<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>form10k.txt
<DESCRIPTION>FORM10-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, 2004
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. [ ]
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 _____
-----
The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the Registrant as of the last trading day of the Registrant's
most recently completed second fiscal quarter was approximately $23,366,360,530.
On August 24, 2004, there were 584,153,997 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 2004 Annual Report to Stockholders.Parts I, II & IV
Portions of the Registrant's Proxy Statement for Annual Meeting
of Stockholders to be held on November 9, 2004. 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 14 of the "Notes to Consolidated Financial Statements"
contained in ADP's 2004 Annual Report to Stockholders, which information is
incorporated herein by reference. The Registrant's Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments
to those reports, Proxy Statement for its Annual Meeting of Stockholders and
Annual Report to Stockholders 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,
human resource ("HR") and benefit administration products and services,
including traditional and Web-based outsourcing solutions, that help over
478,000 employers in the United States, Canada, Europe, South America (primarily
Brazil), Australia and Asia staff, manage, pay and retain their employees.
Employer Services markets these products and services through its direct
marketing sales force and, on a limited basis, through indirect sales channels,
such as marketing relationships with banks and accountants. In fiscal 2004, 86%
of Employer Services' revenues were from the United States, 10% were from
Europe, 3% were from Canada and 1% 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. To facilitate this approach,
in the United States and Canada, Employer Services is comprised of the following
groups: Small Business Services ("SBS") (primarily companies with fewer than 50
employees); Major Accounts Services (primarily companies with between 50 and 999
employees); and National Account Services (primarily companies with 1,000 or
more employees).
SBS processes payroll for 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 fiscal 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 and benefits needs. Through ADP 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 that 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., form W-2) in the United States.
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Other large clients rely on ADP to design and deliver customized human resource
information systems and benefit outsourcing solutions. 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 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, and analogous services are
provided in the Canadian market.
ADP's Tax and Financial Services business in the United States and its
money movement business in Canada process and collect federal, state, provincial
and local payroll taxes on behalf of, and from, ADP clients and remit such taxes
to the appropriate taxing authorities. ADP'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
TotalPay(R) payroll check (ADPCheck(TM)), full service direct deposit (FSDD)
and, in conjunction with major bank partners, stored value payroll card
(TotalPay(R) Card) products and the collection and payment of wage garnishments.
In the United States and Canada, these businesses support large, mid-sized and
small clients and provide an electronic interface between approximately 379,000
ADP clients 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 2004, ADP's Tax and Financial Services business in the
United States and its money movement business in Canada together processed and
delivered over 48 million year-end tax statements to its clients' employees
(i.e., form W-2 in the United States and analogous statements in Canada)
and approximately 37.5 million remittances and employer payroll tax returns, and
moved approximately $780 billion in client funds to taxing authorities and its
clients' employees via electronic transfer, direct deposit and ADPCheck.
ADP's HR services, by interfacing with a client's payroll database,
provide comprehensive HR recordkeeping services, including benefit
administration and outsourcing, applicant tracking, employee history and
position control. ADP's Benefit Services provides benefit 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 the United States, ADP TotalSource(R), ADP's professional employer
organization ("PEO") business, provides clients with comprehensive employment
administration outsourcing solutions, including payroll, payroll tax filing,
employee background checks, HR guidance, 401(k) plan administration, benefit
administration, regulatory compliance services, workers' compensation insurance
and supplemental benefits for employees. ADP TotalSource(R), the second largest
PEO in the U.S. (based on the number of worksite employees), has 30 offices
located in sixteen states and serves over 4,200 PEO clients and approximately
94,000 work-site employees in all 50 states.
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 2004, ADP also expanded its service
offerings in the United States by acquiring substantially all of the assets of
ClinNet Solutions, LLC, a
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provider of occupational health services, including substance abuse testing
programs, information and data management services, safety training, accident
investigation, and clinic management services.
Outside the United States and 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 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
expanded its alliance with SAP AG, which began in 2001 as an ADP offering within
Australia and Asia of a payroll and HR administration solution based on SAP's
technology, to create a global offering for multi-national companies.
Brokerage Services
Brokerage Services provides transaction processing services, desktop
productivity applications and investor communications services to the financial
services industry worldwide. ADP's products and services include: (i) global
order entry, trade processing and settlement systems that enable firms to trade
virtually any financial instrument, in any market, at any time; (ii)
full-service investor communications services including: electronic delivery and
Web solutions; workflow services; financial, offset, and on-demand printing;
proxy distribution and vote processing; householding; regulatory mailings;
fulfillment; and customized communications; (iii) automated, browser-based
desktop productivity tools for financial consultants and back office personnel;
and (iv) integrated delivery of multiple products and services through ADP's
Global Processing Solution(SM).
Brokerage Services serves a large client base in the financial services
industry, including: retail and institutional brokerage firms; global banks;
mutual funds; annuity companies; institutional investors; specialty trading
firms; clearing firms; and publicly owned corporations. Brokerage Services
provides securities transaction processing, printing and electronic distribution
of shareholder communications and other services to clients in more than 16
countries in North America, Europe, Asia and Australia. Brokerage Services also
provides computerized proxy vote tabulation and shareholder communication,
distribution and fulfillment services, including Web-enabled products and
services. 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 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.
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Dealer Services
Dealer Services provides integrated dealer management computer systems
(such a system is also known in the industry as a "DMS") and other business
solutions to automotive, heavy truck, and powersports (i.e., motorcycle, marine
and recreational) vehicle retailers and their manufacturers throughout North
America and Europe. More than 17,000 automotive, heavy truck and powersports
dealers use ADP's DMS, networking solutions, data integration, consulting and/or
marketing services.
Dealer Services offers its dealership clients a turnkey service package
that includes computer hardware, hardware maintenance services, licensed
software, software support, system design and network consulting services.
Dealer Services also offers its clients Web-enabled business solutions,
"front-end" dealership sales process and business development training services,
consulting services, software products and customer relationship management
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 estimation and acquisition of vehicle registration
and lien holder information. Dealer Services also offers an Application Service
Provider (ASP) managed services solution to its dealership clients in which the
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 integrated business solutions for clients in the
property and casualty insurance, auto collision repair and auto recycling
industries. These products help clients manage costs and improve efficiency and
accelerate the claims review and settlement process. These products and
services include (i) claims management applications, such as automated collision
repair estimating, total loss vehicle valuation, first notice of loss, dispatch
and assignment, claims audit, claims payment and alternative parts locating,
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 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.
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Markets and Marketing Methods
All of ADP's services are offered broadly across North America and
Europe. Some services within the Employer Services and Brokerage Services
business units are also offered in Australia and Asia, and Employer Services
also provides services in South America (primarily Brazil).
None of ADP's major business groups have a single homogenous client
base or market. For example, Brokerage Services serves a large client base in
the financial services industry, including retail and institutional firms, banks
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 industry 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 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 a decrease
in investment 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.
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Clients and Client Contracts
ADP provides its services to approximately 550,000 clients. In fiscal
2004, no single client or group of affiliated clients accounted 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. 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
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.
Systems Development and Programming
During the fiscal years ended June 30, 2004, 2003 and 2002, ADP
invested $704 million, $604 million and $535 million, respectively, in systems
development and programming, migration to new computing technologies and the
development of new 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 42,000 persons as of June 30, 2004.
Item 2. Properties
ADP leases space for 20 of its principal processing centers. In
addition, ADP leases numerous other operational offices and sales offices. All
of these leases, which aggregate approximately 6,700,000 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 15 of its
processing facilities, other operational offices and its corporate headquarters
complex in Roseland, New Jersey, which aggregate approximately 3,430,000 square
feet. None of ADP's owned facilities is subject to any material
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encumbrances. ADP believes its facilities are currently adequate for their
intended purposes and are adequately maintained.
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, the Registrant believes it has valid defenses with respect to the
legal matters pending against it and the Registrant believes that the ultimate
resolution of these matters will not have a material adverse impact on its
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, Inc., Universal
Computer Consulting, Ltd., Universal Computer Services, Inc., and Dealer
Computer Services, Inc. (collectively, "UCS"), which lawsuit has since been
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 and misappropriation of those trade secrets by the
Registrant through its acquisition of DSI. UCS sought injunctive relief and
damages 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 District 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
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Part II
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
See "Market Price, Dividend Data and Other" contained in the
Registrant's 2004 Annual Report to Stockholders, which information is
incorporated herein by reference. As of August 24, 2004, the Registrant had
38,331 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 March 25, 2004, the Registrant issued 11,607 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 Securities
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(a) (b) (c) (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) Repurchase 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) 4,844,900
</TABLE>
(1) In March 2001, the Registrant received the Board of Directors' approval
to repurchase up to 50 million shares of the Registrant's common stock. In
November 2002, the Registrant received the Board of Directors' approval to
repurchase an additional 35 million shares of the Registrant's common stock.
There is no expiration date for the common stock repurchase plan.
(2) During 2004, pursuant to the terms of the Registrant's restricted 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 satisfy certain tax withholding requirements
through the delivery of shares to the Registrant instead of cash and (ii)
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made purchases of 4,800 shares during June 2004 at a price of $.10 per share
under the terms of such program to repurchase stock granted to employees who
have left the Registrant.
(3) The average price per share does not include the repurchases described
in clause (ii) of the preceding footnote.
Item 6. Selected Financial Data
See "Selected Financial Data" contained in the Registrant's 2004 Annual
Report to 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 2004 Annual Report to Stockholders, which information is
incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
See "Management's Discussion and Analysis - Financial Condition,
Liquidity and Capital Resources" contained in the Registrant's 2004 Annual
Report to Stockholders, which information is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The financial statements described in Item 15(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, 2004 (see Note 15 of the "Notes to Consolidated Financial
Statements" contained in ADP's 2004 Annual Report to Stockholders)
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
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.
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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.
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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>
James B. Benson 59 Vice President, General 1977
Counsel and Secretary
Richard C. Berke 59 Vice President, Human 1989
Resources
Gary C. Butler 57 President and Chief 1975
Operating Officer
Raymond L. Colotti 58 Vice President and 1995
Treasurer
Richard J. Daly 51 Group President, 1989
Brokerage Services
G. Harry Durity 57 Vice President, 1994
Worldwide Business
Development
Karen E. Dykstra 45 Chief Financial Officer 1981
John Hogan 56 Group President, 1993
Brokerage Services
Campbell B. Langdon 43 President, 2000
Tax, Financial and Time
Management Services
S. Michael Martone 56 Group President, Employer 1987
Services
Peter Op de Beeck 48 President, 1998
Claims Solutions Group
Dan Sheldon 48 Vice President, 1984
Corporate Controller
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George I. Stoeckert 56 President, Employer 1991
Services - International
Arthur F. Weinbach 61 Chairman and 1980
Chief Executive Officer
</TABLE>
Messrs. Benson, Berke, Butler, Colotti, Daly, Durity, Hogan, Martone
and Weinbach have each been employed by ADP in senior executive positions for
more than the past five years.
Karen E. Dykstra joined ADP in 1981. Prior to her promotion to Chief
Financial Officer in 2003, she served as Vice President, Finance from 2001 to
2003, Vice President and Controller from 1998 to 2001 and Assistant Corporate
Controller from 1996 to 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.
Directors of the Registrant
See "Election of Directors" in the Proxy Statement for Registrant's
2004 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 2004 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
<PAGE>
Item 11. Executive Compensation
See "Compensation of Executive Officers" and "Election of Directors"
in the Proxy Statement for Registrant's 2004 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" and "Compensation of Executive Officers - Equity
Compensation Plan Information" in the Proxy Statement for Registrant's 2004
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 2004 Annual Meeting of Stockholders, which
information is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
See "Independent Registered Public Accounting Firms' Fees" in the Proxy
Statement for Registrant's 2004 Annual Meeting of Stockholders, which
information is incorporated herein by reference.
14
<PAGE>
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 2004 Annual Report to Stockholders are
also included in Part II, Item 8:
Statements of Consolidated Earnings - years ended June 30, 2004, 2003
and 2002
Consolidated Balance Sheets - June 30, 2004 and 2003
Statements of Consolidated Stockholders' Equity - years ended
June 30, 2004, 2003 and 2002
Statements of Consolidated Cash Flows - years ended June 30, 2004, 2003
and 2002
Notes to Consolidated Financial Statements
Report of Management
Report of Independent Registered 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
<TABLE>
<CAPTION>
Page in Form 10-K
<S> <C> <C>
Report of Independent Registered
Public Accounting Firm 19
Schedule II - Valuation and Qualifying Accounts 20
</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. 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 Registration Statement No.
333-72023 on Form S-4 filed with the Commission on
February 9, 1999
15
<PAGE>
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
<PAGE>
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 Stock Option Plan - 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)
10.12 - 2003 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 June 30, 2004,
among Automatic Data Processing, Inc., the Lenders
Party thereto, JPMorgan Chase Bank, as Administrative
Agent, 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
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 18 to 45 of the 2004 Annual Report to
Stockholders (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
<PAGE>
23 - Consent of Independent Registered 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
32.2 - 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) 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
<PAGE>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders 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, 2004 and 2003,
and for each of the three years in the period ended June 30, 2004, and have
issued our report thereon dated August 11, 2004; such consolidated financial
statements and report are included in your 2004 Annual Report to Stockholders
and are incorporated herein by reference. Our audits also included the
consolidated financial statement schedule of Automatic Data Processing, Inc.,
listed at Item 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 11, 2004
19
<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, 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 $ 743(B) $ (17,569)(A) $52,873
Long-term $16,666 $1,176 $ -- $ (1,823)(A) $16,019
Deferred tax valuation allowance $41,930 $3,179 $ 313(C) $ (5,282)(D) $40,140
</TABLE>
(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 goodwill.
(E) A portion of this allowance is related to the net deferred tax assets
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
<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)
August 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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Arthur F. Weinbach Chairman, Chief Executive August 30, 2004
---------------------------------- Officer and Directors
(Arthur F. Weinbach) (Principal Executive Officer)
/s/ Karen E. Dykstra Chief Financial Officer August 30, 2004
---------------------------------- (Principal Financial Officer)
(Karen E. Dykstra)
/s/ Gregory D. Brenneman Director August 30, 2004
---------------------------------
(Gregory D. Brenneman)
/s/ Leslie A. Brun Director August 30, 2004
---------------------------------
(Leslie A. Brun)
/s/ Gary C. Butler Director August 30, 2004
---------------------------------
(Gary C. Butler)
/s/ Joseph A. Califano, Jr. Director August 30, 2004
---------------------------------
(Joseph A. Califano, Jr.)
/s/ Leon G. Cooperman Director August 30, 2004
---------------------------------
(Leon G. Cooperman)
21
<PAGE>
Signature Title Date
--------- ----- ----
/s/ Glenn Hubbard Director August 30, 2004
---------------------------------
(Glenn Hubbard)
/s/ Ann Dibble Jordan Director August 30, 2004
---------------------------------
(Ann Dibble Jordan)
/s/ Harvey M. Krueger Director August 30, 2004
---------------------------------
(Harvey M. Krueger)
--------------------------------- Director August __, 2004
(Frederic V. Malek)
/s/ Henry Taub Director August 30, 2004
---------------------------------
(Henry Taub)
/s/ Josh S. Weston Director August 30, 2004
---------------------------------
(Josh S. Weston)
</TABLE>
22
</TEXT>
</DOCUMENT>