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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1993
Commission File Number 1-1969
CERIDIAN CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 52-0278528
(State or other jurisdiction of (I.R.S. Employer
Identification No.)
incorporation or organization)
8100 34th Avenue South
Minneapolis, Minnesota 55425
(Address of principal executive offices)
Telephone No.: (612) 853-8100
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which
registered:
Common Stock, par value $.50 ......... New York Stock Exchange, Inc.; The
Chicago
Stock Exchange; and Pacific Stock
Exchange
Depositary Shares, each representing a One One-Hundredth
Interest in a Share of 5/% Cumulative Convertible
Exchangeable Preferred Stock, Par Value $100 New York Stock Exchange,
Inc.
5/% Cumulative Convertible
Exchangeable Preferred Stock, Par Value $100 None
5/% Convertible Subordinated Debentures Due 2008 None
Has the Registrant (1) filed all reports required by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months and (2)
been subject to such 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 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. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of February 28, 1994 was $997,500,000.
The shares of Common Stock outstanding as of February 28, 1994 were
44,334,657.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1993 Annual Report to Stockholders of Registrant: Parts I & II
Portions of the Proxy Statement for Annual Meeting of Stockholders, May 11,
1994: Parts III and IV
CERIDIAN CORPORATION
PART I
Item 1. Business.
Ceridian Corporation ("Ceridian" or the "Company"), known as Control
Data Corporation until June 1992, has been significantly reshaped through
divesting or discontinuing various business units and by narrowing and
reorienting the focus of certain of its continuing operations. As a result
of these reshaping efforts, the Company is comprised of two business
segments, Information Services and Defense Electronics, and operates with
approximately one-fourth the revenue, assets and employees employed five
years ago.
Information Services Segment
The Information Services segment provides technology-based services on
a repetitive or subscription basis and consists of Ceridian Employer
Services ("Employer Services") and The Arbitron Company ("Arbitron"), and
two other services businesses that are not material to the Company's
operations. The Information Services businesses collect, manage and
analyze data on behalf of customers, and report information resulting from
that process to customers. The products and services provided by the
Information Service businesses address specified information management
needs of other businesses to enable them to operate more efficiently and
effectively. The technology-based products and services of the Information
Services businesses are typically provided through long-term customer
relationships that result in a high level of recurring revenue.
Information regarding Information Services' revenue, operating profit or
loss and identifiable assets for the years 1991-1993 is in Note G, "Segment
Data," on page 44 of the Company's 1993 Annual Report to Stockholders,
which is incorporated herein by reference.
Employer Services. Employer Services offers a broad range of services
designed to help employers manage their work forces more effectively,
including payroll processing, payroll tax filing, human resource
information services and employee assistance programs. Employer Services'
revenue for the years 1991, 1992 and 1993 was $191.3 million, $209.9
million and $232.6 million, respectively.
Markets. The employer services market covers a comprehensive range of
information management and employer/employee assistance services, including
payroll and payroll-related services, human resource information services
and benefit plan management services. The market for these services is
expected to continue to grow as companies continue to outsource
administrative services. The factors driving this movement toward
outsourcing include the increasing scope and complexity of legislation
regulating businesses and their employees, the rising costs of providing
payroll and other employer services in-house and the introduction of new
types of employer services.
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Traditionally, the employer services market consisted of payroll
processing, payroll tax filing and other services that were transaction-
based, generally routinized and technology-oriented. These types of
services continue to account for a significant portion of the employer
services market and demand for these services continues to grow. In 1992,
the payroll services market alone was estimated at $2.75 billion, which
excludes the sizeable portion of the overall payroll market that was
supported in-house rather than outsourced through third party providers.
The employer services market is expanding into other value-added
services that address other aspects of the employment relationship, such as
human resource administration, benefits administration, compensation,
staffing, training development and employee relations. Many employers seek
to combine records for payroll and these value-added services to create a
single database of employee information for on-line inquiry, updating and
reporting in areas important to human resource administration and
management. Employer Services believes that the ability to provide a
number of these other services and to integrate payroll and human resource
information databases can be an important factor in customer retention
because it provides customers with a stronger connection to their payroll
service provider and offers a means to distinguish its service from
others provided in the market. Accordingly, it is increasingly important
for companies in the employer services market, particularly for those
targeting medium and large employers, to offer a wide range of services
that are designed to address a broad spectrum of employer services needs.
The Company segments the employer services market by classifying
employers into three categories: small (fewer than 100 employees), medium
(100 to 5,000 employees) and large (over 5,000 employees). Small employers
in the payroll services market are relatively price sensitive, tend to
focus more narrowly on payroll services and payroll tax filing and have low
costs in switching from one provider to another. Medium and large
employers generally require more complex, customized payroll services, have
a greater need for additional services and integrated databases and have
higher costs in switching from one provider to another.
Services. A substantial portion of Employer Services' revenue is
attributable to payroll processing and payroll tax filing services. During
1993, these services accounted for over 80% of Employer Services' total
revenue. Payroll processing consists primarily of preparing and furnishing
employee payroll checks, direct deposit advices and supporting journals,
summaries and other reports. Payroll tax filing services consist primarily
of processing federal, state and local withholding taxes on behalf of
employers and remitting such taxes to the appropriate taxing authorities.
These payroll-related services are typically priced on a fee-per-item-
processed basis, and quarterly revenue consequently fluctuates with the
volume of items processed. Employer Services also derives a portion of its
payroll tax filing revenue from interest income it receives on tax filing
deposits temporarily held pending remittance on behalf of customers to
taxing authorities. As a result, quarterly revenue and profitability will
vary as a result of changes in interest rates and in the amount of tax
filing deposits held by Employer Services. The effect of interest rate
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changes on Employer Services' revenue from interest received on tax filing
balances has been lessened somewhat during 1993 as the result of
intermediate-term interest rate swap agreements entered into by the Company
with respect to a portion of the tax filing balances. These agreements
effectively convert the interest earned on such portion of the tax filing
balances from a floating rate to a fixed rate basis. Nevertheless, because
the volume of payroll items processed increases in the first and fourth
quarters of each year in connection with employers' year-end reporting
requirements, and because the amount of tax filing deposits also tends to
be greater in the first quarter, Employer Services' revenue and
profitability tend to be greater in those quarters.
Payroll processing is currently conducted by Employer Services at its
district offices located throughout the United States, all of which are
linked in a nationwide network. Employer Services' payroll processing
system operates on proprietary software developed by Employer Services,
which is continuously updated to accommodate regulatory changes affecting
payroll accounting. Employer Services' payroll system allows customers to
input their own payroll data via personal computers, transmit the data on-
line to Employer Services for processing, retrieve reports and data files
from Employer Services and print reports and, in certain instances, payroll
checks or direct deposit advices on site. Customers can also input payroll
data by telephone or batch transmittal, with payroll checks and related
reports prepared by Employer Services at one of its district processing
centers. Employer Services' payroll system also interfaces with both
customer and third-party transaction processing systems to facilitate
services such as direct deposit of payroll checks. Through its Minidata
Services, Inc. subsidiary ("Minidata"), the Company provides payroll
services to customers in the mid-Atlantic states with fewer than 100
employees.
Employer Services' human resource information service provides
application software to customers that enables them to combine their
payroll and human resource information databases. This enables the
customer to create a single database of employee information for on-line
inquiry, updating and reporting in areas important to human resource
administration and management.
Employer Services' employee assistance service provides confidential,
around-the-clock assessment and referral services to customers' employees
to help them address legal and financial problems, substance abuse,
childcare, eldercare and other personal problems. Employer Services
maintains a network of professional counselors who are available to work
with employees to solve problems and to provide referrals to specialists if
such referrals are warranted by the circumstances.
Sales and Marketing. Employer Services markets its services through a
direct sales force operating through more than 35 district offices. As of
December 31, 1993, Employer Services had approximately 380 salespeople
compared to approximately 300 salespeople as of December 31, 1992.
Employer Services also has established marketing relationships with banks
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and accounting firms, pursuant to which Employer Services offers its
services to the business clients of these entities.
Employer Services markets its services by identifying customers that
use or are contemplating using a third party service provider. Although
Employer Services' most significant source of customer leads are referrals
from existing customers and from the numerous banks and accounting firms
with which it has relationships, it also identifies potential customers
through newspaper articles, periodicals, trade publications and, to a
limited extent, direct mailings. As of January 31, 1994, Employer Services
had approximately 27,500 contracts with approximately 20,000 different
customers from a wide range of industries and markets.
Strategy. Employer Services' strategy is to improve its operating
margins and revenue growth by:
Investing in Technology. Employer Services believes that improved
technology and greater automation will allow it to deliver its
services more cost-effectively, provide it with greater operational
and product flexibility, and result in more user-friendly processes,
documents and reports. Because Employer Services' existing payroll
processing and payroll tax filing processes incorporate older
technology, these processes require a significant amount of manual
processing of information and are relatively labor intensive to
install, maintain and customize.
In the second quarter of 1993, Employer Services began a multi-year
project to redesign its payroll processing system software to provide
a system that will be more highly automated, easier and less costly to
install and maintain and will provide greater flexibility to customers
in terms of product and service options. The Company is capitalizing
the cost of this software development effort, and expects to begin
amortization of the costs as certain developmental milestones are
achieved beginning in 1994.
To address Employer Services' needs with respect to its payroll tax
filing system, in October 1993 the Company acquired Systems Tax
Service, Inc. ("STS"), a California-based payroll tax filing processor
with a highly automated tax filing system. All of Employer Services'
1994 payroll tax filing processing will be conducted on STS' more
highly automated payroll tax filing system, and Employer Services' tax
filing processing operations in Baltimore will be discontinued when
1993 processing is completed.
Other recent actions to improve Employer Services' technology and
automation have included the December 1992 acquisition of the software
applications division of Revelation Technologies, Inc., which has
enhanced Employer Services' human resources information software
development capabilities. The Company also completed the conversion
of Employer Services' printing operations from impact printers to
laser printers in 1992, which has eliminated the need to carry check
- 4 -
stock and forms and has improved the quality of the resulting
documents.
Employer Services believes that the redesign of its payroll processing
system software and the creation of a new generation of human
resources information software, including applications in
client/server and Windows* environments, are multi-year projects, will
require a relatively high level of investment in technology (much of
which will be capitalized) and will entail certain risks inherent in
software development projects generally.
Consolidating Operations. Employer Services is seeking to realize
additional operational efficiencies by consolidating the payroll
processing activities conducted in its district centers into fewer
regional centers, and by creating a national telephone service support
center to more efficiently and effectively handle customer inquiries.
Employer Services expects that the consolidation of the payroll
processing operations will occur over a multi-year period in
conjunction with the redesign of its payroll processing software, and
enable it to both upgrade and make more effective use of its
processing capacity. By creating a national telephone support center
during 1994, Employer Services believes that it can improve customer
service by creating a single point of contact for most customer
inquiries, while at the same time eliminating inefficiencies inherent
in the current system involving multiple points of contact.
Restructuring charges of $18.9 million recorded by Employer Services
in the fourth quarter of 1993 primarily consist of the anticipated
costs of consolidating these operations.
Increasing Productivity and Size of Sales Force. Employer Services
believes that increasing the effectiveness of its sales and marketing
efforts and expanding the size of its sales force will be important
factors in achieving its profitability and growth objectives.
Employer Services intends to increase the effectiveness of sales and
marketing efforts by orienting them more toward medium and large
employers, which tend to purchase a greater variety of services,
require more flexibility and customization in services offerings and
have higher costs associated with changing providers. At the same
time, the previously described efforts to upgrade technology should
also increase sales effectiveness by shortening the length of the
sales/installation cycle and by building greater flexibility into
service offerings. For small employers, Employer Services is
evaluating expanding the Minidata payroll processing system into
additional markets. Employer Services plans to introduce the Minidata
system on a test basis into certain Southern California markets during
1994.
* Windows is a trademark of Microsoft Corporation
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Expanding Human Resource Offerings. Employer Services believes that
the introduction of additional human resource information management
products and services which complement its existing products and
services will play an important role in enabling it to achieve its
profitability and growth objectives. Employer Services' goal is to
identify the overall human resource information management needs
arising out of the employment relationship, and address those needs
through a broad range of integrated customer-driven solutions, such as
outsourcing services, software applications and consulting services.
The Company believes that broadening and integrating its product and
service offerings should also play an important role in attracting and
retaining customers by differentiating Employer Services from other
service providers and by providing customers with a stronger
connection to Employer Services.
Making Strategic Acquisitions. To support its business strategy,
Employer Services also intends to seek additional strategic
acquisition opportunities that would allow it to either increase its
market penetration, increase its technology or provide additional
products. Over the last few years, Employer Services has made a
number of strategic acquisitions, including STS in October 1993,
Minidata in November 1991 and the software applications division of
Revelation Technologies, Inc. in December 1992. Employer Services has
also acquired a number of payroll service providers, including the
customer bases of banks that are divesting their payroll service
businesses. Employer Services also acquired, in December 1991, the
employee assistance unit of Hazelden Foundation, which expanded
Employer Services' customer base for employee assistance services.
Competition. The employer services industry is characterized by
intense competition in the small, medium and large employer segments of the
market. Competitors in this market include national, regional and local
third party providers, banks, divisions of diversified companies and in-
house payroll processors.
A substantial portion of the overall payroll market is supported in-
house with the remainder supported by third party providers. Automatic
Data Processing, Inc. ("ADP") is the dominant third party provider in the
payroll market, with Employer Services and Paychex, Inc. ("Paychex")
comprising the other two large, national providers. ADP and Employer
Services serve all segments of the payroll market, while Paychex focuses on
the small employer segment of the market. The remainder of the third party
payroll market is highly fragmented and is represented by smaller regional
and local competitors. There is significant industry consolidation as the
larger national providers acquire smaller regional and local providers and
as banks sell their payroll service operations. In addition, software
companies have begun marketing application software to customers that
allows these customers to support their payroll services in-house.
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The market for the non-payroll portion of the employer services
industry is evolving and is not dominated by any one competitor. Rather,
these markets are highly fragmented and, with respect to employee
assistance programs, are dominated by small local providers.
Currently, the principal competitive factors in the employer services
market are price, quality and service. Employer Services believes that it
is able to compete effectively in the overall employer services market with
respect to all of these competitive factors. On average, during the last
three years, customers generating 86% of Employer Services' payroll
processing and tax filing revenue during any single year continued as
customers in the following year. This percentage has increased in each of
the last four years. In addition, Employer Services offers a range of
services in addition to payroll processing and payroll tax filing services,
and Employer Services believes that offering a broad range of human
resource information management products and services will become an
increasingly important competitive factor, particularly with respect to
medium and large employers.
Employer Services' ability to continue to compete effectively in the
employer services market will depend to a large part on its ability to
implement and effectively use new technology, offer new, innovative
services and improve its sales efforts and visibility in this market.
Arbitron. Arbitron is the leading provider of radio audience
measurement information in terms of revenue and market share, and also
provides media and marketing information to radio and television
broadcasters, cable operators, advertising agencies and advertisers.
Arbitron's proprietary data regarding radio audience size and demographics
is provided to customers through multi-year subscription agreements. In
addition, through various joint ventures and licensing arrangements,
Arbitron has access to services that monitor television and other
commercials and provide data regarding product purchasing decisions.
Arbitron's revenue for the years 1991, 1992 and 1993 was $201.7 million,
$178.3 million and $172.2 million, respectively.
In October 1993, the Company announced the discontinuance of
Arbitron's syndicated television and cable ratings service, effective the
end of 1993. Through this service, Arbitron had provided local market
television and cable audience measurement information gathered
electronically and through written diaries. This service provided
approximately 26% of Arbitron's 1993 revenue. Additional information
regarding the discontinuance of this service is on page 23 of the Company's
1993 Annual Report to Stockholders, which is incorporated herein by
reference.
Markets. Because of the significant amounts spent by advertisers on
radio advertising, radio broadcasters, advertising agencies and advertisers
all have a strong interest in information regarding the size and
composition of audiences for radio broadcasts. Nevertheless, the market
for audience measurement of radio broadcasts, from which Arbitron currently
derives most of its revenue, has grown slowly in recent years due in large
- 7 -
measure to economic conditions, consolidation within the radio broadcast
industry, and competition from other forms of media. As advertisers
increasingly seek to tailor advertising strategies to target specific
demographic groups through specific media, and as audiences become more
fragmented with increased programming choices, the audience information
needs of radio broadcasters, advertising agencies and advertisers become
more complex. Increasingly, more detailed information regarding the
demographics and buying behavior of audiences is required, as well as more
sophisticated means to analyze such information.
These trends are not confined to the radio broadcast industry, but
also affect other media. As the importance of reaching niche audiences
with targeted marketing strategies increases, broadcasters, publishers,
advertising agencies and advertisers are requiring that information
regarding exposure to advertising be provided on an individualized rather
than a household basis and that such information be coupled with
information regarding shopping patterns and purchaser behavior. The need
for such qualitative information may create opportunities for innovative
approaches to satisfy these information needs.
Sales and Marketing. Arbitron is the leading supplier of radio
audience measurement services, and provides these services to approximately
2,000 radio stations and 2,500 advertising agencies. Arbitron markets its
products and services through a direct sales force operating through
offices in six cities around the U.S. As of December 31, 1993, Arbitron
had 60 salespeople. Contracts with customers vary in length from one to
seven years.
Services. Arbitron estimates audience size and demographics in the
U.S. for local radio stations, and reports this and related data to its
customers. This information is used by radio stations to price and sell
advertising time and by advertising agencies and large corporate
advertisers in purchasing advertising time. Arbitron also provides
software applications and analytical services to assist subscribers in
understanding and using this data. Arbitron uses listener diaries to
gather radio listener data from sample households in the 261 local markets
for which it currently provides radio ratings. Respondents mail the
diaries to Arbitron's processing center in Laurel, Maryland, where Arbitron
compiles periodic audience measurement estimates. The Company believes
that the proprietary database which Arbitron has developed and maintains
through its position as the leading provider of radio audience measurement
data in the U.S. is a very valuable asset. The radio audience measurement
service represents more than 90% of Arbitron's revenue, after taking into
account the discontinuance of Arbitron's television and cable ratings
service and the transfer of the majority of Arbitron's commercial
monitoring revenue to the Competitive Media Reporting ("CMR") joint venture
established with VNU Business Information Services, Inc. ("VNU").
Additional information regarding this transfer to CMR is on pages 24 and 25
of the Company's 1993 Annual Report to Stockholders, which is incorporated
herein by reference.
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Because Arbitron believes it will become increasingly important to
address the more comprehensive information needs of the broadcast industry,
it has entered into several cooperative arrangements in recent years.
Through its CMR joint venture, Arbitron has access to services which: (i)
monitor television, radio, newspaper, magazine and billboard advertisements
and compile information regarding advertising expenditures for
broadcasters, publishers, advertising agencies, and advertisers, (ii)
provide copies of broadcast commercials (video and audio as well as
storyboards), (iii) compile video clips of news events, and (iv) track the
amount of space and the estimated cost of advertisements in newspapers,
magazines, outdoor advertising and other print media. In December 1991,
Arbitron entered into a five-year license with VNU as to certain markets,
including exclusive rights as to radio broadcasters, to market the
"Scarborough Report," which provides information regarding product/service
usage and media usage in 55 major U.S. markets. The Scarborough Report
measures products purchased based on a sample of consumers in the relevant
markets. Arbitron has also entered into a cross license with Information
Resources, Inc. ("IRI"), under which Arbitron may obtain point-of-sale
packaged goods purchasing information gathered by IRI and resell this
information on a royalty-free basis to broadcasters.
Strategy. Arbitron's primary strategy is to maintain its competitive
position, increase its revenue and strengthen its profitability by:
Enhancing Radio Audience Measurement. Arbitron intends to enhance its
radio audience measurement service so as to increase the value of that
service to customers and increase Arbitron's radio-related revenue.
Arbitron has announced plans to increase the sample size of its radio
surveys by 70% over the next three years. Expanding the size of its
diary-based surveys is a cost-effective means of enhancing the
reliability of its audience estimates. Arbitron has also introduced a
new personal computer-based application that gives radio broadcasters
flexible and unlimited access to Arbitron's database, and enables them
to more effectively analyze that information and develop sales
strategies for maximum effectiveness. Arbitron also plans to develop
applications that will enable customers to link information provided
by Arbitron's database with other information from other databases
(such as product movement information) so as to enable customers to
further refine sales strategies and compete more effectively for
advertising dollars.
Introducing Qualitative Services. Arbitron is beginning to test
market in certain smaller markets a new, locally oriented, qualitative
audience research service. The goal of this service is to provide a
profile of the broadcast audience in terms of local media, retail and
consumer preferences so that local broadcasters will have information
that helps them develop targeted sales and programming strategies to
attract a larger share of the marketing dollars spent by local
advertisers. The service will be diary and questionnaire based, and
will also involve telephone surveys of participants. As such, the
investment required to initiate this service during 1994 and to expand
it in following years is expected to be relatively low.
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Utilizing Cooperative Arrangements. Arbitron intends to further
develop its capabilities and technologies through alliances and
licensing arrangements that will enable it to gather, analyze and
integrate broadcasting, product purchasing and advertising data from
various sources and provide the comprehensive information and systems
that broadcasters, advertising agencies and advertisers require to
market their products more effectively. In this regard, Arbitron is
involved in the very early stages of a cooperative effort to develop a
passive, personalized electronic measurement device to record
broadcast listening or viewing. Arbitron's annual investment being
directed toward this development effort is relatively low.
Competition. Arbitron does not currently have any major competitors
for its radio audience measurement service, although a competing radio
audience measurement service utilizing a different methodology is seeking
to establish itself. Arbitron also competes with providers of other forms
of research used by broadcasters, advertising agencies and advertisers.
Other Services. The Company's TeleMoney Services business provides
network-based transaction services, credit and debit card authorization and
check verification. TeleMoney's primary customers include banks,
independent sales organizations that subcontract technical aspects of
credit card processing for banks, and major merchants. The market for
electronic payment authorization and processing is consolidating rapidly.
The Company's Business Information Services business ("BIS") runs custom
data processing applications for customers (primarily the U.S. government)
and delivers them via its timesharing network. Neither of these businesses
is material to the Company's overall operations. Responsibility for BIS
has been transferred to Computing Devices International effective
January 1, 1994.
Defense Electronics Segment - Computing Devices International
The Defense Electronics segment, consisting of Computing Devices
International ("Computing Devices"), develops, manufactures and markets
electronic systems, subsystems and components, and provides systems
integration and other services, primarily to government defense agencies.
Information regarding Computing Devices' revenue, operating profit or loss
and identifiable assets for the years 1991-1993 is in Note G, "Segment
Data," on page 44 of the Company's 1993 Annual Report to Stockholders,
which is incorporated herein by reference.
Markets. The defense contracting market is currently in the process
of dramatic change. With changing geo-political conditions, defense
spending has declined and the number of companies serving the defense
industry has decreased. Computing Devices believes these trends are likely
to continue. At the same time, the defense market focus has shifted from
strategic defense (nuclear) to tactical defense (non-nuclear) as the threat
of military conflicts shifts toward regional and ethnic conflicts.
- 10 -
The reduction in overall defense spending and the shift in focus
toward tactical defense needs is also shifting the focus of defense
spending. Computing Devices believes that a greater emphasis will be
placed by its customers on extending the service life of existing military
equipment by upgrading, enhancing and retrofitting such equipment.
Computing Devices also believes that budgetary constraints will result in
greater reductions by defense agencies in procurement spending than in
research and development spending. In addition, although there will
continue to be opportunities in the production of equipment and hardware,
greater opportunities are expected in providing software and systems
integration services as the use of commercial and open systems hardware
architectures becomes more widespread.
Products and Services. Computing Devices' products and services
feature its capabilities in signal processing, digital image manipulation,
"ruggedized" subsystems for harsh environments and real-time software
systems. These products and services are produced primarily through its
operations in the U.S. and Canada, with only a small portion produced in
the United Kingdom ("U.K."). A majority of Computing Devices' revenue is
attributable to products and services relating to avionics systems,
including the AN/AYK-14 standard Navy airborne mission computer systems;
communications systems, including the Iris tactical command, control and
communications system; and intelligence and surveillance systems, including
advanced parallel processing and reconnaissance systems. The remainder of
Computing Devices' revenue is primarily attributable to products and
services relating to shipboard subsystems, anti-submarine warfare
subsystems, ground subsystems, space processing, display subsystems and
tactical reconnaissance systems. Computing Devices employs technology
developed through internal research and development, contract research and
development and customer funded development programs.
During 1991, Computing Devices secured, through its Canadian
subsidiary, a contract to modernize the tactical command, control and
communications system used by the Canadian armed forces in defense and
peacekeeping situations. This system, called Iris, incorporates a broad
range of technologies, including satellite, fiber optic and microwave
communication. During 1993 and in 1992, the Company recorded revenue of
$105 million and $69 million, respectively, with respect to this contract.
This contract has a remaining term of approximately seven years and
estimated total remaining revenue of approximately $860 million over the
life of the contract. Although Computing Devices' Canadian subsidiary is
the prime contractor under this contract, a significant portion of the
contract has been subcontracted to other communications technology
companies. Under this contract, Computing Devices receives periodic
advances from its customer through April 1994. Thereafter, Computing
Devices will begin receiving monthly progress payments which will be
subject to a percentage holdback until Computing Devices achieves the next
quarterly contract milestone.
Approximately 51% and 59%, respectively, of Computing Devices' revenue
for 1993 and for 1992 was derived from contracts with the U.S. Government
or with prime contractors to the U.S. Government, and approximately 30% and
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24%, respectively, of Computing Devices' revenue for 1993 and for 1992 was
derived from contracts with the Canadian Government or with prime
contractors to the Canadian Government. See "Government Contracts" below,
with respect to certain terms and conditions of government contracts.
Sales and Marketing. Computing Devices markets its products and
services through a direct sales force operating through sales offices
located in the U.S., Canada, the U.K. and France. As of December 31, 1993,
Computing Devices had 50 salespeople. Sales of products and services are
made principally through competitive proposals in response to requests for
bids from government agencies and prime contractors. In addition,
Computing Devices has independent sales agents who represent Computing
Devices' products and services in a number of European and Asian markets.
Strategy. Computing Devices' strategy is to improve its competitive
position and operating margins by:
Reducing Operating Costs. Computing Devices believes that in light of
decreases in defense spending and over-capacity among defense
contractors, and increasing price sensitivity from its government
customers, future success will be dependent in large measure upon
becoming a low cost provider of products and services. Toward this
end, Computing Devices intends to reduce overhead and increase
productivity through consolidating operations, increasing the level of
automation in its production and development facilities and providing
increased employee training. Computing Devices' revenue per employee
in 1993 increased by approximately 16% in 1993 compared to 1992.
Focusing in Areas of Expertise. Computing Devices intends to continue
to focus its efforts in its current areas of expertise, including
additional product and service areas that Computing Devices believes
will continue to experience growth and in which Computing Devices'
capabilities will enable it to compete favorably. Computing Devices
intends to continue to pursue tactical (as opposed to strategic)
defense programs and will use technology developed through both
internal and contract research and development. Computing Devices
believes that spending on tactical systems will not be reduced to the
same extent as spending on strategic systems and that greater emphasis
will be placed on weapons sophistication, electronics, surveillance
and intelligence. Computing Devices also believes that there will be
greater emphasis on the insertion of new technology into existing
military equipment in order to reduce the costs (including substantial
training costs) associated with the development and production of new
equipment.
Emphasizing Existing Geographic Markets. Computing Devices intends to
continue to emphasize specific segments of the North American and U.K.
defense electronics markets where it believes significant
opportunities exist, including opportunities in the upgrade,
enhancement and retrofit of existing military equipment. The Company
may seek to expand its presence in these market segments through
strategic acquisitions.
- 12 -
Leveraging Existing Products for New Applications. Computing Devices
also intends to adapt existing products and services in response to
business opportunities in other worldwide defense markets and in
civilian and civil government markets. In so doing, Computing Devices
may, from time to time, establish cooperative arrangements with other
entities where their expertise or familiarity with other markets would
prove beneficial. For example, Computing Devices and Northwest
Airlines are jointly developing an electronic data library system to
manage information required to operate commercial airliners.
Competition. Computing Devices faces intense competition with respect
to all of its products and services. Many of Computing Devices'
significant competitors, such as E-Systems, Inc., Loral Corporation and the
Hughes Electronics subsidiary of General Motors Corporation, are companies
(or divisions or subsidiaries of companies) that are larger and have
substantially greater financial resources than Computing Devices.
Computing Devices also competes with companies of various sizes operating
within a particular market segment.
The principal competitive factors include price, technical compliance,
service and ability to perform in accordance with the established schedule.
Due to the diversity and specialized nature of the products produced and
services provided and the governmental security restrictions applicable to
certain of Computing Devices' activities, it is difficult to generalize as
to Computing Devices' market position in certain segments of its business.
Computing Devices does believe, however, that it is able to compete
effectively in each of its market segments with respect to these
competitive factors. In particular, Computing Devices believes that its
high rate of schedule adherence is one of its principal competitive
advantages. The demonstrated ability to complete a project within the
required time schedule is an important factor to governments and prime
contractors in selecting companies for new projects. Computing Devices
currently has preferred supplier status with two prime contractors, with
the U.S. Government with respect to Navy mass storage systems and avionics
computers and with the Canadian Government with respect to display systems,
anti-submarine warfare systems and communication systems.
Government Contracts. Companies which do business with governments
are subject to certain unique business risks. Among these are dependence
on annual government appropriations, changing policies and regulations,
complexity of design and possible cost overruns. Any government contract
may be terminated by the government at any time it believes that such
termination would be in its best interests. In such event, Computing
Devices would generally be entitled to receive payments for its allowable
costs and, in general, a proportionate share of its fee or profit for the
work actually performed.
Approximately 78% of Computing Devices' revenue for 1993 came from
government contracts which were fixed price contracts. Under this type of
contract, the price paid to Computing Devices is not subject to adjustment
by reason of the costs incurred by the Company in the performance of the
contract, except for costs incurred due to contract changes ordered by the
- 13 -
government. Thus, under fixed price contracts, the Company bears the risk
of cost overruns, which may result from factors such as the need to bid on
programs in advance of design completion, unforeseen technological
difficulties, design complexity and uncertain cost factors, particularly in
connection with multi-year contracts. Multi-year fixed price contracts in
Canada and the U.K. normally allow for price revision based on government
price indices.
Computing Devices is usually entitled to invoice governments for
monthly progress payments on fixed price and cost reimbursable contracts.
Computing Devices does not normally acquire inventory in advance of
contract award, and does not maintain significant stocks of finished
products for sale. Moreover, Computing Devices obtains advance funding
from customers in connection with certain of its contracts. The amount of
progress payments and customer advances and the amount of the holdback from
such payments and advances affect the amount of working capital necessary
for Computing Devices to finance work-in-process costs in the performance
of these contracts. Governments typically do not recognize interest or
other costs associated with the use of capital and, therefore, the timing
of payments may have adverse effects on Computing Devices' profitability.
Computing Devices also performs work under cost reimbursable and
incentive type contracts. Cost reimbursable contracts provide for
reimbursement of costs incurred, to the extent such costs are allowable
under applicable government regulations, plus a fee. Under incentive type
contracts, the amount of profit or fee realized varies with the attainment
of incentive goals such as costs incurred, delivery schedule, quality and
other criteria. Fixed price contracts normally carry a higher profit rate
than cost reimbursable and incentive type contracts to compensate for
higher business risk. In addition, government law and regulation provides
that certain types of costs may not be included in either the directly-
billed cost or the indirect overheads for which the government is
responsible. Many of these so-called "unallowable" costs include ordinary
costs of doing business in a commercial context. These costs must be borne
out of the pretax profit of the corporation and, thus, tend to reduce
margins on government work.
Recognition of profits is based upon estimates of final performance,
which may change as contracts progress. Work may be performed prior to
formal authorization or adjustment of contract price for increased work
scope, change orders and other funding adjustments. Because of the
complexity of government contracts and applicable regulations, contract
disputes may occur. The resolution of such disputes may affect the
profitability of Computing Devices in performing these contracts. The
Company believes that adequate provision has been made in its financial
statements for these and other normal uncertainties incident to its
Computing Devices business.
Changes to procurement regulations in recent years, as well as the
U.S. Government's drive against "fraud, waste and abuse" in defense
procurement systems have increased the complexity and cost of doing
business with the U.S. Government. Some of these changes have redefined
- 14 -
the ability to recover various standard business costs that the U.S.
Government will not allow, in whole or in part, as the cost of doing
business on U.S. Government contracts. Other legal and regulatory
practices have increased the number of auditors, inspectors general and
investigators. Computing Devices is classified by the Defense Contract
Audit Agency as a "low risk" contractor. If, however, Computing Devices
were to be determined to be in noncompliance with any of the applicable
laws and regulations, the possibility would exist for penalties and
debarment or suspension from receiving additional U.S. Government
contracts.
International Sales. International sales of Computing Devices'
products and services totaled approximately $216 million and $167 million,
respectively, or 48% and 41%, respectively, of Computing Devices' total
revenue in 1993 and in 1992. Most of these products and services were
produced by Computing Devices' Canadian or U.K. subsidiaries for customers
in those countries. Because most of Computing Devices' cross-border sales
involve technologically advanced products, services and expertise, export
control regulations may limit the type of products and services that may be
offered and the countries and governments to which sales may be made.
Although cross-border sales could be adversely affected by changes in
government export policies, Computing Devices has not historically
experienced significant obstacles to cross-border sales due to export
controls. Computing Devices' international sales are subject to risks
inherent in foreign commerce, including currency fluctuations and
devaluations, changes in foreign governments and their policies,
differences in foreign laws and difficulties in negotiating and litigating
with foreign sovereigns. Computing Devices believes that it has mitigated
certain of these risks by obtaining letters of credit and advance payments,
by contractual protections on currency fluctuations and by denominating
contracts in U.S. dollars where possible.
Divestitures and Discontinued Operations
Ceridian's results over the past five years have been significantly
affected by the performance and subsequent sale, spin-off or closing of a
number of its businesses. Included among those businesses are Imprimis
Technology Incorporated, a manufacturer of magnetic disk drives, sold in
1989; ETA Systems Incorporated, developer of a line of super-computers,
closed in 1989, VTC Incorporated, a semiconductor manufacturer, disposed of
in 1989, Micrognosis, Inc., a supplier of trading room information systems,
sold in 1990, and SAMI, Incorporated, a market research operation, the
assets of which were disposed of in 1990. Because these operations did not
meet the criteria for treatment as discontinued operations, their results,
including the restructure charges and gains associated with their
dispositions, are included in Ceridian's results from continuing operations
and significantly affect the years 1989 and 1990.
Three other significant businesses which Ceridian has disposed of are
shown as discontinued operations in Ceridian's consolidated financial
statements. These businesses are the Computer Products business, which was
separately incorporated as Control Data Systems, Inc. and whose stock was
- 15 -
then distributed to Ceridian's stockholders as of July 31, 1992; the
Automated Wagering division, which provided on-line computer-based networks
for state lotteries and which was sold in June 1992; and the Empros energy
management systems division, which was sold March 1993.
Investments in Affiliated Companies
In past years, the Company invested in limited partnerships formed to
construct and operate Business and Technology Centers ("BTCs"). In
February 1994, the Company disposed of its interest in the remaining five
partnerships, as well as the remaining BTC it owned. This disposition had
no impact on the Company's results of operations.
Additional Information
Patents. The Company owns or is licensed under a number of patents
which relate to its products and are of importance to its business.
However, the Company believes that none of its businesses is materially
dependent upon any particular patent or license, or any particular group of
patents or licenses. Instead, the Company believes that its success and
growth are far more dependent, among other things, on the quality of its
services and products and its reputation with its customers.
Backlog. The Company's backlog is attributable to the Defense
Electronics segment, since no backlog amount is determinable for revenue
from the Company's Information Services businesses. Backlog does not
include those portions of government contracts for which funding has not
yet been approved. Effective with this report and in consideration of the
previously discussed change in funding for the Iris contract, the remaining
Iris contract value is included in backlog. Previously, the Company had
only included Iris contract value for which cash advances had been
received. Prior year amounts have been revised to provide comparable data.
As of December 31, 1993, the backlog of the Company's orders is $1,213
million, of which $862 million relates to the Iris contract and $351
million relates to other contracts and programs. At the end of the
previous year, the comparable total backlog was $1,309 million, of which
Iris represented $979 million and other contracts and programs represented
$330 million. The portion of the backlog at the end of 1993 expected to be
reflected in 1994 revenue is $349 million (29%), of which Iris represents
$143 million and the remainder of the backlog is $206 million.
Without regard to the Iris contract (which is a fixed price contract
with the Canadian government), the portion of the remaining backlog at
December 31, 1993 and 1992, respectively, under government prime and
subcontracts was 89% and 75% and the portion under fixed-price contracts
was 81% and 72%. Including the Iris contract, the portion of the total
backlog at December 31, 1993 and 1992, respectively, under government prime
and subcontracts was 97% and 94% and the portion under fixed-price
contracts was 95% and 94%.
- 16 -
Research and Development. The table below sets forth the amount of
the Company's research and development expenses for the periods indicated.
Year ended December 31,
1993 1992 1991
(Dollars in millions)
Research and development $33.4 $30.5 $34.6
Percent of revenues 3.8% 3.7% 4.5%
Customer sponsored research
and development $77.4 $59.6 $60.9
The Company's research and development efforts, including those
sponsored cooperatively by the Company and other participants, are
generally described earlier in this Item in the descriptions of the
Company's business segments. The amounts shown above as customer sponsored
research and development primarily represent government funded product
development efforts.
Geographic Segment Data. For financial information regarding the
Company's U.S. and international operations, as well as revenue from the
U.S. and Canadian governments, see the Note G, "Segment Data" on page 44 of
the Company's 1993 Annual Report to Stockholders, which is incorporated
herein by reference.
Employees. As of December 31, 1993, the Company employed
approximately 7,600 people in its continuing operations on a full- or part-
time basis.
- 17 -
Item 2. Properties.
At February 28, 1994, the Company's principal production and office
facilities were located in the metropolitan areas of Minneapolis,
Minnesota; Atlanta, Georgia; Cleveland, Ohio; Beltsville and Laurel,
Maryland; New York, New York; Ottawa and Calgary, Canada; and Hastings,
England.
The following table summarizes the usage and location of the Company's
facilities as of February 28, 1994.
(In thousands of square feet)
Type of Property Interest U.S. Non-U.S. Worldwide
Owned 341 310 651
Leased 3,286 341 3,627
Total Square Feet 3,627 651 4,278
Utilization
Manufacturing and
Warehousing 387 461 848
Office, Computer Center
and Other 1,901 190 2,091
Vacant/Idle 212 -- 212
Leased or Subleased
to Others 1,127 -- 1,127
Total Square Feet 3,627 651 4,278
The 4.3 million square feet of aggregate space reflected a decrease of
0.9 million square feet from February 28, 1993. Most of this decrease was
due to the disposition of vacant or idle space and the sale in February
1994 of the remaining BTCs. Space subject to assigned leases is not
included in the table above, and the Company remains secondarily liable
under all such leases. These assigned leases involve 1.9 million square
feet of space and future rental obligations totalling $52.5 million. The
principal elements of these amounts are 0.7 million square feet and $13.2
million related to the spin-off of Control Data Systems, and 1.2 million
square feet and $39.0 million related to the 1989 sale of Imprimis
Technology Incorporated to Seagate Technology, Inc. The Company does not
anticipate any material nonperformance by the assignees of these leases.
Except for two buildings utilized by Computing Devices' Canadian
subsidiary (which are subject to mortgages securing $10.1 million in debt
- 18 -
obligations), no facilities owned by the Company are subject to any major
encumbrances.
The Company believes that all of the facilities it currently utilizes
in its continuing operations are adequate for their intended purposes and
are adequately maintained. Utilization of those facilities varies among
the Company's operations. Generally, most of the facilities relating to
Employer Services are reasonably necessary for current and anticipated
output levels of that business. As a result of the decision to
discontinue its television and cable ratings service, Arbitron has excess
capacity at its Beltsville and Laurel, Maryland facilities, but has
established restructure reserves for the expected cost of such facilities
in excess of continuing requirements. There is also excess production
capacity in the Defense Electronics segment. Efforts are ongoing to
identify operations and facilities that can be consolidated and to dispose
of excess or idle space.
Item 3. Legal Proceedings.
Information regarding legal proceedings involving the Company and its
subsidiaries is incorporated by reference in Note O, Legal Matters, on page
52 of the Company's 1993 Annual Report to Stockholders, which is
incorporated herein by reference.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
- 19 -
Executive Officers of the Registrant
The executive officers of Ceridian as of March 1, 1994, are as
follows:
Executive
Name (Age) Position Officer Since
Lawrence Perlman (55) Chairman, President and 1980
Chief Executive Officer
John R. Eickhoff (53) Vice President and 1989
Chief Financial Officer
Loren D. Gross (48) Vice President and Corporate 1993
Controller
Linda J. Jadwin (50) Vice President, 1990
Corporate Communications
Glenn W. Jeffrey (47) Executive Vice President 1990
James D. Miller (45) Vice President, Strategic 1993
Initiatives
Stephen B. Morris(50) Vice President and President, 1992
The Arbitron Company
Patrick C. Sommers(46) Vice President and 1992
President, Ceridian
Employer Services
Ronald L. Turner(47) Vice President and President, 1993
Computing Devices International
The executive officers of the Company are elected by the Board of
Directors or appointed by the Company's Chief Executive Officer. They
serve at the pleasure of the Board of Directors and the Chief Executive
Officer. They are customarily elected each year at the first meeting of
the Board of Directors immediately following the annual meeting of
stockholders.
- 20 -
Lawrence Perlman has been President and Chief Executive Officer of the
Company since January 1990, and was appointed Chairman in November 1992.
Mr. Perlman was President and Chief Operating Officer of the Company from
December 1988 to January 1990. He is a director of Inter-Regional
Financial Group, Inc.; Seagate Technology, Inc.; The Valspar Corporation;
and Computer Network Technology Corporation. He is also a member of the
National Advisory Board of the Chemical Banking Corporation. Mr. Perlman
has been a director of the Company since 1985.
John R. Eickhoff has been Vice President and Chief Financial Officer
of the Company since June 1993. Mr. Eickhoff was Vice President and
Corporate Controller of the Company from July 1989 to June 1993, and was
Controller of the Company's Computer Systems and Services Group from August
1987 to July 1989.
Loren D. Gross has been Vice President and Corporate Controller of the
Company since July 1993. Mr. Gross was Assistant Corporate Controller of
the Company from March 1987 to July 1993.
Linda J. Jadwin has been Vice President, Corporate Communications of
the Company since March 1990. Ms. Jadwin was Vice President,
Communications and Administration of the Company's Computer Products
business from April 1989 to March 1990; and Vice President, Communications
of Imprimis Technology Incorporated from September 1988 to March 1989.
Glenn W. Jeffrey has been Executive Vice President of the Company
since December 1992. Mr. Jeffrey was Executive Vice President,
Organization Resources of the Company from June 1990 to December 1992;
President of Jeffrey & Associates, an executive and organization
development firm, from September 1989 to June 1990; and Vice President,
Human Resources, Corporate Staff and Restaurants, for The Pillsbury Company
from August 1988 to April 1989.
James D. Miller has been Vice President, Strategic Initiatives of the
Company since January 1993. From February 1989 to January 1993, Mr. Miller
was Vice President and Associate General Counsel for the Company.
Stephen B. Morris has been Vice President of the Company and President
of The Arbitron Company since December 1992. Mr. Morris was President and
Chief Executive Officer, Vidcode, Inc., which electronically monitors,
verifies and reports the broadcast of television commercials, from August
1990 to December 1992; and Director and co-founder of Spectra Marketing
Systems, a micro-marketing firm, from March 1987 to March 1992. Prior to
that time, he spent seventeen years at General Foods Corporation, the last
three as General Manager/President of the Maxwell House Division.
- 21 -
Patrick C. Sommers has been Vice President of the Company and
President of Ceridian Employer Services since November 1992. Mr. Sommers
was President, GTE Industry Services, a group of diversified companies
providing software, medical information, networking and publishing products
and services, from April 1990 to November 1992; and President, D&B
Information Resources, Inc., a subsidiary of Dun & Bradstreet Corporation
which collects and assimilates information into databases, from May 1988 to
April 1990.
Ronald L. Turner has been Vice President of the Company and President
of Computing Devices International since January 1993. Mr. Turner was
President and Chief Executive Officer, GEC-Marconi Electronics Systems
Corporation, a defense electronics company, from March 1987 to January
1993.
- 22 -
PART II
All information incorporated by reference into Items 5 through 8 below
is contained in the financial portion of the 1993 Annual Report to
Stockholders of Ceridian Corporation, which is filed with this report as
Exhibit 13.
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
The Company's common stock, par value $.50 per share ("Common Stock"),
is listed and trades on the New York Stock Exchange as well as on the
Chicago and Pacific Stock Exchanges. The following table sets forth the
high and low sales prices for a share of Common Stock on the New York Stock
Exchange.
1993 1992
High Low High Low
4th Quarter 19-7/8 17-1/2 17-1/4 13-3/4
3rd Quarter 18-1/2 14-3/8 16 13-1/8
2nd Quarter 16-1/8 13 14-1/8 11
1st Quarter 16-1/8 14-3/8 12-3/4 9-1/8
The number of holders of record of Common Stock on February 28, 1994
was approximately 24,050. No dividends have been declared or paid on the
Common Stock since 1985. For information regarding restrictions on
Ceridian's ability to pay cash dividends on its Common Stock or to
repurchase that stock, see Note K entitled "Financing Arrangements" on page
49 and the discussion on page 31 of "Management's Discussion and Analysis
of Financial Condition and Results of Operations," both of which are
incorporated herein by reference.
Item 6. Selected Financial Data.
See "Selected Five-Year Data" on page 1, which 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" on pages 20 through 31, which is incorporated herein
by reference.
Item 8. Financial Statements and Supplementary Data.
The financial statements described in Item 14(a)1. of this report are
incorporated herein by reference. See "Supplementary Quarterly Data
(Unaudited)" on page 53, which is incorporated herein by reference.
Item 9. Disagreements on Accounting and Financial Disclosure.
None.
- 23 -
PART III
Item 10. Directors and Executive Officers of the Registrant.
See information regarding the directors and nominees for director of
Ceridian under the heading "Nominees for Director" on pages 4 and 5 of the
Proxy Statement for the Annual Meeting of Stockholders, May 11, 1994 (the
"Proxy Statement"), which is incorporated herein by reference.
See the information regarding compliance with Section 16(a) of the
Securities Exchange Act of 1934 under the heading "Compliance With Section
16(a) of the Securities Exchange Act" on page 20 of the Proxy Statement,
which is incorporated herein by reference.
Information regarding the executive officers of Ceridian is on pages
20 through 22 of this Report, and is incorporated herein by reference.
Item 11. Executive Compensation.
See information under the headings "Directors' Compensation" on page 6
of the Proxy Statement and "Executive Compensation" on pages 14 through 18
of the Proxy Statement, all of which is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
See information under the heading "Share Ownership Information" on
pages 18 through 20 of the Proxy Statement, which is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions.
See information under the heading "Compensation Committee Interlocks
and Insider Participation" on page 6 of the Proxy Statement, which is
incorporated herein by reference.
- 24 -
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. Financial Statements of Registrant
Incorporated by reference from
the pages indicated in the 1993
Annual Report to stockholders of
Ceridian Corporation into Part II,
Item 8, of this Report: Page
Report of Management . . . . . . . . . . . . . . . . 32
Independent Auditors' Report . . . . . . . . . . . . 33
Consolidated Statements of
Operations for the years ended
December 31, 1993, 1992 and 1991. . . . . . . . . . . 34
Consolidated Balance Sheets as of
December 31, 1993 and 1992. . . . . . . . . . . . . . 35
Consolidated Statements of Cash Flows
for the years ended
December 31, 1993, 1992 and 1991. . . . . . . . . . . 36-37
Notes to Consolidated Financial Statements for
the three years ended December 31, 1993 . . . . . . . 38-52
(a) 2. Financial Statement Schedules of Registrant
Included in Part IV of this Report: Page
Independent Auditors' Report on financial
statement schedules . . . . . . . . . . . . . . . 29
Schedule VII - Guarantees of securities
of other issuers. . . . . . . . . . . . . . . . . 30
Schedule VIII - Valuation and qualifying accounts 31-32
All other financial statement schedules are omitted as the
required information is inapplicable or the information is presented in the
consolidated financial statements or related notes.
- 25 -
(a) 3. Exhibits
The following is a complete list of Exhibits filed or incorporated by
reference as part of this report.
Exhibit Description
2.01 Asset Purchase Agreement, dated as of March 4, 1992,
as amended, among the Company as seller, and Video Lottery
Technologies, Inc., and Automated Wagering International, Inc.
as purchasers (incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K dated June 23, 1992
(File No. 1-1969)).
2.02 Asset Purchase Agreement, dated as of March 14, 1993,
between the Company and Siemens Energy & Automation Inc.
(incorporated by reference to Exhibit 10.24 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1992 (File No. 1-1969)).
2.03 Transfer Agreement between the Company and Control Data
Systems, Inc., and Distribution Agreement between Control
Data Systems, Inc. and the Company, each dated as of
July 15, 1992 (incorporated by reference to Exhibits 10.1
and 10.2 to Amendment No. 1, dated July 10, 1992, to Control
Data Systems, Inc.'s Registration Statement on Form 10
(File No. 0-20252)).
3.01 Certificate of Incorporation, as amended (incorporated
by reference to Exhibit 3.01 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992
(File No. 1-1969)).
3.02 Form of Certificate of Designation of 5-1/2% Cumulative
Convertible Exchangeable Preferred Stock (incorporated by
reference to Exhibit 4.2 to the Company's Registration
Statement on Form S-3 (File No. 33-50959)).
3.03 Certificate of Elimination of Ceridian Corporation, dated
January 7, 1994.
3.04 Bylaws, as amended (incorporated by reference to Exhibit 3.01
to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1993 (File No. 1-1969)).
4.01 Form of Deposit Agreement, dated as of December 23, 1993,
between The Bank of New York and the Company (incorporated
by reference to Exhibit 4.5 to the Company's Registration
Statement on Form S-3 (File No. 33-50959)).
4.02 Form of Indenture, with respect to the 5-1/2% Convertible
Subordinated Debentures Due 2008, dated as of December 23,
1993, between The Bank of New York and the Company
(incorporated by reference to Exhibit 4.7 to the Company's
Registration Statement on Form S-3 (File No. 33-50959)).
- 26 -
10.01 Executive Employment Agreement between the Company
and Lawrence Perlman, dated February 1, 1994.
10.02 Executive Employment Agreement between the Company
and Stephen B. Morris, dated June 7, 1993.
10.03 Executive Employment Agreement between the Company
and Patrick C. Sommers, dated June 7, 1993.
10.04 Executive Employment Agreement between the Company
and Ronald L. Turner, dated June 7, 1993.
10.05 Directors Deferred Compensation Plan - 1993
Restatement (As amended through December 13, 1993).
10.06 1990 Long-Term Incentive Plan (1992 restatement)
(incorporated by reference to Exhibit 10.07 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1992 (File No. 1-1969)).
10.07 1993 Long-Term Incentive Plan (As amended through
December 13, 1993).
10.08 Description of Registrant's Annual Executive Incentive
Plan (incorporated by reference to Exhibit 10.08 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1992 (File No. 1-1969)).
10.09 Benefit Equalization Plan and First Declaration of
Amendment to the Benefit Equalization Plan, effective as
of January 1, 1989 (incorporated by reference to
Exhibit 10.09 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1990 and to Exhibit 10.23
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1989 (File No. 1-1969)).
10.10 Benefits Protection Trust (As amended through
July 29, 1988) (incorporated by reference to Exhibit 10.12
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1988 (File No. 1-1969)).
10.11 Form of Indemnification Agreement between Registrant and
its directors (incorporated by reference to Exhibit 10.11
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1991 (File No. 1-1969)).
10.12 Credit Agreement, dated as of June 30, 1993, among the
Company, Bank of America N.T. & S.A. as Agent and the
other Financial Institutions parties thereto (the "Credit
Agreement") (incorporated by reference to Exhibit 10.01 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993 (File No. 1-1969)).
10.13 First Amendment to the Credit Agreement (incorporated by
reference to Exhibit 10.01 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1993 (File No. 1-1969)).
- 27 -
(a) 3. Exhibits (cont.)
10.14 Form of Underwriting Agreement among the Company, Bear,
Stearns & Co. Inc., Cowen & Company and Piper Jaffray, Inc.,
dated December 16, 1993 (incorporated by reference to
Exhibit 1.1 to the Company's Registration Statement on
Form S-3 (File No. 33-50959)).
10.15 Employee Non-Statutory Stock Option Award Agreement between
the Company and Lawrence Perlman, dated February 3, 1993.
11. Statement re computation of earnings (loss) per share
12. Statements re computation of ratios
13. Pages 1 and 20 through 53 of the Company's 1993 Annual Report
to Stockholders
22. Subsidiaries of the Company
24. Consent of Independent Auditors
25. Power of Attorney
If requested, Ceridian will provide copies of any of the exhibits
listed above upon payment of Ceridian's reasonable expenses in furnishing
such exhibits.
(b) Reports on Form 8-K
None during the quarter ended December 31, 1993.
- 28 -
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULES
THE BOARD OF DIRECTORS AND STOCKHOLDERS
CERIDIAN CORPORATION:
Under date of January 24, 1994, we reported on the consolidated
balance sheets of Ceridian Corporation and subsidiaries as of December 31,
1993 and 1992, and the related consolidated statements of operations and
cash flows for each of the years in the three-year period ended December
31, 1993, as contained in the 1993 Annual Report to Stockholders. These
consolidated financial statements and our report thereon are incorporated
by reference in the Annual Report on Form 10-K for the year 1993. In
connection with our audits of the aforementioned consolidated financial
statements, we also have audited the related financial statement schedules
as listed in the accompanying index (see Item 14.(a)2.). These financial
statement schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statement
schedules based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth
therein.
As discussed in notes A and I to the consolidated financial
statements, the Company changed its method of accounting for postretirement
benefits other than pensions in 1992.
KPMG Peat Marwick
Minneapolis, Minnesota
January 24, 1994
- 29 -
SCHEDULE VII
CERIDIAN CORPORATION AND SUBSIDIARIES
GUARANTEES OF SECURITIES OF OTHER ISSUERS
December 31, 1993
(Dollars in millions)
Name of Issuer
of Securities
Guaranteed by Title of Issue
Person for of Each Class of Total Amount
Which Statement Securities Guaranteed and Nature of
is Filed Guaranteed Outstanding Guarantee
Seagate Note to Unisys $ 2.4 Guaranteed by
Technology Inc. Corporation (Memorex) Ceridian
due December 29, 1995 as to principal
and interest
Other 0.8 Guaranteed by
Ceridian
as to principal
and interest
Total $ 3.2
None of the amounts guaranteed and outstanding are (1) owned by the
person or persons for which the statement is filed, (2) held in treasury of
the issuer of the securities, or (3) in default.
- 30 -
SCHEDULE VIII
CERIDIAN CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in millions)
Operations and Investment Restructure
Balance at December 31
Charged to Asset Accrued
Operations Deductions Total ReservesLiabilities
1990
Total $ 179.2 $ -- $ 179.2
1991
1985 Restructure $ -- $ (13.9) $ 1.6 $ -- $ 1.6
1986 Restructure -- (0.5) 5.3 -- 5.3
1987 Restructure -- (2.2) 14.0 -- 14.0
1989 Restructure -- (48.3) 61.8 -- 61.8
1990 Restructure -- (20.5) 11.1 -- 11.1
1991 Restructure (16.2) 40.5 24.3 -- 24.3
Total $ (16.2) $ (44.9) $ 118.1 $ -- $ 118.1
1992
1985 Restructure $ -- $ (0.1) $ 1.5 $ -- $ 1.5
1986 Restructure -- (0.7) 4.6 -- 4.6
1987 Restructure -- (6.4) 7.6 -- 7.6
1989 Restructure -- (34.2) 27.6 -- 27.6
1990 Restructure -- (9.0) 2.1 -- 2.1
1991 Restructure -- (6.6) 17.7 -- 17.7
1992 Restructure 76.2 3.3 79.5 -- 79.5
Total $ 76.2 $ (53.7) $ 140.6 $ -- $ 140.6
1993
1985 Restructure $ -- $ (1.5) $ -- $ -- $ --
1986 Restructure -- (2.8) 1.8 -- 1.8
1987 Restructure -- (7.6) -- -- --
1989 Restructure -- (12.1) 15.5 -- 15.5
1990 Restructure -- (2.1) -- -- --
1991 Restructure -- (16.3) 1.4 -- 1.4
1992 Restructure -- (47.8) 31.7 -- 31.7
1993 Restructure 67.0 (3.9) 63.1 5.5 57.6
Total $ 67.0 $ (94.1) $ 113.5 $ 5.5 $ 108.0
- 31 -
SCHEDULE VIII (CONT.)
CERIDIAN CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in millions)
Allowance for Doubtful Accounts Receivable
Year Ended December 31
1993 1992 1991
Balance at beginning of year. . . . . . . $ 4.3 $ 3.8 $ 3.5
Additions charged to costs and
expenses. . . . . . . . . . . . . . . 1.7 1.1 1.5
Write-offs and other adjustments* . . . (0.6) (0.6) (1.2)
Balance at end of year. . . . . . . . . . $ 5.4 $ 4.3 $ 3.8
[FN]
(*)Other adjustments include balances removed as a result of sales of
businesses.
Investments and Advances
Year Ended December 31
1993 1992 1991
Balance of Seagate note
at beginning of year $ 10.0 $ 47.9 $ 48.2
Principal payment received (37.9)
Discount on Seagate note
as initially recorded or
at beginning of year (6.2) (6.2)
Amortization/Recovery of discount 6.2
Discount at end of year -- -- (6.2)
Balance of Seagate note
at end of year $ 10.0 $ 10.0 $ 42.0
- 32 -
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, on
March 10, 1994.
CERIDIAN CORPORATION
By: /s/Lawrence Perlman
Lawrence Perlman
Chairman, President 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 and in the capacities indicated on March 10, 1994.
/s/Lawrence Perlman /s/J. R. Eickhoff
Lawrence Perlman John R. Eickhoff
Chairman, President and Chief Vice President and Chief
Executive Officer (Principal Financial Officer
Executive Officer) and (Principal Financial Officer)
Director
/s/Loren Gross */s/Richard G. Lareau
Loren D. Gross Richard G. Lareau, Director
Vice President and Corporate
Controller (Principal Accounting
Officer) */s/Charles Marshall
Charles Marshall, Director
*/s/Ruth M. Davis */s/Richard W. Vieser
Ruth M. Davis, Director Richard W. Vieser, Director
*/s/Allen W. Dawson */s/Paul S. Walsh
Allen W. Dawson, Director Paul S. Walsh, Director
*/s/Ronald James *By: /s/John A. Haveman
Ronald James, Director John A. Haveman
Attorney-in-fact
- 33 -
EXHIBIT INDEX
Exhibit
No. Description Code
2.01 Asset Purchase Agreement, dated as of March 4, 1992, IBR
as amended, among the Company as seller, and Video Lottery
Technologies, Inc., and Automated Wagering International,
Inc. as purchasers (incorporated by reference to Exhibit
2.1 to the Company's Current Report on Form 8-K dated
June 23, 1992 (File No. 1-1969)).
2.02 Asset Purchase Agreement, dated as of March 14, 1993, IBR
between the Company and Siemens Energy & Automation Inc.
(incorporated by reference to Exhibit 10.24 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1992 (File No. 1-1969)).
2.03 Transfer Agreement between the Company and Control Data IBR
Systems, Inc., and Distribution Agreement between Control
Data Systems, Inc. and the Company, each dated as of
July 15, 1992 (incorporated by reference to Exhibits 10.1
and 10.2 to Amendment No. 1, dated July 10, 1992, to Control
Data Systems, Inc.'s Registration Statement on Form 10
(File No. 0-20252)).
3.01 Certificate of Incorporation, as amended (incorporated IBR
by reference to Exhibit 3.01 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992
(File No. 1-1969)).
3.02 Form of Certificate of Designation of 5-1/2% Cumulative IBR
Convertible Exchangeable Preferred Stock (incorporated by
reference to Exhibit 4.2 to the Company's Registration
Statement on Form S-3 (File No. 33-50959)).
3.03 Certificate of Elimination of Ceridian Corporation, dated IBR
January 7, 1994.
3.04 Bylaws, as amended (incorporated by reference to Exhibit IBR
3.01 to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1993 (File No. 1-1969)).
4.01 Form of Deposit Agreement, dated as of December 23, 1993, IBR
between The Bank of New York and the Company (incorporated
by reference to Exhibit 4.5 to the Company's Registration
Statement on Form S-3 (File No. 33-50959)).
4.02 Form of Indenture, with respect to the 5-1/2% Convertible IBR
Subordinated Debentures Due 2008, dated as of December 23,
1993, between The Bank of New York and the Company
(incorporated by reference to Exhibit 4.7 to the Company's
Registration Statement on Form S-3 (File No. 33-50959)).
10.01 Executive Employment Agreement between the Company E
and Lawrence Perlman, dated February 1, 1994.
10.02 Executive Employment Agreement between the Company E
and Stephen B. Morris, dated June 7, 1993.
10.03 Executive Employment Agreement between the Company E
and Patrick C. Sommers, dated June 7, 1993.
10.04 Executive Employment Agreement between the Company E
and Ronald L. Turner, dated June 7, 1993.
10.05 Directors Deferred Compensation Plan - 1993 E
Restatement (As amended through December 13, 1993).
10.06 1990 Long-Term Incentive Plan (1992 restatement) E
(incorporated by reference to Exhibit 10.07 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1992 (File No. 1-1969)).
10.07 1993 Long-Term Incentive Plan (As amended through
December 13, 1993).
10.08 Description of Registrant's Annual Executive Incentive IBR
Plan (incorporated by reference to Exhibit 10.08 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1992 (File No. 1-1969)).
10.09 Benefit Equalization Plan and First Declaration of IBR
Amendment to the Benefit Equalization Plan, effective as
of January 1, 1989 (incorporated by reference to
Exhibit 10.09 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1990 and to Exhibit 10.23
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1989 (File No. 1-1969)).
10.10 Benefits Protection Trust (As amended through IBR
July 29, 1988) (incorporated by reference to Exhibit 10.12
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1988 (File No. 1-1969)).
10.11 Form of Indemnification Agreement between Registrant and IBR
its directors (incorporated by reference to Exhibit 10.11
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1991 (File No. 1-1969)).
10.12 Credit Agreement, dated as of June 30, 1993, among the IBR
Company, Bank of America N.T. & S.A. as Agent and the
other Financial Institutions parties thereto (the "Credit
Agreement") (incorporated by reference to Exhibit 10.01 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993 (File No. 1-1969)).
10.13 First Amendment to the Credit Agreement (incorporated by IBR
reference to Exhibit 10.01 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1993 (File No. 1-1969)).
(a) 3. Exhibits (cont.)
10.14 Form of Underwriting Agreement among the Company, Bear, IBR
Stearns & Co. Inc., Cowen & Company and Piper Jaffray, Inc.,
dated December 16, 1993 (incorporated by reference to
Exhibit 1.1 to the Company's Registration Statement on
Form S-3 (File No. 33-50959)).
10.15 Employee Non-Statutory Stock Option Award Agreement between E
the Company and Lawrence Perlman, dated February 3, 1993.
11. Statement re computation of earnings (loss) per share E
12. Statements re computation of ratios E
13. Pages 1 and 20 through 53 of the Company's 1993 Annual E
Report to Stockholders
22. Subsidiaries of the Company E
24. Consent of Independent Auditors E
25. Power of Attorney E