
because many factors influence the return on the Company's portfolio. These
factors include, among others, the overall portfolio mix between short-term and
long-term investments. This mix varies during the year and is impacted by daily
interest rate changes. A hypothetical change in interest rates of 25 basis
points applied to the June 30, 2001 balances would result in a $12 million
pre-tax earnings impact over the following twelve-month period.
Market Price, Dividend Data and Other
The market price of the Company's common stock (symbol: ADP) 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 2001 quarter ended High Low Per Share
---------------------- ---------
June 30 $57.1500 $49.5700 $ .10250
March 31 63.5625 48.4700 .10250
December 31 69.9375 58.5000 .10250
September 30 67.8750 49.5000 .08750
- ------------------------------------------------------------------
Fiscal 2000 quarter ended
June 30 $57.9375 $44.6875 $ .08750
March 31 55.4375 40.0000 .08750
December 31 54.8125 43.0000 .08750
September 30 44.8750 37.3750 .07625
- ------------------------------------------------------------------
As of June 30, 2001 there were approximately 34,000 holders of record of
the Company's common stock. Approximately 271,000 additional holders have their
stock in "street name".
New Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board issued SFAS No.
141,"Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible
Assets," which revise the standards for accounting for business combinations and
goodwill and other intangible assets acquired in a business combination. The
Company intends to adopt SFAS No.141 and SFAS No.142 in fiscal 2002. The pro
forma basic and diluted earnings per share for fiscal 2001 will increase by $.07
per share from $1.47 to $1.54 and $1.44 to $1.51, respectively.
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; changes in
laws regulating payroll taxes and employee benefits; 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. ADP disclaims any obligations to update any forward-looking
statements, whether as a result of new information, future events or otherwise.
<PAGE>
Statements of Consolidated Earnings
Automatic Data Processing, Inc. and Subsidiaries
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
Years ended June 30, 2001 2000 1999
---------- ---------- ----------
<S> <C> <C> <C>
Revenues other than interest on funds held for clients
and PEO revenues $6,264,030 $5,729,042 $5,110,262
Interest on funds held for clients 518,956 348,596 269,496
PEO revenues(A) 234,584 209,874 160,383
---------- ---------- ----------
Total revenues 7,017,570 6,287,512 5,540,141
---------- ---------- ----------
Operating expenses 2,900,124 2,564,496 2,376,172
General, administrative and selling expenses 1,665,447 1,643,360 1,379,026
Systems development and programming costs 514,279 460,275 412,380
Depreciation and amortization 320,856 284,282 272,807
Interest expense 14,260 13,140 19,090
Realized(gains)/losses on investments 77,594 32,359 (3,834)
---------- ---------- ----------
5,492,560 4,997,912 4,455,641
---------- ---------- ----------
Earnings before income taxes 1,525,010 1,289,600 1,084,500
Provision for income taxes 600,290 448,800 387,660
---------- ---------- ----------
Net earnings $ 924,720 $ 840,800 $ 696,840
---------- ---------- ----------
---------- ---------- ----------
Basic earnings per share $ 1.47 $ 1.34 $ 1.13
---------- ---------- ----------
Diluted earnings per share $ 1.44 $ 1.31 $ 1.10
---------- ---------- ----------
Basic shares outstanding 629,035 626,766 615,630
---------- ---------- ----------
Diluted shares outstanding 645,989 646,098 636,892
========== ========== ==========
- --------------------------------------------------------------------------------------------
(A) Net of pass-through costs of $2,446,768, $2,197,323, and $1,748,841,
respectively.
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Consolidated Balance Sheets
Automatic Data Processing, Inc. and Subsidiaries
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
Years ended June 30, 2001 2000
----------- -----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,275,356 $ 1,227,637
Short-term marketable securities 515,245 596,792
Accounts receivable 976,638 899,314
Other current assets 316,221 340,709
----------- -----------
Total current assets 3,083,460 3,064,452
Long-term marketable securities 806,363 628,120
Long-term receivables 224,964 245,249
Property, plant and equipment:
Land and buildings 457,110 439,022
Data processing equipment 653,641 612,608
Furniture, leaseholds and other 533,883 498,354
----------- -----------
1,644,634 1,549,984
Less accumulated depreciation (1,029,984) (952,715)
----------- -----------
614,650 597,269
Other assets 219,133 271,136
Intangibles 1,601,410 1,623,701
----------- -----------
Total assets before funds held for clients 6,549,980 6,429,927
Funds held for clients 11,339,110 10,420,889
----------- -----------
Total assets $17,889,090 $16,850,816
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ - $ 21,523
Accounts payable 156,324 129,436
Accrued expenses and other current liabilities 1,032,273 1,044,002
Income taxes 147,676 101,707
----------- -----------
Total current liabilities 1,336,273 1,296,668
Long-term debt 110,227 132,017
Other liabilities 208,880 171,843
Deferred income taxes 207,928 151,337
Deferred revenue 85,931 95,361
----------- -----------
Total liabilities before client funds obligations 1,949,239 1,847,226
Client funds obligations 11,238,854 10,420,772
----------- -----------
Total liabilities 13,188,093 12,267,998
----------- -----------
Shareholders' equity:
Preferred stock, $1.00 par value:
Authorized, 300 shares; issued, none -- --
Common stock, $.10 par value:
Authorized, 1,000,000 shares; issued, 638,702
and 631,443 shares , respectively 63,870 63,144
Capital in excess of par value 553,927 402,767
Retained earnings 5,153,408 4,477,141
Treasury stock - at cost 14,766 and 2,697 shares, respectively (837,244) (130,800)
Accumulated other comprehensive income (232,964) (229,434)
----------- -----------
Total shareholders' equity 4,700,997 4,582,818
----------- -----------
Total liabilities and shareholders' equity $17,889,090 $16,850,816
=========== ===========
- ----------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
<PAGE>
Statements of Consolidated Shareholders' Equity
Automatic Data Processing, Inc. and Subsidiaries
- -------------------------------------------------------------------------------
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
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, 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)
Net earnings -- -- -- 924,720 -- $ 924,720 --
Currency translation (80,816) (80,816)
Unrealized gain on
securities 77,286 77,286
---------
Comprehensive income $ 921,190
---------
---------
Employee stock plans
and related
tax benefits 6,878 688 163,464 -- 187,058
Treasury stock acquired
(16,558 shares) -- -- -- -- (935,064)
Acquisitions (22 shares) -- -- 234 -- 839
Debt conversion
(1,303 shares) 381 38 (12,538) -- 40,723
Dividends
($.395 per share) -- -- -- (248,453) --
- ---------------------------------------------------------------------------------------------------------------------
Balance, June 30, 2001 638,702 $63,870 $553,927 $5,153,408 $(837,244) $(232,964)
======= ======== ======== ========== ========= =========
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<Page>
<PAGE>
Statements of Consolidated Cash Flows
Automatic Data Processing, Inc. and Subsidiaries
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
(In thousands)
Years ended June 30, 2001 2000 1999
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net earnings $ 924,720 $840,800 $ 696,840
Adjustments to reconcile net earnings to net cash flows
provided by operating activities:
Depreciation and amortization 320,856 284,282 272,807
Write-off of investment in Bridge 90,000 - -
Deferred income taxes 29,450 8,885 (23,235)
Increase in receivables and other assets (70,699) (149,913) (155,132)
Increase in accounts payable and accrued expenses 182,634 39,339 100,057
Other 14,063 46,708 (37,476)
--------- --------- ---------
Net cash flows provided by operating activities 1,491,024 1,070,101 853,861
--------- --------- ---------
Cash Flows From Investing Activities
Purchases of marketable securities (3,973,434) (7,372,892) (1,882,411)
Proceeds from sale of marketable securities 3,087,406 4,001,848 1,064,810
Net change in client fund obligations 818,082 3,406,039 486,293
Capital expenditures (185,406) (166,012) (177,700)
Additions to intangibles (97,448) (67,303) (62,360)
Acquisitions of businesses, net of cash acquired (73,667) (175,248) (107,317)
Disposals of businesses 900 14,634 276,035
Other (32,267) (11,664) 10,590
--------- --------- ---------
Net cash flows used in investing activities (455,834) (370,598) (392,060)
--------- --------- ---------
Cash Flows From Financing Activities
Payments of debt (48,567) (106,090) (289,141)
Proceeds from issuance of notes 26,435 13,940 91,696
Repurchases of common stock (935,064) (201,007) (85,365)
Proceeds from issuance of common stock 218,178 172,589 100,359
Dividends paid (248,453) (212,578) (181,133)
--------- --------- ---------
Net cash flows used in financing activities (987,471) (333,146) (363,584)
--------- --------- ---------
Net change in cash and cash equivalents 47,719 366,357 98,217
Cash and cash equivalents, at beginning of period 1,227,637 861,280 763,063
--------- --------- ---------
Cash and cash equivalents, at end of period $1,275,356 $1,227,637 $ 861,280
--------- --------- ---------
--------- --------- ---------
- ------------------------------------------------------------------------------------------------------
</table>
See notes to consolidated financial statements.
<PAGE>
Notes to Consolidated Financial Statements
Automatic Data Processing, Inc. and Subsidiaries
Years ended June 30, 2001, 2000 and 1999
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. In
December 1999, the Securities and Exchange Commission released Staff Accounting
Bulletin (SAB) No. 101,"Revenue Recognition." Adherence to this SAB has not had
a material impact on the Company's consolidated financial statements.
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 $6,408 million of funds held
for clients, are considered to be "available-for-sale" at June 30, 2001 and,
accordingly, are carried on the balance sheet at fair market value. The
remainder of the funds held for clients are cash equivalents. Approximately
$2,561 million of the "available-for-sale" investments mature in less than one
year, $2,660 million in 1-2 years, $1,057 million in 2-3 years, $479 million in
3-4 years, and $973 million in 5-10 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 over their estimated useful lives. Goodwill
is amortized over periods ranging 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 recorded.
<PAGE>
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
accumulated other comprehensive income on the balance sheet.
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
-------- -------- -------- --------
2001
Net earnings $924,720 $ 2,340 $ -- $927,060
Average shares 629,035 3,472 13,482 645,989
EPS $ 1.47 $ 1.44
-------- -------- --------
- --------
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
-------- -------- -------- --------
- --------------------------------------------------------------------------------
I. Reclassification of Prior Financial Statements. Certain reclassifications
have been made to previous years' financial statements to conform to the 2001
presentation.
J. New Accounting Pronouncements. In July 2001, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards (SFAS) No.
141,"Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible
Assets," which revise the standards for accounting for business combinations and
goodwill and other intangible assets acquired in a business combination. The
Company intends to adopt SFAS No.141 and SFAS No.142 in fiscal 2002. The pro
forma basic and diluted earnings per share for fiscal 2001 will increase by $.07
per share from $1.47 to $1.54 and $1.44 to $1.51, respectively.
Note 2. Acquisitions and Dispositions
The Company purchased several businesses for approximately $75 million in
fiscal 2001, $200 million (including $25 million in common stock) in 2000 and
$107 million in 1999, net of cash acquired. The results of these acquired
businesses are included from the dates 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.
<PAGE>
Additionally, in fiscal 2000 and 1999, the Company sold several businesses
with annual revenues of approximately $27 million and $270 million,
respectively.
Note 3. Non-recurring Items
In fiscal 1999 the Company divested its Brokerage front-office business to
Bridge Information Systems, Inc.(Bridge), and received $90 million of Bridge
convertible preferred stock as part of the proceeds. In fiscal 2001 Bridge filed
for bankruptcy and the Company recorded a $90 million ($54 million net of tax)
write-off of its investment, reflected in "realized(gains)/losses on
investments."
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 $42
million and $48 million at June 30, 2001 and 2000, 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, 2001 2000
----------------------- -----------------------
Current Long-term Current Long-term
----------------------- -----------------------
Receivables $189,079 $267,394 $171,415 $293,489
Less:
Allowance for
doubtful accounts (9,717) (16,666) (13,063) (16,946)
Unearned income (28,603) (25,764) (29,980) (31,294)
----------------------- -----------------------
$150,759 $224,964 $128,372 $245,249
----------------------- -----------------------
----------------------- -----------------------
- --------------------------------------------------------------------------------
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, 2001 mature as follows:
- --------------------------------------------------------------------------------
(In thousands)
2003 $138,942
2004 77,482
2005 38,397
2006 11,374
2007 1,146
Thereafter 53
--------
$267,394
--------
--------
- --------------------------------------------------------------------------------
Note 5. Intangible Assets
Components of intangible assets are as follows:
- --------------------------------------------------------------------------------
(In thousands)
June 30, 2001 2000
----------- -----------
Goodwill $ 1,405,493 $ 1,378,265
Other 1,086,487 1,025,610
----------- -----------
2,491,980 2,403,875
Less accumulated amortization (890,570) (780,174)
----------- -----------
$ 1,601,410 $ 1,623,701
----------- -----------
----------- -----------
- --------------------------------------------------------------------------------
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
$157 million for fiscal 2001, $133 million for 2000 and $126 million for 1999.
Note 6. Short-term Financing
In October 2000, the Company entered into an unsecured revolving credit
agreement with certain financial institutions, which provides for borrowings up
to $2.5 billion. Borrowings under the agreement bear interest tied to LIBOR or
prime rate depending on the number of days the borrowings are outstanding. The
agreement, which expires in October 2001, has no borrowings to date.
The Company's short-term financing is sometimes obtained on a secured basis
through the use of repurchase agreements, which are collateralized principally
by U.S. government securities. These agreements generally have terms ranging
from overnight to up to three days. There were no outstanding repurchase
agreements at June 30, 2001 and 2000. For the fiscal year ended June 30, 2001,
the Company had an average outstanding balance of $41 million at an average
interest rate of 4.3%.
Note 7. Debt
Components of long-term debt are as follows:
<PAGE>
- --------------------------------------------------------------------------------
(In thousands)
June 30, 2001 2000
--------- ---------
Zero coupon convertible subordinated
notes (5.25% yield) $ 62,312 $ 86,639
Industrial revenue bonds
(with fixed and variable interest rates
from 2.85% to 3.5%) 36,449 36,858
Other 12,681 11,713
--------- ---------
111,442 135,210
Less current portion (1,215) (3,193)
--------- ---------
$ 110,227 $ 132,017
--------- ---------
--------- ---------
- --------------------------------------------------------------------------------
The zero coupon convertible subordinated notes have a face value of
approximately $108 million at June 30, 2001 and mature February 20, 2012, unless
converted or redeemed earlier. At June 30, 2001, the notes were convertible into
approximately 2.8 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 certain years. During
fiscal 2001 and 2000, approximately $50 million and $31 million face value of
notes were converted, resepectively. As of June 30, 2001 and 2000, the quoted
market prices for the zero coupon notes were approximately $139 million and $208
million, respectively. The fair value of the other debt, included above,
approximates its carrying value.
Long-term debt repayments at June 30, 2001 are due as follows:
- --------------------------------------------------------------------------------
(In thousands)
2003 $ 1,485
2004 290
2005 281
2006 822
2007 173
Thereafter 107,176
--------
$110,227
========
- --------------------------------------------------------------------------------
During fiscal 2001 and 2000, the average interest rate for notes payable
was 5.9% and 5.0%, respectively.
Interest payments were approximately $10 million in fiscal 2001, $10
million in fiscal 2000 and $12 million in fiscal 1999.
Note 8. 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
351,000 clients; files annually over 18 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 $8.2 billion in fiscal 2001, $6.9 billion in fiscal 2000, and $5.9
billion in fiscal 1999.
<PAGE>
Note 9. 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, 2001 there were
10,817 participants in the plans. The aggregate purchase price for options
outstanding at June 30, 2001 was approximately $1.7 billion. The options expire
at various points between 2001 and 2011.
<page>
<TABLE>
<CAPTION>
A summary of changes in the stock option plans for the three years ended
June 30, 2001 is as follows:
- ---------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
Number of Options Weighted Average Price
---------------------------------- ----------------------
Years ended June 30, 2001 2000 1999 2001 2000 1999
---------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year 46,694 47,467 45,596 $29 $24 $18
Options granted 10,740 9,646 11,616 $57 $46 $38
Options exercised (7,956) (6,736) (6,154) $18 $16 $12
Options canceled (1,982) (3,683) (3,591) $38 $32 $24
----------------------------------
Options outstanding,
end of year 47,496 46,694 47,467 $37 $29 $24
----------------------------------
Options exercisable,
end of year 19,929 18,719 16,898 $25 $19 $15
----------------------------------
Shares available for
future grants,
end of year 1,720 10,478 1,691
----------------------------------
Shares reserved for
issuance under
stock option plans 49,216 57,172 49,158
----------------------------------
----------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
Summarized information about stock options outstanding as of June 30, 2001
is as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
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 5,077 2.4 $12 5,020 $12
$15 to $25 8,645 4.9 $20 6,671 $20
$25 to $35 7,017 6.5 $29 3,673 $29
$35 to $45 13,231 7.8 $41 3,805 $41
$45 to $55 6,459 9.3 $52 607 $51
Over $55 7,067 9.2 $60 153 $59
- ---------------------------------------------------------------------------------------------
</TABLE>
<page>
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 2.4 million and 2.2 million shares are scheduled for issuance on
December 31, 2002 and 2001, respectively. Approximately 2.5 million and 3.1
million shares were issued during the years ended June 30, 2001 and 2000,
respectively. At June 30, 2001 and 2000, there were approximately 5.7 million
and 7.2 million shares, respectively, reserved for purchase under the plans.
Included in liabilities as of June 30, 2001 and 2000 are employee stock purchase
plan withholdings of approximately $94 million and $86 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:
- --------------------------------------------------------------------------------
Years ended June 30, 2001 2000 1999
--------- --------- ---------
Risk-free interest rate 5.3-6.0% 6.0-6.7% 4.5-5.7%
Dividend yield .7-.8% .8-.9% 1.0%
Volatility factor 27.9-28.2% 22.0-26.7% 19.7-21.8%
Expected life:
Options 6.3 6.4 6.3
Purchase rights 2.0 2.0 2.0
Weighted average fair value:
Options $21.31 $16.89 $11.63
Purchase rights $20.58 $19.73 $12.29
--------- --------- ---------
--------- --------- ---------
- --------------------------------------------------------------------------------
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, 2001 2000 1999
-------- -------- --------
Pro forma net earnings $ 818 $ 762 $ 638
Pro forma basic earnings per share $ 1.30 $ 1.22 $ 1.04
Proforma diluted earnings per share $ 1.27 $ 1.18 $ 1.01
-------- -------- --------
-------- -------- --------
- --------------------------------------------------------------------------------
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, 2001, 2000 and 1999 the Company
issued 172,500, 171,900, and 121,400 restricted shares, respectively.
<page>
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 interest. Effective January 1, 2001, the plan
interest credit rate was changed from a fixed rate of 7% to a rate that will
vary from year-to-year with the 10-year treasury constant. 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.
The plans' funded status as of June 30, 2001 and 2000 follows:
- --------------------------------------------------------------------------------
(In thousands)
June 30, 2001 2000
--------- ---------
Change in plan assets:
Funded plan assets at market value at
beginning of year $ 485,700 $ 354,500
Plans of acquired employers - 17,300
Actual return on plan assets (44,700) 78,300
Employer contributions 36,100 43,000
Benefits paid (7,800) (7,400)
--------- ---------
Funded plan assets at market value at
end of year $ 469,300 $ 485,700
--------- ---------
--------- ---------
Change in benefit obligation:
Benefit obligation at beginning of year $ 316,600 $ 256,400
Plans of acquired employers - 20,900
Service cost 31,400 29,600
Interest cost 23,600 20,000
Actuarial and other (gain)/losses 18,700 (2,900)
Benefits paid (7,800) (7,400)
--------- ---------
Projected benefit obligation end of year $ 382,500 $ 316,600
--------- ---------
--------- ---------
Plan assets in excess of projected benefits $ 86,800 $ 169,100
Transition obligation 300 500
Unrecognized net actuarial gain/loss due to
different experience than assumed 46,200 (58,200)
--------- ---------
Prepaid pension cost $ 133,300 $ 111,400
--------- ---------
--------- ---------
- --------------------------------------------------------------------------------
The components of net pension expense were as follows:
- --------------------------------------------------------------------------------
(In thousands)
Years ended June 30, 2001 2000 1999
-------- -------- --------
Service cost - benefits earned
during the period $ 31,400 $ 29,600 $ 23,400
Interest cost on projected benefits 23,600 20,200 16,400
Expected return on plan assets (40,100) (32,900) (24,500)
Net amortization and deferral 200 (100) (700)
-------- -------- --------
$ 15,100 $ 16,800 $ 14,600
-------- -------- --------
-------- -------- --------
- --------------------------------------------------------------------------------
<page>
Assumptions used to develop the actuarial present value of benefit
obligations generally were:
- --------------------------------------------------------------------------------
Years ended June 30, 2001 2000
---- ----
Discount rate 7.25% 7.75%
Expected long-term rate on assets 8.75% 8.75%
Increase in compensation levels 6.0% 6.0%
---- ----
---- ----
- --------------------------------------------------------------------------------
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 $31 million, $27 million and $26 million for calendar
years 2000, 1999 and 1998, respectively.
Note 10. 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, 2001 2000 1999
--------- --------- ---------
Current:
Federal $ 439,745 $ 326,875 $ 296,397
Non-U.S. 77,435 56,505 66,440
State 53,660 56,535 48,058
--------- --------- ---------
Total current 570,840 439,915 410,895
Deferred:
Federal 24,895 5,750 (6,045)
Non-U.S. (3,743) 1,220 (15,175)
State 8,298 1,915 (2,015)
--------- --------- ---------
Total deferred 29,450 8,885 (23,235)
--------- --------- ---------
$ 600,290 $ 448,800 $ 387,660
--------- --------- ---------
--------- --------- ---------
- --------------------------------------------------------------------------------
At June 30, 2001 and 2000, the Company had gross deferred tax assets of
approximately $206 million and $188 million, respectively, consisting primarily
of operating expenses not currently deductible for tax return purposes.
Valuation allowances approximated $14 million and $23 million as of June 30,
2001 and 2000, respectively. Gross deferred tax liabilities approximated $373
million and $294 million, as of June 30, 2001 and June 30, 2000, respectively,
consisting primarily of differences in the accounting and tax values of certain
fixed and intangible assets.
Income tax payments were approximately $437 million in 2001, $375 million
in 2000, and $270 million in 1999.
A reconciliation between the Company's effective tax rate and the U.S. federal
statutory rate is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
(In thousands, except percentages)
Years ended June 30, 2001 % 2000 % 1999 %
------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Provision for taxes
at U.S. statutory rate $ 533,800 35.0 $ 451,400 35.0 $ 379,600 35.0
Increase (decrease)
in provision from:
Investments in
municipals (5,700) (0.4) (68,180) (5.3) (68,360) (6.3)
State taxes, net
of federal tax
benefit 40,270 2.6 37,990 2.9 29,930 2.8
Other* 31,920 2.2 27,590 2.2 46,490 4.2
------------------ ------------------ ------------------
$ 600,290 39.4 $ 448,800 34.8 $ 387,660 35.7
------------------ ------------------ ------------------
------------------ ------------------ ------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
* 2001 and 1999 data includes impact of certain acquisitions, dispositions
and other non-recurring adjustments.
Note 11. Commitments and Contingencies
The Company has obligations under various facilities and equipment leases, and
software license agreements. Total expense under these agreements was
approximately $269 million in 2001, $243 million in 2000 and $202 million in
1999, with minimum commitments at June 30, 2001 as follows:
- --------------------------------------------------------------------------------
(In millions)
Years ending June 30,
2002 $257
2003 178
2004 107
2005 66
2006 38
Thereafter 87
----
$733
----
----
- --------------------------------------------------------------------------------
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 12. 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 2001 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, 2001 Services Services Services Other Total
-------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues $ 4,018 $ 1,756 $ 691 $ 553 $ 7,018
Pre-tax earnings $ 938 $ 335 $ 101 $ 151 $ 1,525
Assets $12,320 $ 523 $ 183 $ 4,863 $17,889
Capital expenditures $ 106 $ 33 $ 23 $ 23 $ 185
Depreciation and amortization $ 196 $ 109 $ 38 $ (22) $ 321
------- ------- ------- ------- -------
Year ended June 30, 2000
------- ------- ------- ------- -------
Revenues $ 3,579 $ 1,477 $ 725 $ 507 $ 6,288
Pre-tax earnings $ 775 $ 335 $ 114 $ 66 $ 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 $ 3,232 $ 1,147 $ 723 $ 438 $ 5,540
Pre-tax earnings $ 674 $ 222 $ 106 $ 83 $ 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
------- ------- ------- ------- -------
------- ------- ------- ------- -------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<page>
Revenues and assets by geographic area are as follows:
- --------------------------------------------------------------------------------
(In millions) United
Year ended June 30, 2001 States Europe Canada Other Total
------- ------ ------ ------ -------
Revenues $ 5,991 $ 641 $ 279 $ 107 $ 7,018
Assets $15,799 $1,055 $ 910 $ 125 $17,889
Year ended June 30, 2000
------- ------ ------ ------ -------
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
------- ------ ------ ------ -------
------- ------ ------ ------ -------
- --------------------------------------------------------------------------------
Note 13. Quarterly Financial Results
(Unaudited)
Summarized quarterly results of operations for the two years ended June 30, 2001
are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
First Second Third Fourth
Year ended June 30, 2001* Quarter Quarter Quarter Quarter
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $1,586,523 $1,683,639 $1,894,320 $1,853,088
Net earnings $ 173,400 $ 207,440 $ 288,880 $ 255,000
Basic earnings per share $ .28 $ .33 $ .46 $ .41
Diluted earnings per share $ .27 $ .32 $ .45 $ .40
---------- ---------- ---------- ----------
Year ended June 30,
2000
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
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
- ------------------------------------------------------------------------------------------
</TABLE>
*After impact of non-cash, non-recurring item. 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/ Karen E. Dykstra
Karen E. Dykstra
Vice President Finance
Roseland, New Jersey
August 13, 2001
<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, 2001 and 2000, and the
related consolidated statements of earnings, shareholders' equity, and cash
flows for each of the three years in the period ended June 30, 2001. 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, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 2001, in conformity with accounting principles generally accepted in
the United States of America.
/s/ Deloitte & Touche LLP
New York, New York
August 13, 2001
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>6
<FILENAME>exhibit21.txt
<DESCRIPTION>EXHIBIT 21 LIST OF SUBSIDIARIES
<TEXT>
<TABLE>
<CAPTION>
EXHIBIT 21
Jurisdiction of
Name of Subsidiary Incorporation
------------------ ----------------
<S> <C>
ADP Atlantic, Inc. Delaware
ADP Belgium CVA Belgium
ADP Brasil Ltda. Brazil
ADP Broker-Dealer, Inc. New Jersey
ADP Brokerage International Limited United Kingdom
ADP Central, Inc. Delaware
ADP Claims Solutions Group, Inc. Delaware
ADP Credit Corp. Delaware
ADP Dealer Services Ltd. Canada
ADP Dealer Services Deutschland GmbH Germany
ADP Dealer Services Italia s.r.l. Italy
ADP East, Inc. Delaware
ADP Employer Services GmbH Germany
ADP Europe S.A. France
ADP Financial Information Services, Inc. Delaware
ADP GSI S.A. France
ADP Hollander, Inc. Delaware
ADP, Inc. Delaware
ADP Integrated Medical Solutions, Inc. Delaware
ADP Nederland B.V. The Netherlands
ADP Network Services International, Inc. Delaware
ADP Network Services Limited United Kingdom
ADP of North America, Inc. Delaware
ADP of Roseland, Inc. Delaware
ADP Pacific, Inc. Delaware
ADP Payroll Services, Inc. Delaware
ADP Savings Association Pennsylvania
ADP South, Inc. Delaware
ADP Tax Services, Inc. Delaware
ADP TotalSource Group, Inc. Florida
Audatex GmbH Switzerland
Audatex Holding GmbH Switzerland
Audatex Deutschland Datenverarbeitungs GmbH Germany
Automatic Data Processing Limited Australia
Automatic Data Processing Limited United Kingdom
Automatic Data Processing SPRL Belgium
Business Management Software Limited United Kingdom
Canadian-Automatic Data Processing Services Ltd. Canada
Cunningham Graphics International, Inc. New Jersey
Cunningham Graphics International, S.A. British Virgin Islands
GSI Transport Tourisme S.A. France
Health Benefits America Utah
Informex S.A. Belgium
OMR Systems Corporation New Jersey
Wilco International Limited United Kingdom
In accordance with Item 601(b)(21) of Regulation S-K, the Registrant has
omitted the names of particular subsidiaries because the unnamed
subsidiaries, considered in the aggregate as a single subsidiary, would not
have constituted a significant subsidiary as of June 30, 2001.
</TABLE>
21
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>7
<FILENAME>exhibit23.txt
<DESCRIPTION>EXHIBIT 23 AUDITOR'S CONSENT
<TEXT>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Automatic Data Processing,
Inc.'s Registration Statement Nos. 33-45150, 33-52876, 33-55909, 33-57207,
33-58165, 33-61629, 333-01839, 333-02331, 333-12767, 333-15103, 333-29713,
333-48493, 333-57075, 333-80237, 333-79749, 333-72497, 333-31058, 333-42294
and 333-68030 on Form S-3, Registration Statement No. 333-72023 on Form S-4,
and Registration Statement Nos. 33-24987, 33-25290, 33-38338, 2-75287,
33-38366, 33-38365, 33-46168, 33-51979, 33-51977, 33-52629, 33-56419,
33-56463, 333-10281, 333-10279, 333-10277, 333-13945, 333-50123, 333-84647,
333-81725, 333-74265, 333-33258 and 333-69020 on Form S-8 of our reports
dated August 13, 2001, included in and incorporated by reference in this
Annual Report on Form 10-K of Automatic Data Processing, Inc. for the year
ended June 30, 2001.
/s/ Deloitte & Touche LLP
New York, New York
September 14, 2001
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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