<DOCUMENT>
<TYPE>10-K
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<FILENAME>form10k.txt
<DESCRIPTION>FORM10K
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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, 2005
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 (I.R.S. Employer Identification No.)
of 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 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 (Section 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 _____
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). [ ] 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 business day of the Registrant's
most recently completed second fiscal quarter was approximately $25,860,350,486.
On August 24, 2005 there were 578,425,694 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 2005 Annual Report Parts I, II & IV
to Stockholders.
Portions of the Registrant's Proxy Statement for Annual Part III
Meeting of Stockholders to be held on November 8, 2005.
________________________________________________________________________________
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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 16 of the "Notes to Consolidated Financial Statements"
contained in ADP's 2005 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 human resource ("HR")
information, payroll processing and benefit administration products and
services, including traditional and Web-based outsourcing solutions, that assist
over 518,000 employers in the United States, Canada, Europe, South America
(primarily Brazil), Australia and Asia to 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
2005, 86% of Employer Services' revenues were from the United States, 9% were
from Europe, 4% 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.
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. In addition, in order to expand its
presence in the small business client market, during fiscal 2005 ADP continued
to develop with Microsoft(R) Corporation two new fully integrated ADP payroll
solutions-ADP Payroll(SM) and ADP Total Payroll(SM)--that will be included
within Microsoft(R) Office Small Business Accounting 2006, available only in the
United States. ADP Payroll will offer users access to a
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"do-it-yourself" solution similar to those that are available in the traditional
software market and ADP Total Payroll will offer a full-featured payroll
solution for those who prefer to fully outsource payroll processing. ADP expects
these new offerings to be available for general distribution through Microsoft
Office Small Business Accounting 2006 during fiscal 2006.
In order to address the growing business process outsourcing (BPO) market
for clients seeking customized human resource information systems and benefit
outsourcing solutions, ADP continued to roll out its integrated comprehensive
outsourcing services (COS) solution that allows a client to outsource its HR,
payroll, payroll administration, employee service center, benefits
administration, and time and labor management functions to ADP.
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 these
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 401,000 ADP clients and over 2,000 federal, state, provincial and
local tax agencies, from the Internal Revenue Service and Canada Revenue Agency,
to local town governments. In fiscal 2005, ADP's Tax and Financial Services
business in the United States and its money movement business in Canada together
processed and delivered over 49 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 40.5 million remittances and employer payroll tax
returns, and moved approximately $885 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, 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 36 offices located
in sixteen states and serves approximately 4,900 PEO clients and approximately
113,000 work-site employees in all 50 states.
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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.
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 processing (including full departmental
outsourcing) and various human resource 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
South America (primarily Brazil), Australia and Asia, Employer Services provides
full departmental outsourcing of payroll services. In fiscal 2005, ADP continued
to expand its GlobalView(SM) offering, making it available in 18 countries.
GlobalView is built on the mySAP(TM) ERP Human Capital Management and the SAP
NetWeaver(TM) platform and offers multinational corporations an end-to-end
outsourcing solution enabling standardized payroll processing and human
resources administration.
Brokerage Services
Brokerage Services provides transaction processing services, desktop
productivity applications and investor communications solutions to the financial
services industry worldwide. Brokerage Services' 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) Internet delivery; personalized on-demand and offset financial printing;
statements, confirmations, fulfillment, content management, and imaging,
archival, and workflow solutions that enhance communications with investors;
proxy distribution and vote processing, regulatory mailings, tax reporting and
corporate actions/reorganization solutions that help clients meet regulatory and
compliance needs; (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.
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 that conduct
business in more than 90 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 2005, 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.
Securities Clearing and Outsourcing Services
In fiscal 2005, ADP completed its acquisition of the U.S. Clearing and
BrokerDealer Services divisions of Bank of America and created the Securities
Clearing and Outsourcing Services segment. This acquisition furthered Brokerage
Services' business process outsourcing strategy by positioning ADP to provide
any brokerage firm, regardless of size, an appropriate range of outsourcing
services to best
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meet its individual needs on a single technology platform: service bureau,
operations outsourcing, or correspondent clearing services.
Securities Clearing and Outsourcing Services provides clearing, custody,
financing, securities lending, trade execution and outsourcing solutions to
broker-dealers. Securities Clearing and Outsourcing Services derives revenues
from commissions and service charges related to clearing and execution
activities and from interest income on margin financing, client short selling
activity, and uninvested balances. Securities Clearing and Outsourcing Services
also extends margin loans directly to correspondents to finance their
proprietary activity.
Securities transactions are effected for customers on either a cash or
margin basis. In a margin transaction, Securities Clearing and Outsourcing
Services extends credit to a customer for a portion of the purchase price of the
security. Such credit is collateralized by securities in the customer's accounts
in accordance with regulatory and internal requirements. Securities Clearing and
Outsourcing Services receives income from interest charged on such loans.
Securities Clearing and Outsourcing Services also borrows securities from banks
and other broker-dealers to facilitate customer and proprietary short selling
activity, and lends securities to broker-dealers and other trading entities to
cover short sales and to complete transactions that require delivery of
securities by settlement date.
Dealer Services
Dealer Services provides integrated dealer management systems (such a
system is also known in the industry as a "DMS") and business solutions to
automotive, heavy truck, and powersports (i.e., motorcycle, marine and
recreational) vehicle retailers and manufacturers throughout North America and
Europe. More than 19,500 automotive, heavy truck and powersports dealers use
ADP's DMS, other software based solutions, networking solutions, data
integration, consulting and/or marketing services.
Dealer Services offers its dealership clients a service product 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 license ADP's
DMS and/or other software, and outsource all information technology management,
computing and network infrastructure, technology decisions and system support to
Dealer Services.
In fiscal 2005, ADP acquired Tesoft Automocion S.A., which provides dealer
management systems to approximately 1,500 automotive dealers in Spain, Portugal
and France. ADP also acquired AutoFuse, Inc., a web site development solutions
company.
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Claims Services
Claims Services offers integrated business solutions for clients in the
property insurance, auto collision repair and auto recycling industries. These
solutions help clients manage costs, improve efficiency and accelerate the
claims review and settlement process. Claims Services' 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, managed repair solutions 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 2005,
Claims Services expanded its auto claims services into India, Russia, Eastern
Europe and Central America. It also acquired a majority interest in its Spanish
licensee, Audatex Espana, S.A.
Markets and Marketing Methods
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 and Claims 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 and Securities Clearing and Outsourcing
Services serve 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 heavy
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.
ADP's businesses are not 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 2005, Employer Services
continued to grow, primarily due to the increase in its United States payroll
and payroll tax businesses, including new business started in the fiscal year,
an increase in the number of employees on our clients' payrolls, 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 an increase in the amount of holders of
equities and an increase in mutual fund special communications; Dealer Services
grew due to the revenues generated in fiscal 2005 from fiscal 2004 acquisitions
and growth in its traditional businesses; and our investment income on our
client funds increased due to the increase in our average client fund balances
and higher interest rates.
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.
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Competition
The computing services industry is highly competitive. ADP knows of no
reliable statistics by which it can determine the number of its competitors, but
it believes that it is one of the largest providers of computerized transaction
processing, data communication and information services in the world.
ADP's competitors include other independent computing services companies,
divisions of diversified enterprises and banks. Another competitive factor in
the computing services industry is the in-house computing function, whereby a
company installs and operates its own computing systems.
Competition in the computing services industry is primarily based on
service responsiveness, product quality and price. ADP believes that it is very
competitive in each of these areas and that there are no material negative
factors impacting ADP's competitive position in the computing services industry.
No one competitor or group of competitors is dominant in the computing services
industry.
Clients and Client Contracts
ADP provides its services to approximately 590,000 clients. In fiscal 2005,
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 and because no sale is considered firm until it is installed and begins
producing revenue. ADP receives sales orders in all of our businesses and is
continuously in the process of performing implementation services for our
clients. 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, 2005, 2004 and 2003, ADP invested
$696 million, $704 million, and $604 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.
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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 44,000 persons as of June 30, 2005.
Item 2. Properties
ADP leases space for 22 of its principal processing centers. In addition,
ADP leases numerous other operational offices and sales offices. All of these
leases, which aggregate approximately 7,374,053 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 3,574,365 square feet. None
of ADP's owned facilities is subject to any material 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 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
2005 Annual Report to Stockholders, which information is incorporated herein by
reference. As of August 17, 2005, the Registrant had 40,337 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 January 24, 2005, the Registrant issued 12,452 shares of its Common
Stock, with a market value of approximately $500,000, in respect of an earnout
paid to a company related to 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, 2005 to
April 30, 2005 444,610 $44.12 444,400 17,204,400
May 1, 2005 to
May 31, 2005 1,068,509 $44.11 1,050,000 16,154,400
June 1, 2005 to
June 30, 2005 2,573,044 $42.04 2,563,300 13,591,100
Total 4,086,163(2) 4,057,700
</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 2005, pursuant to the terms of the Registrant's restricted stock
program, the Registrant (i) made repurchases of 210 shares during April 2005,
3,509 shares during May 2005 and 744 shares during June 2005 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 15,000 shares during May 2005 and 9,000 shares during June
2005 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 2005 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 of Financial Condition and
Results of Operations" contained in the Registrant's 2005 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 of Financial Condition and
Results of Operations" contained in the Registrant's 2005 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 fiscal years ended June
30, 2005 (see Note 17 of the "Notes to Consolidated Financial Statements"
contained in ADP's 2005 Annual Report to Stockholders)
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
Item 9A. Controls and Procedures
Attached as Exhibits 31.1 and 31.2 to this Form 10-K are certifications of
ADP's Chief Executive Officer and Chief Financial Officer, which are required by
Rule 13a-14(a) of the Securities Exchange Act of 1934. This "Controls and
Procedures" section should be read in conjunction with such certifications and
the Deloitte & Touche LLP attestation report on management's assessment of ADP's
internal control over financial reporting that appears on page 47 of ADP's 2005
Annual Report to Stockholders and is hereby incorporated herein by reference.
Management's Evaluation of Disclosure Controls and Procedures
ADP carried out an evaluation, under the supervision and with the
participation of ADP's management, including its Chief Executive Officer and
Chief Financial Officer, of the effectiveness of
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ADP'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
ADP's disclosure controls and procedures as of June 30, 2005 were effective to
ensure that information required to be disclosed by ADP 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.
Management's Report on Internal Control over Financial Reporting
It is the responsibility of Automatic Data Processing, Inc.'s ("ADP")
management to establish and maintain effective internal control over financial
reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of
1934). Internal control over financial reporting is designed to provide
reasonable assurance to ADP's management and board of directors regarding the
preparation of reliable financial statements for external purposes in accordance
with generally accepted accounting principles.
ADP's internal control over financial reporting includes those policies and
procedures that: (i) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of ADP; (ii) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of
ADP are being made only in accordance with authorizations of management and
directors of ADP; and (iii) provide reasonable assurance regarding the
prevention or timely detection of unauthorized acquisition, use or disposition
of ADP's assets that could have a material effect on the financial statements of
ADP.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation.
Management has performed an assessment of the effectiveness of ADP's
internal control over financial reporting as of June 30, 2005 based upon
criteria set forth in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on this
assessment, management determined that ADP's internal control over financial
reporting was effective as of June 30, 2005.
Management has excluded from its assessment of internal control over
financial reporting at June 30, 2005 its subsidiary, ADP Clearing and
Outsourcing Services, Inc., which holds all the assets of the Securities
Clearing and Outsourcing Services segment that was formed as a result of an
acquisition on November 1, 2004. ADP Clearing and Outsourcing Services, Inc.
represents 1% and 5% of ADP's consolidated total revenues and consolidated total
assets, respectively, for the year ended June 30, 2005.
Deloitte & Touche LLP, an independent registered public accounting firm,
has issued an attestation report on management's assessment of internal control
over financial reporting, which attestation report appears on page 47 of ADP's
2005 Annual Report to Stockholders.
Changes in Internal Control over Financial Reporting
There were no changes in ADP's internal control over financial reporting
that occurred during the quarter ended June 30, 2005 that have materially
affected, or are reasonably likely to materially affect, ADP's internal control
over financial reporting.
11
<PAGE>
Item 9B. Other Information
None
12
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Registrant
Executive Officers of the Registrant
The executive officers of the Registrant, their ages, positions and the
period during which they have been employed by ADP are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Employed by
Name Age Position ADP Since
--------------------- --- ------------------------ -------------
Steven J. Anenen 52 President, 1975
Dealer Services
James B. Benson 60 Vice President, General 1977
Counsel and Secretary
Richard C. Berke 60 Vice President, Human 1989
Resources
Gary C. Butler 58 President and Chief 1975
Operating Officer
Janice M. Colby 50 President, 2001
Claims Solutions Group
Raymond L. Colotti 59 Vice President and 1995
Treasurer
Richard J. Daly 52 Group President, 1989
Brokerage Services
Karen E. Dykstra 46 Vice President and 1981
Chief Financial Officer
John Hogan 57 Group President, 1993
Brokerage Services
Campbell B. Langdon 44 President, 2000
Tax, Financial and Time
Management Services
S. Michael Martone 57 Group President, Employer 1987
Services
Dan Sheldon 49 Vice President, 1984
Corporate Controller
13
<PAGE>
Jan Siegmund 41 Vice President, 1999
Strategic Development
George I. Stoeckert 57 President, Employer 1991
Services - International
Arthur F. Weinbach 62 Chairman and 1980
Chief Executive Officer
</TABLE>
Messrs. Benson, Berke, Butler, Colotti, Daly, Hogan, Martone and Weinbach
have each been employed by ADP in senior executive positions for more than the
past five years.
Steven J. Anenen joined ADP in 1975. Prior to his promotion to President,
Dealer Services in 2004, he served as Senior Vice President, Dealer Services
from 1998 to 2004.
Janice M. Colby joined ADP in 2001. Prior to her promotion to President,
Claims Solutions Group in 2005, she served as President, Small Business Services
Division, Employer Services from 2001 to 2005. From 1996 to 2001 she served as
Vice President, Business Customer Care for AT&T Corporation.
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 and as Vice President and Controller from 1998 to 2001.
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.
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.
Jan Siegmund joined ADP in 1999 as Vice President, Strategy. Prior to his
promotion to Vice President, Strategic Development in 2004, he served as Senior
Vice President of Strategic Development, Brokerage Services from 2000 to 2004.
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 2005
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 2005 Annual Meeting of Stockholders, which
information is incorporated herein by reference.
14
<PAGE>
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.
Audit Committee
See "Audit Committee Report" in the Proxy Statement for Registrant's 2005
Annual Meeting of Stockholders, which information is incorporated herein by
reference.
Item 11. Executive Compensation
See "Compensation of Executive Officers" and "Election of Directors" in the
Proxy Statement for Registrant's 2005 Annual Meeting of Stockholders, which
information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
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 2005
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 2005 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 2005 Annual Meeting of Stockholders, which
information is incorporated herein by reference.
15
<PAGE>
Part IV
Item 15. Exhibits and Financial Statement Schedules
(a)1. Financial Statements
The following reports and consolidated financial statements of the
Registrant contained in the Registrant's 2005 Annual Report to Stockholders are
also included in Part II, Item 8:
Statements of Consolidated Earnings - years ended June 30, 2005, 2004 and
2003
Consolidated Balance Sheets - June 30, 2005 and 2004
Statements of Consolidated Stockholders' Equity - years ended June 30,
2005, 2004 and 2003
Statements of Consolidated Cash Flows - years ended June 30, 2005, 2004 and
2003
Notes to Consolidated Financial Statements
Management Report on Internal Control Over Financial Reporting
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
Page in Form 10-K
-----------------
Report of Independent Registered
Public Accounting Firm 20
Schedule II - Valuation and Qualifying Accounts 21
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
16
<PAGE>
3.2 - Amended and Restated By-laws of the Registrant - incorporated
by reference to Exhibit 3.2 to Registrant's Current Report on
Form 8-K, dated August 11, 2005
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 April 28, 2005 between Automatic
Data Processing, Inc. and Arthur F. Weinbach - incorporated
by reference to Exhibit 10.1 to Registrant's Current Report
on Form 8-K, dated April 28, 2005 (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
Quarterly Report on Form 10-Q for the fiscal quarter ended
December 31, 2004 (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)
17
<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
10.8 to Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended December 31, 2004 (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 29, 2005, among
Automatic Data Processing, Inc., the Lenders Party thereto,
JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of
America, N.A., as Syndication Agent, and Barclays Bank PLC,
BNP Paribas, Citicorp USA, Inc., Deutsche Bank Securities
Inc. and Wachovia Bank, National Association, as
Documentation Agents - incorporated by reference to Exhibit
10.14 to Registrant's Current Report on Form 8-K, dated June
29, 2005
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 - incorporated by
reference to Exhibit 10.15 to Registrant's Annual Report on
Form 10-K for the fiscal year ended June 30, 2004
18
<PAGE>
10.16 - Five-Year Credit Agreement, dated as of June 29, 2005, among
Automatic Data Processing, Inc., the Lenders Party thereto,
JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of
America, N.A., as Syndication Agent, and Barclays Bank PLC,
BNP Paribas, Citicorp USA, Inc., Deutsche Bank Securities
Inc. and Wachovia Bank, National Association, as
Documentation Agents - incorporated by reference to Exhibit
10.16 to Registrant's Current Report on Form 8-K, dated June
29, 2005
10.17 - 2000 Stock Option Grant Agreement (Form for Employees) -
incorporated by reference to Exhibit 10.1 to Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2004 (Management Compensatory Plan)
10.18 - 2000 Stock Option Grant Agreement (Form for French
Associates) - incorporated by reference to Exhibit 10.1 to
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 2004 (Management Compensatory
Plan)
10.19 - 2000 Stock Option Grant Agreement (Form for Non-Employee
Directors) - incorporated by reference to Exhibit 10.1 to
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 2004 (Management Compensatory
Plan)
10.20 - Directors Compensation Summary Sheet - incorporated by
reference to Exhibit 10.20 to Registrant's Current Report on
Form 8-K, dated August 11, 2005
13 - Pages 16 to 47 of the 2005 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
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
19
<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, 2005 and 2004,
and for each of the three years in the period ended June 30, 2005, and have
issued our report thereon dated August 17, 2005; such consolidated financial
statements and report are included in your 2005 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 17, 2005
20
<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
----------------------
(1) (2)
<S> <C> <C> <C> <C> <C>
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, 2005:
Allowance for doubtful accounts:
Current $50,980 $17,964 $1,209(B) $(24,475)(A) $45,678
Long-term $8,578 $1,326 $ -- $ (1,732)(A) $8,172
Deferred tax valuation allowance $25,858 $7,821 $ -- $ (1,205)(E) $32,474
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
(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.
</TABLE>
21
<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 31, 2005 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>
<S> <C> <C>
Signature Title Date
--------- ----- ----
/s/ Arthur F. Weinbach Chairman, Chief Executive August 31, 2005
-------------------------- Officer and Director
(Arthur F. Weinbach) (Principal Executive Officer)
/s/ Karen E. Dykstra Chief Financial Officer August 31, 2005
-------------------------- (Principal Financial Officer
(Karen E. Dykstra) and Principal Accounting
Officer)
/s/ Gregory D. Brenneman Director August 31, 2005
-------------------------
(Gregory D. Brenneman)
/s/ Leslie A. Brun Director August 31, 2005
-------------------------
(Leslie A. Brun)
/s/ Gary C. Butler Director August 31, 2005
-------------------------
(Gary C. Butler)
/s/ Leon G. Cooperman Director August 31, 2005
-------------------------
(Leon G. Cooperman)
22
<PAGE>
Signature Title Date
--------- ----- ----
/s/ R. Glenn Hubbard Director August 31, 2005
-------------------------
(R. Glenn Hubbard)
/s/ John P. Jones Director August 31, 2005
-------------------------
(John P. Jones)
/s/ Ann Dibble Jordan Director August 31, 2005
-------------------------
(Ann Dibble Jordan)
/s/ Harvey M. Krueger Director August 31, 2005
-------------------------
(Harvey M. Krueger)
/s/ Frederic V. Malek Director August 31, 2005
-------------------------
(Frederic V. Malek)
/s/ Henry Taub Director August 31, 2005
-------------------------
(Henry Taub)
</TABLE>
23
</TEXT>
</DOCUMENT>