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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, 20022004
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 _____
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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. [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes x No _____
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The aggregate market value of the voting stockand non-voting common equity held by
non-affiliates of the Registrant as of August 31, 2002the last trading day of the Registrant's
most recently completed second fiscal quarter was approximately $22,815,638,729.$23,366,360,530.
On August 31, 2002,24, 2004, there were 604,067,745584,153,997 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 20022004 Annual Report to Shareholders.PartsStockholders.Parts I, II & IV
Portions of the Registrant's Proxy Statement for Annual Meeting
of Stockholders to be held on November 12, 2002.9, 2004. Part III
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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 1314 of the "Notes to Consolidated Financial Statements"
contained in ADP's 20022004 Annual Report to Shareholders,Stockholders, which information is
incorporated herein by reference. The Registrant's annual reportAnnual Report on Form 10-K,
quarterly reportsQuarterly Reports on Form 10-Q, current reportsCurrent Reports on Form 8-K and all amendments
to those reports, Proxy Statement for its Annual Meeting of Stockholders and
Annual Report to ShareholdersStockholders are made available, free of charge, on its website
at www.adp.com as soon as reasonably practicable after such reports have been
filed with or furnished to the Securities and Exchange Commission. The
following summary describes ADP's activities.
Employer Services
Employer Services offers a comprehensive range of payroll processing,
Total Pay(TM) products (ADP's payroll check and full service direct deposit
products), human resource information systems ("HR"), benefits and benefit administration products and services,
including 401(k), COBRAtraditional and flexible spending account administration, time and
labor management, payroll and business tax filing and reporting, professional
employer organization ("PEO"), pre-employment screening and selection and
regulatory compliance management (i.e., new hire reporting and wage garnishment
processing) to approximately 450,000Web-based outsourcing solutions, that help over
478,000 employers in North America,the United States, Canada, Europe, South America (primarily
Brazil), Australia and Asia. TheseAsia staff, manage, pay and retain their employees.
Employer Services markets these products and services are marketed
through Employer Services'its direct
marketing sales forcesforce and, on a limited basis, through indirect sales channels,
such as marketing relationships with banks accountants, and online companies that market Employer Services' services to their customers.accountants. In fiscal 2002, 89%2004, 86%
of Employer Services' revenues were from North America, 9%the United States, 10% were from
Europe, 3% were from Canada and 2% were1% was from South America (primarily Brazil),
Australia and Asia.
United States and Canada
Employer Services' approach to the market is to match a client's needs
with the product that will best meet expectations. As a result,To facilitate this approach,
in North
America,the United States and Canada, Employer Services is comprised of the following
groups: EmergingSmall Business Services ("EBS"SBS") (primarily companies with fewer than 50
employees); Major Accounts Services (primarily companies with between 50 and 999
employees); and National AccountsAccount Services (primarily companies with 1,000 or
more employees).
EBSSBS processes payroll for the aforementioned smaller companies and provides them with
leading solutions, including a range of value-added services that are
specifically designed for small business clients. Major Accounts Services and
National Account Services offer a full suite of best-of-breed employer services
solutions, including full database and other functional integration between
payroll and HR, for clients ranging from mid-sized through many of the world's
largest corporations. In manyfiscal 2004, ADP continued to integrate into National
Account Services its fiscal 2003 acquisition of ProBusiness Services, Inc., a
provider of comprehensive payroll, payroll tax filing and HR processing services
to large companies in the United States.
In some cases, ADP provides system solutions for its clients' entire
payroll, human resource payroll and benefits needs. Through ADP Connection(TM)Connection(R) (in the
United States), and by using current product import capabilities (in Canada),
ADP can enable its largest clients to interface their major enterprise resource
planning applications with ADP's outsourced payroll services. For those
companies whothat choose to process these applications in-house, ADP currently
delivers stand-alone services such as payroll tax filing, check printing and
distribution and year-end tax statements (i.e., W-2's).form W-2) in the United States.
2
Other large clients rely on ADP to design and deliver their own customized human resource
information systems and benefitsbenefit outsourcing solutions. -2-
For its largest
clients, ADP in fiscal 2004 augmented its existing capabilities by entering into
the HR business processing outsourcing market with the introduction of its
comprehensive outsourcing services business solution.
In North America,the United States and Canada, ADP provides payroll services that
include the preparation of client employee paychecks and electronic direct
deposits, along with supporting journals, summaries and management reports.
In the United States, 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.
In Europe, South America (primarily Brazil), Australiaemployees, and Asia, Employer
Services provides full departmental outsourcing of payroll services.analogous services are
provided in the Canadian market.
ADP's Tax and Financial Service Center processesServices business in the United States and collectsits
money movement business in Canada process and collect federal, state, provincial
and local payroll taxes on behalf of, and from, ADP clients and remitsremit such taxes
to the appropriate taxing authorities. ThroughADP's Tax and Financial Services
business in the United States and its money movement business in Canada are also
responsible for the efficient movement of information and funds from clients to
third parties through service offerings such as new hire reporting, ADP's
Total Pay(TM)TotalPay(R) payroll check and(ADPCheck(TM)), full service direct deposit products (in(FSDD)
and, in conjunction with major bank partners)partners, stored value payroll card
(TotalPay(R) Card) products and the collection and payment of wage garnishments,garnishments.
In the ADP TaxUnited States and Financial Services Center is
also responsible for the efficient movement of funds and information from
clients to third parties. The ADP Tax and Financial Services Center supportsCanada, these businesses support large, mid-sized and
small clients. It providesclients and provide an electronic interface between approximately 354,000379,000
ADP clients in the United States and Canada and about 2,000 federal, state, provincial and local tax agencies,
from the Internal Revenue Service and Canada Revenue Agency, to local town
governments. In fiscal 2002, the ADP2004, ADP's Tax and Financial Services Center printedbusiness in the
United States and its money movement business in Canada together processed and
delivered approximately 42over 48 million year-end tax statements to its clients' employees
(i.e., form W-2 in North America,the United States and analogous statements in Canada)
and approximately 37.5 million remittances and employer payroll tax returns, and
moved over $580approximately $780 billion in client funds to taxtaxing authorities and its
clients' employees via electronic transfer, direct deposit and ADP
Check.ADPCheck.
ADP's HR services, operating in conjunctionby interfacing with a client's payroll database,
provide comprehensive HR recordkeeping services, including benefitsbenefit
administration and outsourcing, applicant tracking, employee history and
position control. ADP's BenefitsBenefit Services provides benefitsbenefit administration across
all market segments, including management of the open enrollment of benefits,
COBRA and flexible spending account administration, Section 529 College Savings
Plan administrative services and 401(k) recordkeeping.
In fiscal
2002,the United States, ADP grew revenues in its retirement services business 11% and is among the
ten largest providers of 401(k) retirement plans. In fiscal 2002, ADP grew
revenues in its COBRA administration services business by over 19%.
ADP TotalSource,TotalSource(R), ADP's PEOprofessional employer
organization ("PEO") business, provides clients with comprehensive employment
administration outsourcing solutions, including payroll, payroll tax filing,
employee background checks, HR benefitsguidance, 401(k) plan administration, andbenefit
administration, regulatory compliance services, workers' compensation insurance.insurance
and supplemental benefits for employees. ADP TotalSource,TotalSource(R), the thirdsecond largest
PEO in the U.S. (based on the number of worksite employees), has 2130 offices
located in twelvesixteen states and serves over 3,0004,200 PEO clients and over 75,000approximately
94,000 work-site employees in all 50 states.
ADP TotalSource revenues increased by 14% in fiscal 2002 over the
previous fiscal year.
ADP complements its payroll, payroll tax and HR services with
additional employer services that include products such as time and labor
management, pre-employment screening and selection services, substance abuse
testing and unemployment compensation management. ADP's Tax Credit Services
business provides job tax credit services that assist employers in the
identification of, and filing for, special tax credits based on geography,
demographics and other criteria. In fiscal 2002,2004, ADP also expanded its time and
labor management businessservice
offerings in the United States by 20%. ADP's unemployment compensation services aid
clients in managing and reducing unemployment insurance costs. In fiscal 2002,
ADP acquired Avert, Inc.,acquiring substantially all of the assets of
ClinNet Solutions, LLC, a
leading3
provider of pre-employment screening (i.e.,
employee background checking)occupational health services, including substance abuse testing
programs, information and selectiondata management services, safety training, accident
investigation, and clinic management services.
Prior toOutside the acquisition,
Avert had provided these services to ADP clients through a marketing alliance
with ADP. In fiscal 2002, ADP launched its "Pay-by-Pay" Workers' Compensation
Insurance Service that allows employers using ADP's payroll services to pay for
workers' compensation insurance on a payroll by payroll basis.
During fiscal 2002, ADP continued the process of Internet-enabling
existing product offerings, while at the same time creating new products
expressly designed for the Internet. ADP's Internet offerings now include its
EasyPayNet(sm) Internet-based payroll solution for EBS clients, Pay eXpert(R)
Internet-based payroll solution for Major Accounts clients,United States and its Enterprise
HRMS integrated HR,
-3-
payroll and benefits solution for National Accounts Services clients, all of
which feature Internet-based employer self-service capabilities. Further, in
fiscal 2002, ADP launched its Total Choice Solutions(sm)Internet-based payroll
solution, a fully-integrated, web-native human resource and payroll management
solution hosted by ADP. For benefits administration, ADP offers Benefits
eXpert(sm), an Internet-based benefits administration and employee self-service
solution that allows mid-market companies in Major Accounts to manage more
efficiently their employees' health and welfare benefits. For large clients,
ADP Benefit Services offers an Internet-based COBRA administrative solution,
as well as employee self-service applications for open-enrollment, flexible
spending account administration and other employee-administered benefit
options.Canada
The continued increase in the number of multi-national companies makes
payroll and human resource management services a global opportunity. In Europe,
ADP is the leading provider of payroll (including full departmental outsourcing)
and various HR benefit administration services. Employer Services is present in
eight countries in Europe: France, Germany, Italy, the Netherlands, Poland,
Spain, Switzerland and the United Kingdom; it also offers services in Ireland
(from the United Kingdom) and in Portugal (from Spain). In those ten countries,
approximately nine million employees received a payslip produced by ADP or one
of its systems during fiscal 2002,2004. In South America (primarily Brazil),
Australia and Asia, Employer Services provides full departmental outsourcing of
payroll services. In fiscal 2004, in order to address the continued growth in
demand for integrated global payroll and HR administration solutions, ADP
increasedexpanded its alliance with SAP AG, which began in 2001 as an ADP offering within
Australia and Asia of a payroll salesand HR administration solution based on SAP's
technology, to create a global offering for multi-national employers throughout Europe
by nearly 40% over the previous fiscal year. ADP constantly seeks to further
enhance its presence in the global market through alliances, such as its
partnership with Exult, Inc. in which it offers its services for large companies
to the "Global 500" market using a new technology outsourcing model.companies.
Brokerage Services
Brokerage Services provides transaction processing systems,services, desktop
productivity applications and investor communicationcommunications services to the financial
services firms and public corporationsindustry 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 tradingthat enable firms to trade
virtually any financial instrument, (including equities, fixed income, foreign
currency, commodities and derivatives), in any market, at any time; (ii)
full-service investor communications services including convenientincluding: electronic delivery and
Internet solutions,Web solutions; workflow services; financial, offset, and sophisticated on-demand printing,printing;
proxy distribution and vote processing, householding,processing; householding; regulatory mailingsmailings;
fulfillment; and fulfillment services;customized communications; (iii) real-time order entry and processing services for
Internet-based brokerage firms; (iv) automated, browser-based
desktop productivity tools for financial consultants institutional investors and corporate secretaries;back office personnel;
and (v)(iv) integrated delivery of multiple products and services through ADP's
Global Processing Solution(sm)Solution(SM).
In fiscal 2002,
Brokerage Services processedserves a significant portion of
U.S. and Canadian securities transactions, with an average daily volume of 1.4
million trades processed. In addition, ADP served the North American securities
transaction processing needs of most large global banks. In fiscal 2002,
Brokerage Services received ISO 9001:2000 certification, an international
standard for the highest quality, for its Brokerage Processing Services system.
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 banksclient base in fiscal 2002. In fiscal 2002, Brokerage Services distributed more
than 870 million investor communications on behalf of its clients worldwide and
processed over 475 billion shares. In fiscal 2002, Brokerage Services delivered
more than 14 million investor communications via the Internet, which is 172%
more than the prior fiscal year. Brokerage Services consolidated or
electronically delivered approximately 24% of all shareholder positions, saving
clients approximately $300 million in printing and postage costs. In addition,
Brokerage Services printed over 6.4 billion document pages for the financial services
industry, in fiscal 2002.
Brokerage Services serves a diverse client base, including: full-service,
discountretail and onlineinstitutional brokerage firms; global banks;
mutual funds; annuity companies; institutional investors; specialty trading
firms; clearing -4-
firms; and publicly tradedowned corporations. Brokerage Services
provides securities transaction processing, printing and electronic distribution
of shareholder communications and other services to clients in more than 2516
countries in North America, Europe, Asia South America and Australia.
In fiscal 2002, Brokerage Services acquired the output services
business of IBM Global Services, significantly enhancing ADP's distributive
printing capabilities. In fiscal 2002, Brokerage Services also
acquired the
Argus Group, an acquisition that supplemented ADP's current investor deliveryprovides computerized proxy vote tabulation and shareholder communication,
distribution and fulfillment service capabilitiesservices, including Web-enabled products and
providedservices. In fiscal 2004, ADP served approximately 13,000 United States
publicly traded companies and 450 mutual funds and annuity companies with proxy
services on behalf of more than 850 brokerage firms and banks. In fiscal 2004,
Brokerage Services received ISO 9001:2000 certification, an international
standard for the highest quality, for its vote processing, production
operations, print operations and client services systems.
On June 22, 2004, ADP entered into a state-of-the-art,
online content management system.definitive agreement to acquire
the U.S. Clearing and BrokerDealer Services divisions of Bank of America
Corporation. The transaction is subject to regulatory review and is expected to
close before the end of calendar year 2004. When completed, this acquisition
will further Brokerage Services' business process outsourcing strategy by
positioning ADP to provide both retail and institutional broker clients an
integrated solution that encompasses Brokerage Processing Services (Service
Bureau), Operations Outsourcing and Clearing Services. On July 21, 2004, the
Federal Trade Commission granted early termination of the waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with
respect to the transaction.
4
Dealer Services
Dealer Services provides integrated dealer management computer systems
("DMS"(such a system is also known in the industry as a "DMS") and other business
performance solutions for motorto automotive, heavy truck, and powersports (i.e., motorcycle, marine
and recreational) vehicle (automobile and heavy
truck) dealersretailers and their manufacturers worldwide. More than 16,000 automobile
and truck dealers throughout North
America and EuropeEurope. More than 17,000 automotive, heavy truck and more than 30 vehicle
manufacturerspowersports
dealers use ADP's DMS, networking solutions, data integration, consulting and/or
marketing services.
As a result of its acquisition of Digital Motorworks
Holdings, Inc. ("DMI") in fiscal 2002, Dealer Services now has the ability to
extract, transform and standardize data from varied sources to client
specifications. These DMS-independent solutions from DMI help drive improved
decision-making by automotive manufacturers, dealers and related businesses.
Dealer Services offers its dealership clients a turnkey service solutionpackage
that includes computer hardware, hardware maintenance services, licensed
software, software support, system design and network consulting services.
Dealer Services also offers suchits clients Web-enabled business solutions,
"front-end" dealership sales process and business development training services,
consulting services, software products and customer relationship management
solutions.solutions (CRM). Clients use an ADP DMS to manage business activities such as
accounting, inventory, factory communications, scheduling, vehicle financing,
insurance, sales and service. Dealer Services also designs, establishes and
maintains communications networks for its dealership 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 estimatingestimation and obtainingacquisition of vehicle registration
and lien holder information. Dealer Services also offers an Application Service
Provider (ASP) Managed Servicesmanaged services solution to its dealership clients pursuant toin which suchthe
clients outsource all information technology management, computing and network
infrastructure, technology decisions and system support to Dealer Services.
In fiscal 2004, Dealer Services entered the powersports market segment
with the acquisition of ProQuest Business Solutions' DMS business. ADP also
acquired EDS's Automotive Retail Group, which provides dealer management systems
to nearly 1,000 automotive retailers, most of which are General Motors and
Saturn retailers.
Claims Services
Claims Services offers a broad line of automated information tools tointegrated business solutions for clients in the
property and casualty insurance, companies, claims adjusters,auto collision repair shops and auto parts recycling
facilities.industries. These toolsproducts help insurers toclients manage costs and improve their
performance by acceleratingefficiency and
accelerate the claims review and settlement process and
streamlining workflow. Theprocess. These products and
services include the following: (i) claims management applications, such as automated vehiclecollision
repair estimating, applications and total loss vehicle valuation, applicationsfirst notice of loss, dispatch
and related databases for the propertyassignment, claims audit, claims payment and casualty and
collision repair industries; (ii) medical cost management applications and
services for the auto casualty and workers' compensation markets; (iii) auto
body shop management systems; (iv)alternative parts locator systems; and (v) workflow
applications tolocating,
that streamline the end-to-end claims process, (ii) body shop and auto recycler
management systems and auto recycler alternative parts locating solutions, (iii)
other applications, databases and management information tools and services that
enhance and optimize the claims process.
-5-process and (iv) insurance broker risk
management and insurance distribution services that help clients create, update
and manage insurance policies. In fiscal 2004, Claims Services also entered an
important adjacent market - insurance distribution services - by acquiring ABZ
Group B.V., a leading provider of Web-based services to the insurance industry
in the Netherlands. These distribution services, which consist of applications,
databases and networks, link insurers with insurance brokers to facilitate the
efficient delivery of insurance and financial products. Claims Services also
acquired majority ownership of a joint venture that serves the Mexican market.
5
Markets and Marketing Methods
All of ADP's services are offered broadly across North America and
Europe. Some employer services within the Employer Services and brokerage servicesBrokerage Services
business units are also offered in Australia and Asia, and Employer Services
also provides services in South America (primarily Brazil), Australia and Asia..
None of ADP's major business groups have a single homogenous client
base or market. For example, while Brokerage Services primarily serves a large client base in
the financial services industry, including retail brokerage market, it also servesand institutional firms, banks commodity dealers, the
institutional brokerage market
and individual non-brokerage corporations. Dealer Services primarily serves
automobile dealers, but also serves truck, powersports (i.e., motorcycle, marine
and recreational), 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 it also provides services to automobile manufacturers,
body repair shops, salvage yards, 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 client or businessindustry 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. In fiscal 2002, in Employer
Services,2004, despite the
continued impact of weak economic conditions, Employer Services continued to
grow, primarily due to the increase in its United States payroll and payroll tax
businesses, including strong growth in its "beyond payroll" products, and
improved client retention; Brokerage Services grew as a consequence of the
increased volume in its investor communication services resulting from increased
communications relating to recent mutual fund regulatory activity and increased
trading activity; Dealer Services grew due to new product growth in its
traditional business; however, the growth of ADP's business units was offset by
the decline in interest rates over the past year, which resulted in slower sales, lower
client retention due primarily to bankruptcies, and fewer employees on our
clients' payrolls;a decrease
in Brokerage Services, weakness in the brokerage and
financial services industry significantly reduced discretionary spending and
investments in new initiatives, and the change in the mix of retail versus
institutional transactions lowered revenue per trade; and interest rates in the
U.S. declined precipitously last year significantly impacting interest earningsinvestment income on our client and corporate funds.
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.
6
Clients and Client Contracts
ADP provides its services to over 500,000approximately 550,000 clients. In fiscal
2002,2004, no single client or group of affiliated clients accounted for revenues in
excess of 2% of annual consolidated revenues.
-6-
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. Depending on the service agreement and/or the size of the client,
the installation or conversion period for new clients could vary from a short
and because no sale is considered firm until it is installed and
begins producing revenue.period of time (up to two weeks) for an SBS client to a longer period (generally
six to twelve months) for a National Account Services or Dealer Services client
with multiple deliverables.
ADP's average client retention is estimated at more than 8 years in
Employer Services and is 10 or more years in Brokerage Services and Dealer
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 that
facilitates the delivery of its services to clients.
Systems Development and Programming
During the fiscal years ended June 30, 2002, 20012004, 2003 and 2000,2002, ADP
invested $475$704 million, $514$604 million and $460$535 million, respectively, in systems
development and programming, migration to new computing technologies and the
development of new products.products and maintenance of our existing technologies,
including purchases of new software and software licenses.
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 40,00042,000 persons as of June 30, 2002.2004.
Item 2. Properties
ADP leases space for 4520 of its principal processing centers. In
addition, ADP leases numerous other small processing centersoperational offices and sales offices. All
of these leases, which aggregate approximately 6,100,0006,700,000 square feet in North
America, Europe, South America (primarily Brazil), Asia, Australia and South
Africa, expire at various times up to the year 2018. ADP owns 3115 of its
processing facilities, other operational offices and its corporate headquarters
complex in Roseland, New Jersey, which aggregate approximately 3,000,0003,430,000 square
feet. None of ADP's owned facilities is subject to any material
7
encumbrances. ADP believes its facilities are currently adequate for their
intended purposes and are adequately maintained.
-7-
Item 3. Legal Proceedings
In the normal course of business, the Registrant is subject to various
claims and litigation. While the outcome of any litigation is inherently
unpredictable, we believe we havethe Registrant believes it has valid defenses with respect to the
legal matters pending against usit and we believethe Registrant believes that the ultimate
resolution of these matters will not have a material adverse impact on ourits
financial condition, results of operations or cash flows. Among the various
claims and litigation pending against the Registrant is the following:
The Registrant and its indirect wholly-owned subsidiaries Dealer
Solutions, L.L.C. and Dealer Solutions Holdings, Inc. ("DSI") are named as
defendants in a lawsuit filed on March 4, 1999 in the 133rd Judicial District
Court of Harris County, Texas by Universal Computer systems,Systems, Inc., Universal
Computer Consulting, Ltd., Universal Computer Services, Inc., and Dealer
Computer Services, Inc. (collectively, "UCS"), which lawsuit has since been
referred by
the Court to arbitration.tried before an arbitration panel in June 2003. This lawsuit alleges trade
secret violations by DSI in the creation by DSI of the CARMan automobile
dealership software product.product and misappropriation of those trade secrets by the
Registrant through its acquisition of DSI. UCS is seekingsought injunctive relief and
unspecified damages. We believe we have
valid defenses with respectdamages of $56 million. On November 11, 2003, the arbitration panel appointed
by the District Court entered an Award in favor of the DSI and its co-
defendants. The Award denied all relief to UCS. The Award has been affirmed
and adopted by the above matterDistrict Court as a final judgment of the Court. On March
12, 2004, the plaintiffs filed an appeal of the final judgment, which appeal is
now pending before the Texas Court of Appeals. The Registrant believes that the
judgment of the District Court was correct and that the Registrant should
prevail.
Item 4. Submission of Matters to a Vote of Security Holders
None
-8-8
Part II
Item 5. Market for the Registrant's Common Equity, and Related Stockholder Matters
and Issuer Purchases of Equity Securities
See "Market Price, Dividend Data and Other" contained in the
Registrant's 20022004 Annual Report to Shareholders,Stockholders, which information is
incorporated herein by reference. As of August 31, 2002,24, 2004, the Registrant had
34,53638,331 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.
On May 23, 2002,March 25, 2004, the Registrant issued 8,77411,607 shares of its Common
Stock in respect of an earnout paid to a company in accordance with an asset
purchase agreement dated November 30, 2000, pursuant to which the Registrant
acquired substantially all of the assets of such company. The Registrant issued
the foregoing shares of Common Stock without registration under the Securities
Act of 1933, as amended, in reliance upon the exemption therefrom set forth in
Section 4(2) of such Act relating to sales by an issuer not involving a public
offering.
Issuer Purchases of Equity Compensation Plan InformationSecurities
Plan category Number of securities to Weighted average Number of securities
be issued upon exercise exercise price of remaining available for
of outstanding options, outstanding options, future issuance under
warrants and rights warrants and rights equity compensation
plans (excluding
securities reflected in
Column (a))
(a) (b) (c) Equity compensation plans 50,656,776 $40.94 17,210,779(d)
Total Number of
Shares Purchased as Maximum Number of
Part of the Publicly Shares that may yet
Announced Common be Purchased under
Total Number of Average Price Paid Stock Repurchase the Common Stock
Period Shares Purchased per Share (3) Plan (1) approved by security holders
Equity compensation plans not 186,000 $27.43 2,115,330 (3), (4), (5)
approved by security holdersRepurchase Plan (1)
April 1, 2004 to April
30, 2004 765,852 $44.23 765,000 31,758,700
May 1, 2004 to May 31,
2004 1,333,781 $44.58 1,329,900 30,428,800
June 1, 2004 to June
30, 2004 2,756,357 $43.88 2,750,000 27,678,800
Total 4,855,990 (2) Total 50,842,776 $40.89 19,326,1094,844,900
(1) Includes 3,318,779In March 2001, the Registrant received the Board of Directors' approval
to repurchase up to 50 million shares of Common Stock remaining available for
future issuance under the Registrant's Employees' Stock Purchase Plan,
which suchcommon stock. In
November 2002, the Registrant received the Board of Directors' approval to
repurchase an additional 35 million shares and weighted average exercise prices are not
reflected in Columns (a) and (b) of this table.
(2) Represents (i) the Registrant's 1989 Non-Employee Director Stock Option
Plan, as amended, (ii)common stock.
There is no expiration date for the Key Employees' Restricted Stock Plan, and
(iii) the French Employees' Saving-Stock Option Plan, as amended, none
of which have been approved by the Registrant's stockholders. The terms
of the 1989 Non-Employee Director Stock Option Plan are described under
"Corporate Governance" in the Proxy Statement for Registrant's 2002
Annual Meeting of Stockholders, the terms of the Key Employees'
Restricted Stock Plan are described in Note 10 to the Registrant's
Consolidated Financial Statements included in the Registrant's 2002
Annual Report to Shareholders and the terms of the French Employees'
Saving-Stock Option Plan are described in footnote (5) below.
-9-
(3) The number of shares of Common Stock reserved for issuancecommon stock repurchase plan.
(2) During 2004, pursuant to the terms of the Registrant's 1989 Non-Employee Director Stock Option
Plan adjustrestricted stock
program, the Registrant (i) made repurchases of 852 shares during April 2004,
3,881 shares during May 2004 and 1,557 shares during June 2004 at the then
market value of the shares in connection with the exercise by employees of their
option under such program to equalsatisfy certain tax withholding requirements
through the numberdelivery of shares to the Registrant instead of Common Stock issuablecash and (ii)
9
made purchases of 4,800 shares during June 2004 at a price of $.10 per share
under such plan. At June 30, 2002, there were 280,500 shares of Common
Stock reserved for issuance pursuant to the terms of such program to repurchase stock granted to employees who
have left the 1989
Non-Employee Director Stock Option Plan, as amended.
(4) Includes 768,672 shares of Common Stock reserved for issuance pursuant to
the Key Employees' Restricted Stock Plan.
(5) Includes 1,066,158 shares of Common Stock reserved for issuance pursuant to
the French Employees' Saving-Stock Option Plan. In January 1996, the Board
of Directors adopted the French Employees' Saving-Stock Option Plan (the
"French Plan"). Employees of the Registrant based in France are entitled to
purchase shares of Common Stock (such rights referred to as "Stock
Options") under the French Plan under annual offerings that commence on
January 1 of each calendar year and close on December 31 of the following
calendar year (each, an "Offering"). Each eligible employee is granted
Stock Options in each Offering that would generally entitle such employee
to purchase a whole number of shares of Common Stock equivalent in value to
10% of his or her base salary, based upon aRegistrant.
(3) The average price per share (in U.S.
dollars) determineddoes not include the repurchases described
in advance of such Offering by the French Employees'
Saving-Stock Option Plan Committee (appointed by the Board of Directors),
subject to adjustment for currency rate changes over the termclause (ii) of the Offering. Participating employees pay for the exercise of the Stock Options
through monthly payroll deductions taken during the two-year period of each
Offering, and have the opportunity upon the close of the Offering to
exercise their Stock Options (or any portion thereof) and purchase the
associated number of shares of Common Stock. To the extent a participating
employee elects to purchase fewer shares of Common Stock than would be
available under his or her full allotment of Stock Options, such employee
would receive the cash remaining from the aggregate payroll deductions
after taking into account his or her purchase of shares of Common Stock.preceding footnote.
Item 6. Selected Financial Data
See "Selected Financial Data" contained in the Registrant's 20022004 Annual
Report to Shareholders,Stockholders, 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 20022004 Annual Report to Shareholders,Stockholders, which information is
incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Approximately 30% ofSee "Management's Discussion and Analysis - Financial Condition,
Liquidity and Capital Resources" contained in the Registrant's overall investment portfolio2004 Annual
Report to Stockholders, which information is invested in overnight interest-bearing instruments, which are therefore impacted
immediatelyincorporated herein by changes in interest rates. The other 70% of the Registrant's
investment portfolio is invested in fixed-income securities, with maturities of
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 forecasted average balances in fiscal 2003 would result in
approximately a $9 million pre-tax earnings impact over the twelve-month period.
-10-
reference.
Item 8. Financial Statements and Supplementary Data
The financial statements described in Item 15(a)1.1 hereof are
incorporated herein.
The following supplementary data is incorporated herein by reference:
Quarterly Financial Results (unaudited) for the two years ended June
30, 20022004 (see Note 1415 of the "Notes to Consolidated Financial
Statements" contained in ADP's 20022004 Annual Report to Shareholders)Stockholders)
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
-11-Item 9A. Controls and Procedures
The Registrant carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the Registrant's disclosure controls and procedures, as defined
in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934.
Based on that evaluation, the Chief Executive Officer and Chief Financial
Officer have concluded that the Registrant's disclosure controls and procedures
as of June 30, 2004 were effective to ensure that information required to be
disclosed by the Registrant in reports that it files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission's rules
and forms.
10
There were no changes in the Registrant's internal control over
financial reporting that occurred during the quarter ended June 30, 2004 that
have materially affected, or are reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
11
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:
Employed by
Name Age Position ADP Since
- -------------------- --- -------------------------- --------------------------------- ------------
John D. Barfitt 49 President, Employer 1979
Services - International
James B. Benson 5759 Vice President, General 1977
Counsel and Secretary
Richard C. Berke 5759 Vice President, Human 1989
Resources
Gary C. Butler 5557 President and Chief 1975
Operating Officer
Raymond L. Colotti 5658 Vice President and 1995
Treasurer
Richard J. Daly 4951 Group President, 1989
Brokerage Services
Richard A. Douville 47 Vice President, 1999
Finance
G. Harry Durity 5557 Vice President, 1994
Worldwide Business
Development
Karen E. Dykstra 43 Vice President,45 Chief Financial Officer 1981
Finance
(Principal Financial Officer)
Russell P. Fradin 47 Group President, 1996
Employer Services - North America
Eugene A. Hall 46 Senior Vice President, and 1998
President of Financial
and Technology Services,
Employer Services - North America
-12
John Hogan 5456 Group President, 1993
Brokerage Services
Campbell B. Langdon 41 Vice43 President, 2000
Strategic DevelopmentTax, Financial and Time
Management Services
S. Michael Martone 5456 Group President, DealerEmployer 1987
Services
Peter Op de Beeck 46 Group48 President, 1998
Claims Solutions Group
Dan Sheldon 48 Vice President, 1984
Corporate Controller
12
George I. Stoeckert 56 President, Employer 1991
Services - International
Arthur F. Weinbach 5961 Chairman and 1980
Chief Executive Officer
Messrs. Benson, Berke, Butler, Colotti, Daly, Durity, Fradin, 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.
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.
Karen E. Dykstra joined ADP in 1981. Prior to her promotion to Chief
Financial Officer in 2003, she served as Vice President, Finance (Principal Financial Officer) infrom 2001 she served asto
2003, Vice President and Controller from 1998 to 2001 and Assistant Corporate
Controller from 1996 to 1998 and as Chief Financial Officer of Dealer Services from 1995 to
1996.
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.1998.
Campbell B. Langdon joined ADP in 2000 as Vice President, Strategic
Development. In 2003, he was promoted to President, Tax, Financial and Time
Management Services. Prior to joining ADP, he was a partner of McKinsey &
Company and had been associated with that firm for 11 years.
Peter Op de Beeck joined ADP in 1998 as Managing Director of Claims
Solutions Group's Audatex. In 2001, he became President of ADP Claims Solutions
Group. Prior to joining ADP, he was Chairman and Chief Executive Officer of
Online Internet from 1996 to 1998.
Dan Sheldon joined ADP in 1984. Prior to his promotion to Vice
President, Corporate Controller in 2003, he served as Chief Financial Officer of
Brokerage Services from 2001 to 2003 and Chief Financial Officer of Dealer
Services from 1996 to 2001.
George I. Stoeckert joined ADP in 1991. Prior to his promotion to
President, Employer Services International in 2003, he served as President -
Major Accounts Services Division, Employer Services from 1995 to 2003.
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.
-13-
Directors of the Registrant
See "Election of Directors" in the Proxy Statement for Registrant's
20022004 Annual Meeting of Stockholders, which information is incorporated herein by
reference.
Section 16(a) Beneficial Ownership Reporting Compliance
See "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Proxy Statement for Registrant's 20022004 Annual Meeting of Stockholders, which
information is incorporated herein by reference.
Code of Ethics
ADP has adopted a code of ethics that applies to its principal
executive officer, principal financial officer, principal accounting officer and
persons performing similar functions. The code of ethics may be viewed online
on ADP's website at www.adp.com under "Ethics" in the "About ADP" section.
13
Item 11. Executive Compensation
See "Compensation of Executive Officers" and "Election of Directors"
in the Proxy Statement for Registrant's 20022004 Annual Meeting of Stockholders,
which information is incorporated herein by reference. See Item 5 of this Annual Report on Form 10-K
for information concerning the Registrant's equity compensation plans.
Item 12. Security Ownership of Certain Beneficial Owners and Management
See "Election of Directors - Security Ownership of Certain Beneficial
Owners and Managers" and "Compensation of Executive Officers - Equity
Compensation Plan Information" in the Proxy Statement for Registrant's 20022004
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 20022004 Annual Meeting of Stockholders, which
information is incorporated herein by reference.
Item 14. ControlsPrincipal Accounting Fees and Procedures
There have been no significant changesServices
See "Independent Registered Public Accounting Firms' Fees" in the Proxy
Statement for Registrant's internal
controls or other factors that could significantly affect those controls since
the date2004 Annual Meeting of the Registrant's last evaluation of its internal controls, and there
have been no corrective actions with regard to significant deficiencies and
material weaknesses in such controls.
-14-Stockholders, which
information is incorporated herein by reference.
14
Part IV
Item 15. 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 20022004 Annual Report to ShareholdersStockholders are
also included in Part II, Item 8:
Statements of Consolidated Earnings - years ended June 30, 2002, 20012004, 2003
and 20002002
Consolidated Balance Sheets - June 30, 20022004 and 20012003
Statements of Consolidated Shareholders'Stockholders' Equity - years ended
June 30, 2002, 20012004, 2003 and 20002002
Statements of Consolidated Cash Flows - years ended June 30, 2002,
20012004, 2003
and 20002002
Notes to Consolidated Financial Statements
Report of Management
Report of Independent Auditors' ReportRegistered Public Accounting Firm
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
Page in Form 10-K
Report of Independent Auditors' Report on Schedule 18Registered
Public Accounting Firm 19
Schedule II - Valuation and Qualifying Accounts 1920
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. Exhibits
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 -15-
registration statementRegistration Statement No.
333-72023 on Form S-4 filed with the Commission on
February 9, 1999
15
3.2 - Amended and Restated By-laws of the Registrant -
incorporated by reference to Exhibit 3.2 to
Registrant's Annual Report on Form 10-K for the fiscal
year ended June 30, 2002
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
- incorporated by reference to Exhibit 10.1 to
Registrant's Annual Report on Form 10-K for the fiscal
year ended June 30, 2001 (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 -
incorporated by reference to Exhibit 10.4 to
Registrant's Annual Report on Form 10-K for the fiscal
year ended June 30, 2002 (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 10-K for the fiscal
year ended June 30, 1997 (Management Compensatory Plan)
16
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)
-16-
10.8 - 2000 Key Employees' Stock Option Plan as amended- incorporated by reference to
Exhibit 10.4 to Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended December 31, 2003
(Management Compensatory Plan)
10.9 - 2001 Executive Incentive Compensation Plan -
incorporated by reference to Exhibit 10.9 to
Registrant's Annual Report on Form 10-K for the fiscal
year ended June 30, 2001 (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 (Management
Compensatory Plan)
10.11 - Employees' Saving-Stock Option Plan - incorporated by
reference to Registrant's Registration Statement No.
333-10281 on Form S-8 (Management Compensatory Plan)
1110.12 - Schedule2003 Director Stock Plan - incorporated by reference to
Exhibit 10.6 to Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended December 31, 2003
(Management Compensatory Plan)
10.13 - Amended and Restated Employees' Savings-Stock Purchase
Plan - incorporated by reference to Exhibit 10.5 to
Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended December 31, 2003
10.14 - 364-Day Credit Agreement, dated as of CalculationJune 30, 2004,
among Automatic Data Processing, Inc., the Lenders
Party thereto, JPMorgan Chase Bank, as Administrative
Agent, and Bank of Earnings Per ShareAmerica, N.A., Barclays Bank PLC,
BNP Paribas, Citibank, N.A., Deutsche Bank Securities
Inc. and Wachovia National Association, as Co-
Syndication Agents
10.15 - Five-Year Credit Agreement, dated as of June 30, 2004,
among Automatic Data Processing, Inc., the Lenders
Party thereto, JPMorgan Chase Bank, as Administrative
Agent, J.P. Morgan Europe Limited, as London Agent,
JPMorgan Chase Bank, Toronto Branch, as Canadian Agent,
the Swingline Lenders, and Bank of America, N.A.,
Barclays Bank PLC, BNP Paribas, Citibank, N.A.,
Deutsche Bank Securities Inc. and Wachovia National
Association, as Co-Syndication Agents
13 - Pages 2218 to 3945 of the 20022004 Annual Report to
ShareholdersStockholders (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
17
23 - Consent of Independent Auditors' Consent
99.1Registered Public Accounting
Firm
31.1 - Certification by Arthur F. Weinbach pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934
31.2 - Certification by Karen E. Dykstra pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934
32.1 - Certification by Arthur F. Weinbach pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
99.232.2 - Certification by Karen E. Dykstra pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) None.
-17-Reports on Form 8-K during the fiscal quarter ended June 30,
2004
A Current Report on Form 8-K was filed on April 22, 2004 under Item 12 of Form
8-K, announcing the Registrant's financial results for the third fiscal quarter
ended March 31, 2004. A Current Report on Form 8-K was filed on June 22, 2004
under Items 5 and 7 of Form 8-K, announcing that the Registrant had entered into
a definitive agreement pursuant to which one of the Registrant's wholly owned
subsidiaries had agreed to acquire all of the issued and outstanding shares of
the capital stock of Fleet Securities Inc., a New York corporation, as well as
certain assets and liabilities of the BrokerDealer Services division of Banc of
America Securities LLC.
18
REPORT OF INDEPENDENT AUDITORS' REPORT ON SCHEDULEREGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and ShareholdersStockholders of
Automatic Data Processing, Inc.
Roseland, New Jersey
We have audited the consolidated financial statements of Automatic Data
Processing, Inc. and subsidiaries (the "Company") as of June 30, 20022004 and 2001,2003,
and for each of the three years in the period ended June 30, 2002,2004, and have
issued our report thereon dated August 12, 2002;11, 2004; such consolidated financial
statements and report are included in your 20022004 Annual Report to ShareholdersStockholders
and are incorporated herein by reference. Our audits also included the
consolidated financial statement schedule of Automatic Data Processing, Inc.,
listed inat Item 15.15(a)2. 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 12, 2002
-18-11, 2004
19
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
-----------------------------------------------------------
(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, 2004:
Allowance for doubtful accounts:
Current $54,654 $15,656 $ 3,335(B) $ (22,665)(A) $50,980
Long-term $11,103 $680 $ -- $ (3,205)(A) $8,578
Deferred tax valuation allowance $32,220 $2,953 $ -- $ (9,315)(D) $25,858
Year ended June 30, 2003:
Allowance for doubtful accounts:
Current $52,873 $17,588 $ 712(B) $ (16,519)(A) $54,654
Long-term $16,019 $1,534 $ -- $ (6,450)(A) $11,103
Deferred tax valuation allowance $40,140 $5,318 $ 899(C) $ (14,137)(E) $32,220
Year ended June 30, 2002:
Allowance for doubtful accounts:
Current $41,996 $27,703 $ 27,703 $ 743 (B)743(B) $ (17,569)(A) $ 52,873$52,873
Long-term $16,666 $ 1,176$1,176 $ -- $ (1,823)(A) $ 16,019$16,019
Deferred tax valuation allowance $41,930 $3,179 $ 3,179 $ 313 (C)313(C) $ (5,282)(D) $ 40,140
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 $43,700 $ 6,145 $ (165)(C) $ (7,750) (D) $ 41,930
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 $38,804 $ 5,229 $ (333) (C) $ -- $ 43,700$40,140
(A) Doubtful accounts written off, less recoveries on accounts previously
written off.
(B) Acquired in purchase transactions.
(C) Related to foreign exchange fluctuation.
(D) Related to the net deferred tax assets recorded in purchase accounting. The
recognition of this allowance is allocated to reduce the excess purchase price
overgoodwill.
(E) A portion of this allowance is related to the net deferred tax assets
acquired.
-19-recorded in purchase accounting, the recognition of which is allocated to reduce
goodwill. The remaining portion reduced the current year provision for income
taxes.
20
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 16, 2002August 30, 2004 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.
Signature Title Date
- --------- ----- ----
/s/ Arthur F. Weinbach Chairman, Chief Executive September 16, 2002August 30, 2004
- ---------------------------------- Officer and Directors
(Arthur F. Weinbach) Officer and Director (Principal Executive Officer)
/s/ Karen E. Dykstra Vice President, Finance September 16, 2002Chief Financial Officer August 30, 2004
- ---------------------------------- (Principal Financial Officer)
(Karen E. Dykstra) (Principal Financial Officer
and Controller)
/s/ Gregory D. Brenneman Director September 16, 2002August 30, 2004
- -------------------------------------------------------------------
(Gregory D. Brenneman)
/s/ Leslie A. Brun Director August 30, 2004
- ---------------------------------
(Leslie A. Brun)
/s/ Gary C. Butler Director September 16, 2002August 30, 2004
- -------------------------------------------------------------------
(Gary C. Butler)
/s/ Joseph A. Califano, Jr. Director September 16, 2002August 30, 2004
- -------------------------------------------------------------------
(Joseph A. Califano, Jr.)
/s/ Leon G. Cooperman Director September 16, 2002August 30, 2004
- -------------------------------------------------------------------
(Leon G. Cooperman)
/s/ George H. Heilmeier Director September 16, 2002
- ----------------------------------
(George H. Heilmeier)
-20-21
Signature Title Date
- --------- ----- ----
/s/ Glenn Hubbard Director August 30, 2004
- ---------------------------------
(Glenn Hubbard)
/s/ Ann Dibble Jordan Director September 16, 2002August 30, 2004
- -------------------------------------------------------------------
(Ann Dibble Jordan)
/s/ Harvey M. Krueger Director September 16, 2002August 30, 2004
- -------------------------------------------------------------------
(Harvey M. Krueger)
/s/ Frederic V. Malek- --------------------------------- Director September 16, 2002
- ----------------------------------August __, 2004
(Frederic V. Malek)
/s/ Henry Taub Director September 16, 2002August 30, 2004
- -------------------------------------------------------------------
(Henry Taub)
/s/ Laurence A. Tisch Director September 16, 2002
- ----------------------------------
(Laurence A. Tisch)
/s/ Josh S. Weston Director September 16, 2002August 30, 2004
- -------------------------------------------------------------------
(Josh S. Weston)
-21-
CERTIFICATIONS
I, Arthur F. Weinbach, certify that:
1. I have reviewed this annual report on Form 10-K of Automatic Data Processing,
Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.
Date: September 16, 2002
_____________/s/ Arthur F. Weinbach__________
----------------------
Arthur F. Weinbach
Chairman and Chief Executive Officer
I, Karen E. Dykstra, certify that:
1. I have reviewed this annual report on Form 10-K of Automatic Data Processing,
Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.
Date: September 16, 2002
______________/s/ Karen E. Dykstra _________________
--------------------
Karen E. Dykstra
Vice President, Finance (Principal Financial Officer)
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