________________________________________________________________________________
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, 2003
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 $23,534,103,946.
On August 31, 2003, there were 594,883,230 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 2003 Annual Report to Shareholders.Parts I, II & IV
Portions of the Registrant's Proxy Statement for Annual Meeting
of Stockholders to be held on November 11, 2003. Part III
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Part I
Item 1. Business
Automatic Data Processing, Inc., incorporated in Delaware in 1961
(together with its subsidiaries "ADP" or the "Registrant"), is one of the
largest providers of computerized transaction processing, data communication and
information services in the world. For financial information by segment and by
geographic area, see Note 13 of the "Notes to Consolidated Financial Statements"
contained in ADP's 2003 Annual Report to Shareholders, 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 Shareholders 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 benefits administration products and services,
including traditional and Web-based outsourcing solutions that help over 460,000
employers in North America, 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, accountants and online companies. In fiscal 2003, 90%
of Employer Services' revenues were from North America, 9% were from Europe and
1% was from South America (primarily Brazil), Australia and Asia.
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 North America, Employer Services is comprised of the following groups: Small
Business Services (which was previously known as Emerging Business Services)
("SBS") (primarily companies with fewer than 50 employees); Major Accounts
(primarily companies with between 50 and 999 employees); and National Accounts
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 and National
Accounts 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 2003, ADP expanded its presence in its National
Accounts Services market through its acquisition of ProBusiness Services, Inc.,
a provider of comprehensive 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
human resource, payroll and benefits needs. Through ADP Connection(R), 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 delivers stand-alone services
such as payroll tax filing, check printing and distribution and year-end tax
statements (i.e., W-2s). Other large clients rely on ADP to design and deliver
customized human resource information systems and benefits outsourcing
solutions.
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In North America, ADP provides payroll services that include the
preparation of client employee paychecks and electronic direct deposits, along
with supporting journals, summaries and management reports. ADP also supplies
the quarterly and annual social security, medicare and federal, state and local
income tax withholding reports required to be filed by employers and employees.
In Europe, South America (primarily Brazil), Australia and Asia, Employer
Services provides full departmental outsourcing of payroll services.
The ADP Financial and Compliance Services business (which was
previously known as ADP Tax and Financial Services) processes and collects
federal, state and local payroll taxes on behalf of, and from, ADP clients and
remits such taxes to the appropriate taxing authorities. The ADP Financial and
Compliance Services business is also responsible for the efficient movement of
funds and information from clients to third parties through service offerings
such as new hire reporting, ADP's TotalPay(TM) payroll check (ADPCheck(TM)),
full service direct deposit (FSDD) and, in conjunction with major bank partners,
stored value payroll card (TotalPay Card) products and the collection and
payment of wage garnishments. The ADP Financial and Compliance Services business
supports large, mid-sized and small clients. It provides an electronic interface
between approximately 364,000 ADP clients in the United States and Canada and
about 2,000 federal, state, provincial and local tax agencies, from the Internal
Revenue Service to local town governments. In fiscal 2003, the ADP Financial and
Compliance Services business printed and delivered approximately 38 million
year-end tax statements in North America and moved over $620 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 benefits
administration and outsourcing, applicant tracking, employee history and
position control. ADP's Benefits Services provides benefits administration
across all market segments, including management of the open enrollment of
benefits, COBRA and flexible spending account administration, Section 529
College Savings Plan administrative services and 401(k) recordkeeping. In fiscal
2003, ADP greatly expanded its retirement services business through its
acquisition of the retirement services recordkeeping operations of Scudder
Investments, making ADP the 4th largest recordkeeper of retirement plans in the
United States (based on number of plans).
ADP TotalSource, ADP's professional employer organization ("PEO")
business, provides clients with comprehensive employment administration
outsourcing solutions, including payroll, tax filing, employee background
checks, HR guidance, 401(k) plan administration, benefits administration,
regulatory compliance services, workers' compensation insurance and supplemental
benefits for employees. ADP TotalSource, the second largest PEO in the U.S.
(based on the number of worksite employees), has 29 offices located in fifteen
states and serves over 3,800 PEO clients and over 85,000 work-site employees in
all 50 states.
ADP complements its payroll and HR services with additional employer
services that include products such as time and labor management, pre-employment
screening and selection services and unemployment compensation management. In
fiscal 2003, ADP expanded its service offerings by acquiring the assets of the
SMS companies, leading providers of job tax credit services that assist
employers in the identification of, and filing for, special tax credits based
on geography, demographics and other criteria.
During fiscal 2003, ADP continued the process of Web-enabling existing
product offerings, while at the same time creating new products expressly
designed for the Internet. ADP's Internet offerings now include its
EasyPayNet(sm) Web-based payroll solution for SBS clients, Pay eXpert(R)
Web-based payroll solution for Major Accounts clients and its PayForce(sm)
Web-based payroll solution and
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Enterprise HRMS integrated HR, payroll and benefits solution for National
Accounts Services clients, all of which feature Web-based employer self-service
capabilities. Further, during fiscal 2003, ADP continued its rollout of its new
TotalChoice(sm) Solutions Web-based payroll solution, a fully-integrated,
Web-native human resource and payroll management solution hosted by ADP that was
originally launched in fiscal 2002. For benefits administration, ADP offers
Benefits eXpert(sm), a Web-based benefits administration and employee
self-service solution that allows mid-sized companies in Major Accounts to
manage more efficiently their employees' health and welfare benefits. For large
clients, ADP Benefit Services offers a Web-based COBRA administrative solution,
as well as employee self-service applications for open-enrollment, flexible
spending account administration and other employee-administered benefit options.
The continued increase in the number of multi-national companies makes
payroll and human resource management services a global opportunity. In fiscal
2003, ADP increased payroll sales to multi-national employers throughout Europe
by nearly 36% over the previous fiscal year.
Brokerage Services
Brokerage Services provides transaction processing systems, 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) real-time order entry and
processing services for Web-based brokerage firms; (iv) automated, browser-based
desktop productivity tools for financial consultants and back office personnel;
and (v) 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; hedge funds; 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 25 countries in North America, Europe, Asia, South America and Australia.
Brokerage Services also provides computerized proxy vote tabulation and
shareholder communication, distribution and fulfillment services, including
Web-enabled products and services. ADP served approximately 14,000 publicly
traded companies and 450 mutual funds and annuity companies with proxy services
on behalf of more than 800 brokerage firms and banks in fiscal 2003. In fiscal
2003, 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.
In fiscal 2003, Brokerage Services acquired the assets of Vantra Group,
Inc., a leading provider of specialized Web-based solutions to brokerage
clients; all of the capital stock of Power Securities Systems, Inc., a leading
back-office software provider for niche market firms; and all of the capital
stock of Dataphile Software, Ltd., a leading provider of real-time,
straight-through-processing solutions for brokerage firms and mutual fund
securities dealers in Canada.
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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
performance solutions to automotive retailers and their manufacturers throughout
North America and Europe. More than 16,000 automobile and truck dealers and more
than 30 manufacturers use ADP's DMS, networking solutions, data integration,
consulting and/or marketing services.
Dealer Services offers its dealership clients a service solution that
includes computer hardware, hardware maintenance services, licensed software,
software support, system design and network consulting services. Dealer Services
also offers its clients "front-end" dealership sales process and business
development training services, consulting services, software products and
customer relationship management solutions. Clients use an ADP DMS to manage
business activities such as accounting, inventory, factory communications,
scheduling, vehicle financing, insurance, sales and service. 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 estimating and obtaining vehicle
registration and lien holder information. Dealer Services also offers an
Application Service Provider Managed Services solution to its dealership clients
pursuant to which such clients outsource all information technology management,
computing and network infrastructure, technology decisions and system support to
Dealer Services.
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 repair estimating,
total loss vehicle valuation, first notice of loss, dispatch and assignment,
claims audit, parts exchange and workflow applications that streamline the
end-to-end claims process, (ii) body shop and auto recycler management systems
and (iii) other applications, databases and services that enhance and optimize
the claims process.
Markets and Marketing Methods
All of ADP's services are offered broadly across North America and
Europe. Some employer services and brokerage services are also offered in South
America (primarily Brazil), Australia and Asia.
None of ADP's major business groups have a single homogenous client
base or market. For example, 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 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
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industries. Employer Services also sells to auto dealers, brokerage clients and
insurance clients. While concentrations of clients exist, no one client or
business group is material to ADP's overall revenues.
None of ADP's businesses are overly sensitive to price changes.
Economic conditions among selected clients and groups of clients may and do have
a temporary impact on demand for ADP's services. In fiscal 2003, despite the
continued impact of weak economic conditions, Employer Services continued to
grow, primarily due to the increase in its North America payroll and tax
businesses, including strong growth in its "beyond payroll" products and in its
PEO business, and improved client retention; in Brokerage Services, weakness in
the brokerage and financial services industry reduced Brokerage Services'
primarily volume-based back-office processing and investor communications
activities; and interest rates in the U.S. continued to decline over the last
fiscal year, significantly impacting interest earnings 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.
Clients and Client Contracts
ADP provides its services to approximately 500,000 clients. In fiscal
2003, 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 Accounts Services or Dealer Services client
with multiple deliverables.
ADP's average client retention is 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.
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Systems Development and Programming
During the fiscal years ended June 30, 2003, 2002 and 2001, ADP
invested $604 million, $535 million and $584 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 41,000 persons as of June 30, 2003.
Item 2. Properties
ADP leases space for 24 of its principal processing centers. In
addition, ADP leases numerous other operational offices and sales offices. All
of these leases, which aggregate approximately 7,100,000 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 14 of its
processing facilities, other operational offices and its corporate headquarters
complex in Roseland, New Jersey, which aggregate approximately 3,000,000 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
referred by the District Court to arbitration and was tried before an
arbitration panel in June 2003 with a final decision expected in October 2003.
This lawsuit alleges trade secret violations by DSI in the creation by DSI of
the CARMan automobile
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dealership software product and misappropriation of those trade secrets by the
Registrant through its acquisition of DSI. UCS is seeking injunctive relief and
damages of $56 million. The Registrant believes it has valid defenses with
respect to the above matter and 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 and Related Stockholder
Matters
See "Market Price, Dividend Data and Other" contained in the
Registrant's 2003 Annual Report to Shareholders, which information is
incorporated herein by reference. As of August 31, 2003, the Registrant had
36,439 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 February 11, 2003, the Registrant issued 9,430 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.
Item 6. Selected Financial Data
See "Selected Financial Data" contained in the Registrant's 2003 Annual
Report to Shareholders, which information is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
See "Management's Discussion and Analysis" contained in the
Registrant's 2003 Annual Report to Shareholders, which information is
incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
See "Management's Discussion and Analysis - Liquidity and Capital
Resources" contained in the Registrant's 2003 Annual Report to Shareholders,
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, 2003 (see Note 14 of the "Notes to Consolidated Financial
Statements" contained in ADP's 2003 Annual Report to Shareholders)
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
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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, 2003 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.
There were no changes in the Registrant's internal control over
financial reporting that occurred during the quarter ended June 30, 2003 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:
Employed by
Name Age Position ADP Since
- -------------------- --- -------------------------- ----------
John D. Barfitt 50 Vice President 1979
James B. Benson 58 Vice President, General 1977
Counsel and Secretary
Richard C. Berke 58 Vice President, Human 1989
Resources
Gary C. Butler 56 President and Chief 1975
Operating Officer
Raymond L. Colotti 57 Vice President and 1995
Treasurer
Richard J. Daly 50 Group President, 1989
Brokerage Services
G. Harry Durity 56 Vice President, 1994
Worldwide Business
Development
Karen E. Dykstra 44 Chief Financial Officer 1981
Russell P. Fradin 48 Group President, 1996
Employer Services
Eugene A. Hall 47 President,
Employer Services -
Major Accounts Division 1998
John Hogan 55 Group President, 1993
Brokerage Services
Campbell Langdon 42 President,
Tax, Financial and Time
Management Services 2000
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S. Michael Martone 55 Group President, Dealer 1987
Services
Peter Op de Beeck 47 President, 1998
Claims Solutions Group
Dan Sheldon 47 Vice President, 1984
Corporate Controller
George I. Stoeckert 55 President, Employer 1991
Services - International
Arthur F. Weinbach 60 Chairman and 1980
Chief Executive Officer
Messrs. Benson, Berke, Butler, Daly, Durity, Fradin, Hall, Hogan,
Martone and Weinbach have each been employed by ADP in senior executive
positions for more than the past five years.
John D. Barfitt joined ADP in 1979. He is a Vice President. He served
as President, Employer Services -International from 2000 to 2003, President,
Claims Services at ADP from 1998 to 2000 and Senior Vice President - Automotive
Claims Services at ADP from 1996 to 1998.
Raymond L. Colotti joined ADP in 1995. Prior to his promotion to Vice
President and Treasurer in 1997, he served as President of ADP Atlantic, Inc.
and its related companies from 1995 to 1997.
Karen E. Dykstra joined ADP in 1981. Prior to her promotion to 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 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 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.
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Directors of the Registrant
See "Election of Directors" in the Proxy Statement for Registrant's
2003 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 2003 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 2003 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 2003
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 2003 Annual Meeting of Stockholders, which
information is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
See "Independent Auditors' Fees" in the Proxy Statement for
Registrant's 2003 Annual Meeting of Stockholders, which information is
incorporated herein by reference.
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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 2003 Annual Report to Shareholders are
also included in Part II, Item 8:
Statements of Consolidated Earnings - years ended June 30, 2003, 2002
and 2001
Consolidated Balance Sheets - June 30, 2003 and 2002
Statements of Consolidated Shareholders' Equity - years ended June 30,
2003, 2002 and 2001
Statements of Consolidated Cash Flows - years ended June 30, 2003, 2002
and 2001
Notes to Consolidated Financial Statements
Report of Management
Independent Auditors' Report
Financial information of the Registrant is omitted because the
Registrant is primarily a holding company. The Registrant's subsidiaries, which
are listed on Exhibit 21 attached hereto, are wholly owned.
2. Financial Statement Schedules
Page in Form 10-K
Independent Auditors' Report on Schedule 17
Schedule II - Valuation and Qualifying Accounts 18
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
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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)
-15-
10.7 - 1994 Directors' Pension Arrangement -
incorporated by reference to Exhibit
10(iii)(A)-#10 to Registrant's Annual Report on
Form 10-K for the fiscal year ended June 30, 1994
(Management Compensatory Plan)
10.8 - 2000 Key Employees' Stock Option Plan, as amended
- incorporated by reference to Exhibit 10.8 to
Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 2002 (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)
13 - Pages 16 to 39 of the 2003 Annual Report to
Shareholders (with the exception of the pages
incorporated by reference herein, the Annual
Report is not a part of this filing)
21 - Subsidiaries of the Registrant
23 - Independent Auditors' Consent
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, 2003
A Form 8-K was filed on April 17, 2003 under Items 9 and 12 of Form
8-K, announcing the Registrant's financial results for the third fiscal quarter
ended March 31, 2003.
-16-
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
To the Board of Directors
and Shareholders of
Automatic Data Processing, Inc.
Roseland, New Jersey
We have audited the consolidated financial statements of Automatic Data
Processing, Inc. and subsidiaries (the "Company") as of June 30, 2003 and 2002,
and for each of the three years in the period ended June 30, 2003, and have
issued our report thereon dated July 28, 2003; such consolidated financial
statements and report are included in your 2003 Annual Report to Shareholders
and are incorporated herein by reference. Our audits also included the financial
statement schedule of Automatic Data Processing, Inc., listed in Item 15. 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
July 28, 2003
-17-
AUTOMATIC DATA PROCESSING, INC.
AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Column A Column B Column C Column D Column E
- -------- -------- -------- -------- ---------
Additions
------------------------------
(1) (2)
Charged
to
Balance at Charged to other Balance at
beginning costs and accounts- Deductions- end of
of period expenses describe describe period
--------- --------- --------- ---------- ----------
Year ended June 30, 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
Year ended June 30, 2001:
Allowance for doubtful accounts:
Current $48,448 $16,431 $ 114 (B) $(22,997) (A) $41,996
Long-term $16,946 $ 1,369 $ -- $ (1,649) (A) $16,666
Deferred tax valuation allowance $43,700 $ 6,145 $ (165)(C) $ (7,750) (D) $41,930
(A) Doubtful accounts written off, less recoveries on accounts previously
written off.
(B) Acquired in purchase transactions.
(C) Related to foreign exchange fluctuation.
(D) Related to the net deferred tax assets recorded in purchase accounting. The
recognition of this allowance is allocated to reduce the excess purchase price
over the net assets acquired.
(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
the excess purchase price over the net assets acquired. The remaining portion
reduced the current year provision for income taxes.
-18-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
AUTOMATIC DATA PROCESSING, INC.
(Registrant)
September 12, 2003 By: /s/ Arthur F. Weinbach
---------------------------
Arthur F. Weinbach
Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Arthur F. Weinbach Chairman, Chief Executive September 12, 2003
- --------------------------------- Officer and Director
(Arthur F. Weinbach) (Principal Executive Officer)
/s/ Karen E. Dykstra Chief Financial Officer September 12, 2003
- --------------------------------- (Principal Financial Officer)
(Karen E. Dykstra)
/s/ Gregory D. Brenneman Director September 12, 2003
- ---------------------------------
(Gregory D. Brenneman)
/s/ Leslie A. Brun Director September 12, 2003
- ---------------------------------
(Leslie A. Brun)
/s/ Gary C. Butler Director September 12, 2003
- ---------------------------------
(Gary C. Butler)
/s/ Joseph A. Califano, Jr. Director September 12, 2003
- ---------------------------------
(Joseph A. Califano, Jr.)
/s/ Leon G. Cooperman Director September 12, 2003
- ---------------------------------
(Leon G. Cooperman)
-19-
Signature Title Date
- --------- ----- ----
/s/ Ann Dibble Jordan Director September 12, 2003
- ---------------------------------
(Ann Dibble Jordan)
Director September __, 2003
- ---------------------------------
(Harvey M. Krueger)
Director September __, 2003
- ---------------------------------
(Frederic V. Malek)
/s/ Henry Taub Director September 12, 2003
- ---------------------------------
(Henry Taub)
/s/ Laurence A. Tisch Director September 12, 2003
- ---------------------------------
(Laurence A. Tisch)
/s/ Josh S. Weston Director September 12, 2003
- ---------------------------------
(Josh S. Weston)
-20-