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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
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Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended DECEMBER 31, 1997
Commission File Number 1-1969
CERIDIAN CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 52-0278528
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
8100 34th Avenue South
Minneapolis, Minnesota 55425
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Telephone No.: (612) 853-8100
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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 The Pacific Exchange
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 the 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
Ceridian as of February 28, 1998 was $3,357,966,810.
The shares of Ceridian common stock outstanding as of February 28, 1998 were
72,375,214.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1997 Annual Report to Stockholders of Registrant: Parts I & II
Portions of the Proxy Statement for Annual Meeting of Stockholders, May 22,
1998: Parts III and IV
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CERIDIAN CORPORATION
PART I
THE INFORMATION CONTAINED IN THIS REPORT INCLUDES FORWARD-LOOKING
STATEMENTS, BASED ON CURRENT EXPECTATIONS AND ASSUMPTIONS, THAT INVOLVE RISKS
AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE EXPRESSED IN THE FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS KNOWN TO
CERIDIAN THAT COULD CAUSE SUCH MATERIAL DIFFERENCES ARE IDENTIFIED IN THE
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION" UNDER THE CAPTION "CAUTIONARY FACTORS THAT COULD AFFECT FUTURE
RESULTS" ON PAGE 11 OF CERIDIAN'S 1997 ANNUAL REPORT TO STOCKHOLDERS, WHICH IS
INCORPORATED BY REFERENCE INTO PART II, ITEM 7 OF THIS REPORT.
ITEM 1. BUSINESS.
Ceridian Corporation ("Ceridian"), known as Control Data Corporation until
June 1992, was founded in 1957 and is incorporated in Delaware. The principal
executive office of Ceridian is located at 8100 34th Avenue South, Minneapolis,
Minnesota 55425, telephone (612) 853-8100.
As a result of the December 31, 1997 sale of Computing Devices
International, Ceridian's defense electronics business, Ceridian now operates
exclusively in the information services industry. Ceridian's information
services businesses, which consist of its Human Resource Services businesses
("HRS"), its Comdata subsidiary and its Arbitron division, provide products and
services to customers in the human resources, trucking and electronic media
markets. These businesses collect, manage and analyze data and process
transactions on behalf of customers, report information resulting from such
activities to customers, and provide customers with related software
applications and services. The technology-based products and services of these
businesses are typically provided through long-term customer relationships that
result in a high level of recurring revenue.
HUMAN RESOURCE SERVICES.
The businesses comprising HRS offer a broad range of services and software
designed to help employers more effectively manage their work forces and
information that is integral to human resource processes. HRS' revenue for the
years 1995, 1996 and 1997 was $412.2 million, $490.3 million and $578.6 million,
respectively.
MARKETS. The market for human resource services covers a comprehensive
range of information management and employer/employee assistance services and
software. These products and services include transaction-oriented
administrative services and software products, in areas such as payroll
processing, tax filing and benefits administration, as well as management
support software and services, in areas such as skills management, regulatory
compliance, employee training and employee assistance.
The market for these products and services is expected to continue to grow
as organizations seek not only to reduce costs and improve productivity by
outsourcing administrative services and further automating internal processes,
but also to adapt to the increasing scope and complexity of laws and regulations
governing businesses and increasingly complicated work-life issues faced by
employers and employees. Continuing growth in multinational companies
increasingly makes providing human resource services a global opportunity.
Ceridian classifies employers in the human resource services market into
three categories: small (fewer than 100 employees), medium (100 to 10,000
employees) and large (over 10,000
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employees). Smaller employers in the human resource services market tend to
be relatively more price sensitive, to require less customization or
flexibility in product and service offerings, and to switch more readily from
one provider to another. Medium- and large-sized employers' human resource
management needs tend to be more complex, and therefore often require more
customization and flexibility in products and services, greater integration
among data processing systems and a greater variety of products and services.
Ceridian believes, however, that with regard to any size employer, a
provider of a transaction-based service such as payroll processing is
afforded attractive opportunities to complement that core service with
additional products and services that are natural adjuncts to that core
service and potentially important factors in revenue growth.
PRODUCTS AND SERVICES. HRS' human resource management products and
services include payroll processing services and software, tax filing services,
human resource information software, benefits administration software, time and
attendance systems, and applications to give employees and managers direct
access to human resources information. These products and services are provided
in the United States, the United Kingdom and Canada through Ceridian Employer
Services. Payroll processing and tax filing services accounted for about
three-fourths of HRS' 1997 revenue, with about 90% of 1997 payroll processing
and tax filing revenue derived from the United States.
Payroll processing in the United States consists primarily of preparing and
furnishing employee payroll checks, direct deposit advices and supporting
journals and summaries, but does not involve the handling or transmission of
customer payroll funds. Ceridian also supplies quarterly and annual social
security, Medicare, and federal, state and local income tax withholding reports
required to be filed by employers and employees. Payroll tax filing consists
primarily of collecting funds for federal, state and local employment taxes from
customers based on payroll information provided, remitting funds collected to
the appropriate taxing authorities, filing applicable returns, and handling
regulatory correspondence and amendments. Payroll-related services are
typically priced on a fee-per-item-processed basis.
Revenue from payroll tax filing services in the United States also includes
investment income earned by Ceridian from tax filing deposits temporarily held
pending remittance on behalf of customers to taxing authorities. Customer
deposits are held in a fiduciary capacity in a tax filing trust established by
Ceridian. The trust invests primarily in high quality collateralized short-term
investments, top tier commercial paper, U.S. Treasury and Agency securities, AAA
rated asset-backed securities and corporate securities rated A3/A- or better.
The duration of investments is carefully managed to meet the liquidity needs of
the trust. About two-thirds of 1997 tax filing revenue and about 14% of HRS'
total 1997 revenue was attributable to such investment income. Due to the
significance of this investment income, HRS' quarterly revenue and profitability
fluctuate as a result of changes in interest rates and in the amount of tax
filing deposits held. 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 greatest in the first quarter, HRS' revenue and profitability
tend to be greater in those quarters.
Payroll processing in the United States is conducted using Ceridian's
proprietary "Signature" software at 31 district offices located throughout
the United States, all of which are linked in a nationwide network.
Ceridian's payroll system allows customers to input their own payroll data
via personal computers, transmit the data on-line to Ceridian for processing,
retrieve reports and data files from Ceridian 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 Ceridian at one of its
district processing centers. Ceridian's payroll processing system also
interfaces with both customer and third-party transaction processing systems
to facilitate services such as direct deposit of payroll.
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Ceridian's tax filing services are provided not only to employers who utilize
Ceridian's payroll processing service, but also to local and regional payroll
processors.
Ceridian provides human resource information systems (HRIS) software that
runs in either Windows (-) or DOS environments and serves as a "front-end" to
Ceridian's Signature payroll processing system, allowing customers to utilize
a common database for both payroll and HRIS purposes. This enables the
customer to create a single database of employee information for on-line
inquiry, updating and reporting in payroll and other areas important to human
resource administration and management, such as employee data tracking,
government compliance, compensation analysis and benefits administration.
As a result of its February 1997 acquisition of FLX Corporation, Ceridian
also provides HRIS software for Microsoft operating environments that
incorporates open, industry standard technology, is scalable from standalone
applications to full client/server configurations, and can be utilized with
an existing interface as a front-end for Ceridian's payroll processing and
tax filing services. Ceridian expects to introduce during 1998 versions of
this software that will enable it to serve as a fully integrated front-end to
the Signature payroll processing system, as well as an Internet/intranet
version which will enable employees and managers to view and modify various
types of human resources information on-line.
Through a cooperative relationship with Humanic Design Corporation,
Ceridian is authorized to resell Humanic's client/server HRIS software for
Oracle operating environments in connection with Ceridian's payroll
processing services. Because of the importance of being able to integrate
Ceridian's payroll processing and tax-filing systems with other systems and
applications utilized by customers and potential customers, particularly
third-party HRIS applications, Ceridian has also developed interfaces to
exchange employee-related information between Ceridian's payroll system and
the HRIS systems of vendors such as Oracle Corporation and PeopleSoft Inc.
In August 1997, Ceridian announced it was terminating development of its
CII payroll processing software system, which had been intended to be a
successor to the Signature system primarily for larger payroll processing
customers with more complex processing needs. Beta tests of the CII system had
revealed that the costs associated with installing and processing payrolls for
large numbers of customers with the system would be higher than previously
anticipated, and that significant further investment would be required. As a
result, Ceridian determined that the CII system would not provide an adequate
return on its investment and decided, in light of continuing customer
satisfaction with and enhancements being made to the Signature system and
increased functionality included in HRIS software front-ends to the Signature
system, to terminate the CII development. In connection with this decision,
Ceridian terminated a technology services agreement with IBM Global Services
under which IBM was to have provided centralized computer processing services
utilizing the CII software.
In recent years, Ceridian has expanded its payroll processing and HRIS
software businesses outside of the United States through acquisitions.
Approximately 8% of HRS' 1997 revenue was obtained from customers outside of the
U.S. Ceridian's Centre-file Limited subsidiary, acquired in 1995, provides
mainframe-based payroll processing services and HRIS software in the United
Kingdom. Centre-file's services do not involve the handling or transmission of
customer payroll funds.
In January 1998, Ceridian's Canadian subsidiary purchased the payroll
processing business of the Toronto-Dominion Bank, which had fiscal 1997 revenue
of approximately $22 million. In March 1998, Ceridian purchased the Comcheq
payroll processing business of the Canadian Imperial Bank of Commerce, which had
1997 revenue of approximately $55 million.
- ---------------------------
- - "Windows" is a trademark of Microsoft Corporation.
Comcheq processes payrolls on a decentralized basis in its branch offices
utilizing a proprietary, PC-based system. Both of these Canadian payroll
businesses collect payroll and payroll tax amounts from customers and remit
tax amounts to applicable governmental authorities and make direct deposits
of payroll amounts to employees' bank accounts. As a result, revenue from
payroll processing services in Canada also includes investment income
received from temporarily holding these amounts. Ceridian expects that these
amounts will be invested in a similar fashion as comparable amounts in the
U.S. About 26% of the 1997 revenue of these Canadian businesses was
attributable to such investment income.
For large employers with complex information management needs that prefer
to have all aspects of their human resource management systems in-house,
Ceridian's Tesseract subsidiary provides mainframe-based payroll processing,
HRIS and benefits administration software, as well as consulting services. For
small employers located in the mid-Atlantic states, Ceridian's MiniData
subsidiary provides payroll processing, tax filing, unemployment compensation
management and related services. Ceridian also provides advanced time and
attendance software, including a client/server version which complements a
wide variety of HRIS and payroll systems, and a series of inter-related
software applications that allow employees and managers direct access to
employment-related information through telephones, touch screen kiosks,
personal computers and Internet/intranet technologies.
HRS also includes businesses that provide a variety of employee
assistance, work-life balance, management support and training products and
services. Ceridian Performance Partners provides services to help
organizations address workplace effectiveness issues and improve employee
recruitment, retention and productivity and reduce absenteeism. Staff
consultants provide confidential assistance 24 hours a day to customers'
employees to help them address issues ranging from everyday matters to crisis
situations. Supporting these consultants are research and product
specialists who provide specialized expertise in areas such as
parenting/child care, elder care, adult disabilities, addiction disorders,
mental health and financial, legal, managerial/supervisory and
education/schooling issues.
Ceridian's Usertech subsidiary provides customized end-user training and
support programs to organizations implementing new systems. Services
provided by Usertech include classroom and computer-based training,
print-based and on-line user guides and reference, and marketing
communications programs. Usertech's Information Learning Systems division
provides employee benefits knowledge base software that provides answers to
employee questions about their benefits and runs on company intranets and in
call centers.
Ceridian's Resumix subsidiary provides skills management software (and
related hardware) that employs image processing and knowledge base and database
technologies to enable organizations to manage large volumes of incoming resume
data to identify qualified candidates for hire and match them with available
staffing needs, and to manage the skills of an existing work force by matching
current employees with new jobs or projects. Resumix also provides a software
product that enables customers to link their Resumix systems with commercial
recruiting sites on the Internet.
SALES AND MARKETING. Payroll processing, tax filing and human resource
management software and services are marketed in the U.S. through a direct sales
force operating through about three dozen offices located throughout the U.S.
Marketing relationships have been established with banks, accounting firms and
insurance companies pursuant to which these products and services are offered to
the business clients of these entities. The most significant source of customer
leads for these transaction-based products and services are referrals from
existing customers and from the marketing relationships previously noted. The
other HRS businesses, including operations in the United Kingdom and Canada,
utilize their own direct
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sales forces. Customer leads for the products and services of these
businesses are generally obtained through referrals, trade shows, product
demonstration seminars and direct sales efforts.
HRS' customer base covers a wide range of industries and markets, and no
single customer represented more than 1% of HRS' 1997 revenue. HRS' products
and services are provided under written license or service agreements, with
contracts for repetitive services generally terminable upon relatively short
notice.
The HRS businesses have utilized cooperative marketing relationships with
other companies offering products or services that complement those of the HRS
businesses as well as informal marketing alliances with human resource
consulting firms, and are exploring similar cooperative arrangements with other
software, insurance and human resource services providers. HRS is also seeking
to further integrate and coordinate the sales and marketing efforts of its
businesses and to sell a greater variety of its products and services to the
customers of its various businesses.
COMPETITION. The human resource services industry is highly competitive.
Competition comes from national, regional and local third party transaction
processors, as well as from software companies, consulting firms and internally
developed and operated systems and software.
The majority of all payroll processing and tax filing in the U.S., Canada
and the United Kingdom is supported in-house, with the remainder supported by
third party providers. In the U.S., Automatic Data Processing, Inc. ("ADP") is
the largest third party provider, with Ceridian and Paychex, Inc. ("Paychex")
comprising the other two large, national providers. ADP serves all sizes of
employers, while Paychex focuses on small employers. Other third party payroll
and tax filing providers are generally regional and local competitors, although
larger, national providers of benefits administration or 401(k) processing
services may contemplate expansion into outsourced payroll processing. In both
the United Kingdom and Canada, Ceridian's respective subsidiaries are the
largest outsourced payroll processing providers in terms of revenue, in each
case competing with several other national providers, including a subsidiary of
ADP, and local providers. Competition in both the payroll processing and HRIS
software areas also comes from a number of large, national software companies
that provide both payroll processing software for in-house processing as well as
HRIS software, often in conjunction with other enterprise management software
applications.
Apart from payroll processing and tax filing services, HRS' businesses
generally compete with a variety of national and regional application software
companies, training companies, consulting firms and human resource services
providers. Generally, the market for these products and services is evolving
and is not dominated by a small number of competitors.
Currently, the principal competitive factors in the human resource services
industry are performance, price, functionality, ease and flexibility of use,
customer support and industry standard technology architecture. HRS believes
that the ability to integrate human resource management software applications
with customers' other in-house applications, and the ability to provide
client/server-based solutions are becoming increasingly important competitive
factors. While HRS believes its businesses are able to compete effectively in
the overall human resource services market, their continued ability to compete
effectively will depend in large measure on their ability to timely develop and
implement new technology, particularly that which incorporates industry standard
architecture and client/server-based solutions.
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COMDATA.
Ceridian's Comdata subsidiary provides transaction processing and decision
support services to the trucking industry. Comdata's revenue from products and
services provided to the trucking industry for the years 1995, 1996 and 1997 was
$156.2 million, $173.7 million and $197.8 million, respectively. On January 17,
1998, Comdata sold its gaming services business to First Data Corporation in
exchange for First Data's NTS transportation services business and cash.
Comdata expects that the operations of NTS, which are being integrated with
Comdata, will generate 1998 revenue of approximately $28 million for Comdata.
MARKETS. The trucking industry encompasses both long haul fleets and
local fleets. Private fleets, which are part of larger companies that have
significant shipping needs, predominate in the local fleet segment, but play
a lesser role in the long haul fleet segment. Common carriers, which provide
trucking services to companies that do not have fleets of their own,
predominate in the long haul fleet segment, which is comprised of
less-than-truckload and truckload components. The less-than-truckload
component, which involves trucks that make multiple stops to load and unload,
is characterized by large capital requirements and a relatively high degree
of consolidation. The truckload component, which involves the transportation
of full loads directly from shipper to final destination without going
through any sorting terminals, is highly fragmented and, Comdata believes, is
growing at the expense of the less-than-truckload component.
The majority of Comdata's trucking company customers are common carriers
serving the truckload component of the long haul segment. Many of these
carriers do not employ their drivers, but instead contract with individual
owner-operators. Such owner-operators usually settle their expenses with the
common carrier after the completion of each trip. Drivers for truckload
carriers often spend weeks on the road at a time, creating a number of unique
conditions and business opportunities. Truckload carriers are challenged to
monitor and control fuel purchases, provide driver services to aid in
recruitment and improve retention, obtain necessary licenses and permits, and
effectively manage the routing and logistics of such long-distance trips.
SERVICES. Comdata provides services to trucking companies, truck stops and
truck drivers in the long haul segment of the trucking industry, and is seeking
to expand its service offerings to the local fleet segment.
TRUCKING COMPANY SERVICES. Comdata provides trucking companies and their
drivers with a variety of funds transfer services, most commonly initiated
through the use of Comdata's proprietary Comchek-Registered Trademark- card,
which is used in a manner similar to an ordinary credit card. Comdata's funds
transfer system is designed to enable truck drivers to obtain funding for
purchases and cash advances at truck stops and other locations en route to their
destination. Drivers may use the Comchek card to purchase fuel, lodging and
other approved items, obtain cash advances from ATM machines or through the use
of Comchek drafts, make long distance phone calls and make direct deposits of
pay, settlements (for non-employee owner-operators) or trip advances to personal
bank accounts. In 1997, Comdata processed approximately 45 million funds
transfer transactions involving approximately $7.2 billion for the trucking
industry.
Use of the Comchek card allows the trucking company customer greater
control over its expenses by allowing it to set limits on the use of the cards,
such as by designating locations where the cards may be used, the frequency with
which they may be used, phone numbers which may be called and the amount of
authorized use. Use of a Comchek card also enables Comdata to capture and
provide to trucking company customers (usually within 24 hours after the
completion of a given trip) transaction and trip-related information that
greatly enhances a customer's ability to track and plan fuel purchases and other
trip expenses and settle with
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drivers. Comdata can also provide trucking companies with a Windows-based
software application that provides trucking companies with on-line access to
Comdata's computer system for data on fuel purchases and other trip
information, and facilitates pre- and post-trip planning functions.
Use of a Comchek card typically generates a Comchek draft, which is payable
through a Comdata bank account. Comdata funds the underlying transaction when
the truck stop (or other payee) negotiates the draft by depositing it in its
bank account. Comdata bills the trucking company for the amount of the draft
plus a portion of the service fee, and collects from the truck stop the balance
of the service fee. The trucking company remits payment to Comdata by wire
transfer or check, typically within six days, although trucking companies may be
billed by Comdata in advance for all funds transfers authorized for any purpose
in connection with a particular trip.
Approximately 18% of Comdata's funds transfer revenue is derived from
transactions that do not involve the Comchek card. When a truck driver makes a
request at a truck stop for a funds transfer, Comdata verifies that the driver's
company has established sufficient credit. Upon presentation of valid
identification, the truck stop obtains an authorization number from Comdata and
issues a Comchek draft, which is handled in the manner described earlier.
Comdata also provides the previously described information gathering and
processing services in connection with fueling transactions which Comdata does
not fund, but instead are billed directly by the truck stop to the trucking
company. Fees for these "direct bill" transactions are substantially lower.
Comdata also provides fuel price tracking reports and management within a
network of truck stops, including cost/plus fuel purchase programs.
Comdata's Transceiver-Registered Trademark- division determines the permits
needed for a designated trip, truck and load, purchases those permits on behalf
of the customer and delivers them by facsimile machine to a truck stop where
they can be picked up by the driver. Comdata also provides certain regulatory
compliance services, such as processing and auditing of driver trip logs,
reporting of fuel taxes, annual licensing and motor vehicle registration
verification. Vehicle escort services for oversized loads are also provided.
Comdata offers a computerized shipment interchange system to help trucking
companies find loads for their return trips, thereby reducing empty backhauls.
By making specific shipment information available to customers on a subscription
basis, available shipments can be matched with available cargo space on a
nationwide basis. Comdata generates and delivers invoices on behalf of trucking
companies to their customers, and also purchases trucking company freight bills
in addition to providing necessary invoicing. As a result of agreements with
two major long-distance telecommunications providers, Comdata offers to its
trucking company customers long distance telecommunications services at volume
discount rates that might not otherwise be available to such customers.
TRUCK STOP SERVICES. Comdata maintains a national network of 24-hour
independent truck stop service centers which have point-of-sale devices and
other computer equipment to facilitate communication with Comdata's database
and operations centers. The service centers act as Comdata's agents pursuant
to a service center agreement, and typically also offer the funds transfer
services of other companies.
Comdata's merchant services division provides fueling centers with
PC-based, point of sale systems which automate the various transactions that
occur at a fuel purchase desk, systems which enable customers to transact
card-based fuel purchases at the fuel pump, UPC scanning devices, and truck
stop management software. These Trendar systems accept many types of fuel
purchase cards currently used by drivers. Comdata also makes long distance
telecommunications services available to truck stops at volume discount
rates, and provides an
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800 number phone service and prepaid long distance phone cards to truck stops
for resale to their customers.
DRIVER RELATIONS SERVICES. In order to assist trucking company
customers in attracting and retaining drivers, Comdata makes available to
trucking company employees and independent drivers the employee assistance
services of Ceridian Performance Partners, and provides additional driver
relations services such as a monthly audio magazine and audio tapes for
drivers, and an electronic mail services to drivers through kiosks placed in
truck stops.
LOCAL FUELING. In August 1997, Comdata acquired the remaining equity
interest in International Automated Energy Systems, Inc. ("IAES"), a provider
of fuel management and payment systems for local transportation fleets. IAES
provides local fleet operators with VISA (+) cards for their drivers' fuel
purchases that offer the fleet operators transaction control and trip-related
information gathering features similar to those of the Comchek card. IAES
has not yet achieved significant revenue, and is seeking to increase the
number of fuel purchase cards issued and the number of sales outlets that
accept the cards.
SALES AND MARKETING. Comdata markets its services to the trucking
industry through a direct sales force operating in various cities throughout
the U.S., and through a centralized tele-sales operation. Comdata has
contracts with approximately 17,000 long haul trucking companies, ranging in
size from those with several thousand trucks to those with fewer than five
trucks. Comdata also has relationships with approximately 8,000 fueling
locations. Contracts with trucking companies generally range up to three
years in duration, while contracts with service centers are typically one or
two years in duration. No single customer represented more than 2% of
Comdata's 1997 revenue from services to the trucking industry. Comdata is
seeking to emphasize the selling of a greater variety of its products and
services to its existing customers.
COMPETITION. The principal competitive factors relevant to funds
transfers in the trucking industry are marketing efforts, pricing,
reliability of computer and communications systems, and time required to
effect transactions. The major credit and debit card companies are
significant competitors of Comdata in that they make cash available to, and
facilitate purchases of fuel and other products by, holders of their cards on
a nationwide basis. Several other companies also offer similar funds
transfer services. In addition, truckstops often negotiate directly with
trucking companies for a direct billing relationship. Certain of Comdata's
competitors also operate or franchise nationwide truckstop chains. In
addition, Comdata competes with service centers (such as truckstops) that
offer similar products and services. Comdata also faces increasing
competition in the funds transfer area from ATMs that participate in national
networks.
While the majority of permitting and legalization services continue to
be performed in-house, at least one other nationwide company and several
regional companies provide permit services similar to those provided by
Comdata. Competition in this market is influenced by price, the expertise of
personnel and the ease with which permits may be ordered and received.
Comdata believes that its competitive strengths include (i) its ability
to provide services to trucking companies and drivers at a large number of
locations in the continental United States and Canada, (ii) its ability to
offer a variety of services, frequently tailored to an individual customer's
needs, (iii) its proprietary databases regarding funds transfers and fuel
purchases, and (iv) its long-term experience and concomitant relationships in
the trucking industry.
NETWORK AND DATA PROCESSING OPERATIONS. Comdata's principal
communications center for its funds transfer business is located near its
corporate headquarters with a secondary center
- ---------------------------
(+) "VISA" is a trademark of Visa International Service Association.
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located in Dallas, Texas. WorldCom is the primary supplier of
telecommunications services to Comdata pursuant to an agreement whose term
expires in 2003. Substantially all of Comdata's internal data processing
functions, including its payment processing systems, are provided by IBM
pursuant to an agreement for systems operations services that expires in
April 2005.
REGULATION. Many states require persons engaged in the business of
selling or issuing payment instruments (such as the Comchek draft) or in the
business of transmitting funds to obtain a license from the appropriate state
agency. In certain states, Comdata is required to post bonds or other
collateral to secure its obligations to its customers in those states.
Comdata believes that it is currently in compliance in all material respects
with the regulatory requirements applicable to its business. The failure to
comply with the requirements of any particular state could have a material
adverse effect on Comdata's business in that state.
ARBITRON.
Arbitron provides media and marketing information to broadcasters
(primarily in radio), advertising agencies, advertisers and, through a joint
venture, newspapers. Arbitron's revenue for the years 1995, 1996 and 1997
was $137.2 million, $153.1 million and $165.2 million, respectively.
MARKETS. Significant consolidation of radio station ownership has
occurred in the U.S. in recent years, which has tended to intensify
competition within the radio industry and to intensify competition between
radio and other forms of media for advertising dollars. At the same time,
audiences have become more fragmented as a result of greatly increased
programming choices and entertainment/media options. As a result,
advertisers increasingly seek to tailor advertising strategies to target
specific demographic groups through specific media, and the audience
information needs of radio broadcasters, advertising agencies and advertisers
have correspondingly become more complex. Increased competition and more
complex information requirements have heightened the need of radio
broadcasters for improved information management systems and more
sophisticated means to analyze such information. In addition, there is a
growing demand for quality radio audience information internationally from
global advertisers, U.S. broadcasters who have acquired broadcasting
interests in other countries, and an increasing number of private commercial
broadcasters in other countries.
These trends also affect other media. As the importance of reaching
niche audiences with targeted marketing strategies increases, broadcasters,
publishers, advertising agencies and advertisers increasingly require that
information regarding exposure to advertising be provided on a more
individualized basis and that such information be coupled with information
regarding shopping patterns and purchaser behavior. The need for purchase
data information may create opportunities for innovative approaches to
satisfy these information needs, particularly as technological advances
increase the alternatives available to advertisers for reaching potential
customers, including the possibilities of interactive communication.
SERVICES. Arbitron is a leading provider of radio audience measurement
information in the U.S. 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's proprietary data regarding radio
audience size and demographics is provided to customers through multi-year
license agreements. Arbitron uses listener diaries to gather radio listening
data from sample households in the 267 local markets for which it currently
provides radio ratings. Respondents mail the diaries to Arbitron's
processing center where Arbitron compiles periodic audience measurement
estimates. During the past three years, Arbitron has increased its survey
frequency so that all markets are measured at least twice each year, and
major markets are measured four times per year, and has taken actions
10
toward increasing sample size, average response rates and the representation
of specific demographic groups.
Arbitron also provides software applications that give customers access
to Arbitron's database, and enable them to more effectively analyze and
understand that information and develop target marketing strategies.
Arbitron is also developing applications to enable customers to link
information provided by Arbitron's database with information from other
databases (such as product purchasing behavior) so as to enable customers to
further refine sales strategies and compete more effectively for advertising
dollars. The radio audience measurement service and related software sales
represented 83% of Arbitron's total 1997 revenue.
In November 1997, Arbitron acquired Continental Research, a United
Kingdom-based company that provides media, advertising, financial and
telecommunications research services in the United Kingdom and Europe.
Continental Research had 1997 revenue of $6.9 million. Arbitron expects to
utilize Continental Research to submit a bid for the United Kingdom radio
industry audience research contract being put out for tender during 1998 by
the Radio Joint Audience Research organization, and to explore other audience
measurement and market research opportunities in the United Kingdom and
Europe.
Arbitron also provides measurements of consumer retail behavior and
media usage in 243 local markets throughout the U.S. Arbitron's Scarborough
Research Partnership joint venture provides information regarding
product/service usage and media usage in 60 large U.S. markets, utilizing a
sample of consumers in the relevant markets to measure product and service
purchases. This information is provided twice each year to newspapers, radio
and television broadcasters, cable systems, advertisers and advertising
agencies in the form of the Scarborough Report. Arbitron has the exclusive
right to market the Scarborough Report to radio broadcasters and cable
systems. Arbitron has also developed and introduced in 43 mid-sized U.S.
markets its RetailDirect service, which is a locally oriented, purchase data
research service. The service, which utilizes diaries and telephone surveys,
provides a profile of the broadcast audience in terms of local media, retail
and consumer preferences so that local radio and television broadcasters and
cable systems will have information that helps them develop targeted sales
and programming strategies. Arbitron's Qualitative Diary service collects
consumer and media usage information from Arbitron radio diary keepers in 140
smaller U.S. markets.
Arbitron is exploring possible cooperative arrangements that would
facilitate the expansion of its radio audience measurement service into
selected international markets, provide additional software applications to
radio broadcasters and advertisers, and develop measurement products for the
Internet. Arbitron is also developing a passive, personalized electronic
measurement device to record broadcast listening or viewing for purposes of
audience measurement and verification that advertisements have been
broadcast.
SALES AND MARKETING. As of December 31, 1997, Arbitron provided its
radio audience measurement and related services to approximately 3,000 radio
stations and about 2,200 advertising agencies nationwide under contracts that
vary in length from one to seven years. Arbitron markets its products and
services through a direct sales force operating through offices in six cities
around the U.S. Reflecting the consolidation that has occurred in the radio
broadcasting industry, Arbitron's ten largest customers represented about 48%
of its 1997 revenue from radio audience measurement services and related
software sales.
Although the industry consolidation that has led to the increased
concentration of Arbitron's customer base could put pressure on the pricing
of Arbitron's radio ratings service, it has also contributed to an increase
in the number of stations subscribing for the ratings service, as stations
have become Arbitron customers upon their acquisition by a larger
broadcasting group. It has also been Arbitron's experience that stations
which are part of a larger broadcasting
11
group have been somewhat more likely to purchase analytical software
applications and other services in addition to the ratings service.
COMPETITION. Arbitron competes with other providers of radio audience
measurement services, one of which utilizes a different survey methodology
than Arbitron and the other of which is a relatively new entrant into the
market. Arbitron also competes with other providers of applications software,
qualitative data and proprietary qualitative studies used by broadcasters,
cable systems, advertising agencies and advertisers.
DIVESTITURES
Ceridian's defense electronics business, Computing Devices
International, was sold to General Dynamics Corporation on December 31, 1997.
Computing Devices has facilities in the U.S., Canada and the United Kingdom,
and provides mission-critical electronics, software, systems integration and
information management for defense and other government agencies and
commercial customers in selected markets. Computing Devices' revenue for the
years 1995, 1996 and 1997 was $509.5 million, $553.0 million and 589.5
million, respectively. Computing Devices is shown as a discontinued
operation in Ceridian's year-end 1997 consolidated financial statements.
Comdata's gaming services business, which was sold in January 1998,
provided cash advance services to gaming patrons in casinos, racetracks and
other gaming locations through the use of credit cards and debit services
employing automated teller machines and similar devices. Revenue for this
business for the years 1995, 1996 and 1997 was $117.9 million, $125.5 million
and $133.2 million, respectively.
ADDITIONAL INFORMATION
PATENTS AND TRADEMARKS. Ceridian owns or is licensed under a number of
patents which relate to its products and are of importance to its business.
Certain of Ceridian's products and services are marketed under federally
registered trademarks which are helpful in creating recognition in the
marketplace. However, Ceridian believes that none of its businesses is
materially dependent upon any particular patent, license or trademark, or any
particular group of patents, licenses or trademarks.
BACKLOG. Although Ceridian's businesses are typically characterized by
long-term customer relationships that result in a high level of recurring
revenue, a substantial portion of the customer contracts utilized by these
businesses are terminable by the customers upon relatively short notice
periods, including contracts that have been extended beyond their original
terms. In addition, the period between the time a customer agrees to use a
Ceridian service and the time the service begins is generally relatively
short. For these reasons, Ceridian does not believe that meaningful backlog
information can be provided for its businesses.
RESEARCH AND DEVELOPMENT. The table below sets forth the amount of
research and development expenses for Ceridian's continuing operations for
the periods indicated.
YEAR ENDED DECEMBER 31,
1997 1996 1995
---- ---- ----
(Dollars in millions)
Research and development $59.6 $52.5 $38.2
Percent of revenue 5.5% 5.6% 4.6%
12
Ceridian's research and development efforts are generally described
earlier in this Item in the description of Ceridian's businesses, and in Part
II, Item 7 of this report.
EMPLOYEES. As of December 31, 1997, Ceridian and its subsidiaries
employed approximately 8,000 people on a full- or part-time basis. None of
Ceridian's employees are covered by a collective bargaining agreement.
EXECUTIVE OFFICERS OF THE REGISTRANT. The executive officers of
Ceridian as of March 1, 1998, are as follows:
Executive
Name (Age) Position Officer Since
---------- -------- -------------
Lawrence Perlman (59) Chairman, President and Chief 1980
Executive Officer
John R. Eickhoff (57) Executive Vice President and 1989
Chief Financial Officer
Loren D. Gross (52)
Vice President and Corporate 1993
Controller
Tony G. Holcombe (42) Vice President, and President of 1997
Comdata Holdings Corporation
Carl O. Keil (56) Vice President, and President of 1997
Ceridian Employer Services
Stephen B. Morris (54) Executive Vice President, and 1992
President of Arbitron
Gary M. Nelson (46) Vice President and General Counsel 1997
Ronald L. Turner (51) Executive Vice President, Operations 1993
The executive officers of Ceridian are elected by the Board of Directors
and serve at the pleasure of the Board of Directors and the Chief Executive
Officer. They are customarily elected each year at the meeting of the Board
of Directors held in conjunction with the annual meeting of stockholders.
Lawrence Perlman has been President and Chief Executive Officer of
Ceridian since January 1990, and was appointed Chairman in November 1992. He
is a director of Seagate Technology, Inc., The Valspar Corporation and
Computer Network Technology Corporation. Mr. Perlman has been a director of
Ceridian since 1985.
John R. Eickhoff has been Executive Vice President and Chief Financial
Officer of Ceridian since May 1995, and was Vice President and Chief
Financial Officer of Ceridian from June 1993 to May 1995. Mr. Eickhoff was
Vice President and Corporate Controller of Ceridian from July 1989 to June
1993.
Loren D. Gross has been Vice President and Corporate Controller of
Ceridian since July 1993. Mr. Gross was Assistant Corporate Controller of
Ceridian from March 1987 to July 1993.
Tony G. Holcombe has been Vice President of Ceridian and President of
its Comdata Holdings Corporation subsidiary since May 1997. Mr. Holcombe was
President and Chief
13
Executive Officer of National Processing, Inc., which provides transaction
processing services and customized processing solutions, from October 1994 to
March 1997, and was Executive Vice President, Corporate Services for National
Processing from 1991 through 1994.
Carl O. Keil has been Vice President of Ceridian and President of
Ceridian Employer Services since April 1997. Mr. Keil was President and
Chief Executive Officer of EduServ Technologies, Inc., which originates,
services, and securitizes student loans, from March 1992 to January 1997;
Executive Vice President and Chief Operating Officer of International
Telecharge, Inc., which provides telecommunications and operator services,
from January 1991 to March 1992; and Senior Vice President of Marketing for
the Employer Services Group of Automatic Data Processing, Inc. from August
1987 to January 1991.
Stephen B. Morris has been Executive Vice President of Ceridian and
President of its Arbitron division since January 1996. Mr. Morris was Vice
President of Ceridian and President of Arbitron from December 1992 to January
1996. He was President and Chief Executive Officer of 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.
Gary M. Nelson has been Vice President and General Counsel of Ceridian
since August 1997. From 1983 to July 1997, Mr. Nelson was a partner in the
Oppenheimer Wolff & Donnelly law firm.
Ronald L. Turner has been Executive Vice President, Operations of
Ceridian since March 1997. Mr. Turner was an Executive Vice President of
Ceridian and President of its Computing Devices International division from
January 1996 to March 1997. Mr. Turner was Vice President of Ceridian and
President of Computing Devices International from January 1993 to January
1996. Mr. Turner was President and Chief Executive Officer, GEC-Marconi
Electronics Systems Corporation, a defense electronics company, from March
1987 to January 1993. Mr. Turner is a director of FLIR Systems, Inc. and BTG,
Inc.
14
ITEM 2. PROPERTIES.
At February 14, 1998, Ceridian's principal production and office
facilities were located in the metropolitan areas of Minneapolis, Minnesota;
Atlanta, Georgia; Columbia, Maryland; New York, New York; Fountain Valley and
San Francisco, California; Brentwood, Tennessee; St. Louis, Missouri; Toronto
and Montreal, Canada; and London, England.
The following table summarizes the usage and location of Ceridian's
facilities as of February 14, 1998:
FACILITIES
(In thousands of square feet)
Type of Property Interest U.S. Non-U.S. Worldwide
------------------------- ----- -------- ---------
Owned 29 15 44
Leased 2,933 102 3,035
----- -------- ---------
Total Square Feet 2,962 117 3,079
----- -------- ---------
Utilization
-----------
Office, Computer Center & 2,111 117 2,228
Other
Vacant/Idle 71 -- 71
Leased or Subleased to Others 780 -- 780
----- -------- ---------
Total Square Feet 2,962 117 3,079
----- -------- ---------
The 3.1 million square feet of aggregate space reflects a decrease of
1.1 million square feet from February 14, 1997 due to the sale of Computing
Devices International. Space subject to assigned leases is not included in
the table above, and Ceridian remains secondarily liable under all such
leases. As of December 31, 1997, these assigned leases involved 1.1 million
square feet of space and future rental obligations totaling $15.8 million.
The principal elements of these amounts are 0.4 million square feet and $1.8
million related to the spin-off of Control Data Systems, Inc. and 0.6 million
square feet and $12.6 million related to the 1989 sale of Imprimis Technology
Incorporated to Seagate Technology, Inc. Ceridian does not anticipate any
material nonperformance by the assignees of these leases.
No facilities owned by Ceridian or its subsidiaries are subject to any
major encumbrances. Ceridian believes that the facilities it currently
utilizes in its continuing operations are adequate for their intended
purposes, are adequately maintained and are reasonably necessary for current
and anticipated output levels of those businesses.
ITEM 3. LEGAL PROCEEDINGS.
Information regarding legal proceedings involving Ceridian and its
subsidiaries is incorporated herein by reference from Note N, LEGAL MATTERS,
on page 36 of Ceridian's 1997 Annual Report to Stockholders. Note N is part
of the consolidated financial statements contained in Ceridian's 1997 Annual
Report to Stockholders, which are attached hereto as Exhibit 13.03.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of Ceridian's stockholders during
the fourth quarter 1997.
15
PART II
All information incorporated by reference into Items 5 through 8 below
is contained in the financial portions of Ceridian's 1997 Annual Report to
Stockholders (the "Annual Report"), which are filed with this Report as
Exhibits 13.01 through 13.04.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Ceridian's common stock, par value $.50 per share, is listed and trades
on the New York Stock Exchange as well as on the Chicago Stock Exchange and
The Pacific Exchange. The following table sets forth the high and low sales
prices for a share of Ceridian's common stock on the New York Stock Exchange.
1997 1996
---------------------- ------------------------
High Low High Low
1st Quarter $42.50 $32.25 $46.875 $37.00
2nd Quarter 43.625 29.50 54.875 42.50
3rd Quarter 45.625 32.125 51.375 41.625
4th Quarter 47.75 35.25 53.125 39.00
The number of holders of record of Ceridian common stock on February 28,
1998 was 14,125. No dividends have been declared or paid on the Ceridian's
common stock since 1985. Although Ceridian is not contractually precluded
from paying dividends on its common stock, it has no present intention of
paying such dividends.
ITEM 6. SELECTED FINANCIAL DATA.
See "Selected Five-Year Data" on the inside front cover of the Annual
Report, which is attached to the Report as Exhibit 13.01 and 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 Results of Operations and
Financial Condition" on pages 6 through 13 of the Annual Report, which is
attached to this Report as Exhibit 13.02 and incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Ceridian's consolidated financial statements described in Item 14.(a)1 of
this Report are attached to this Report as Exhibit 13.03 and are incorporated
herein by reference. As for certain required supplementary financial
information, see "Supplementary Quarterly Data (Unaudited)" on page 37 of the
Annual Report, which is attached to this Report as Exhibit 13.04 and
incorporated herein by reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
16
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 2 and 3 of the Proxy
Statement for the Annual Meeting of Stockholders, May 22, 1998 (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 "Section 16(a) Beneficial
Ownership Reporting Compliance" on page 22 of the Proxy Statement, which is
incorporated herein by reference.
Information regarding the executive officers of Ceridian is on pages 13 and
14 of this Report, and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
See information under the headings "Directors' Compensation" on page 5 of
the Proxy Statement and "Executive Compensation" on pages 13 through 19 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
20 and 21 of the Proxy Statement, which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(A) 1. FINANCIAL STATEMENTS OF REGISTRANT
Ceridian's consolidated financial statements included in its 1997 Annual
Report to Stockholders, which are attached to this Report as Exhibit 13.03
and have been incorporated by reference into Part II, Item 8 of this Report,
are listed below (with the corresponding page numbers in the 1997 Annual
Report to Stockholders):
PAGE
------
Report of Management------------------------------------- 14
Independent Auditors' Report----------------------------- 15
Consolidated Statements of
Operations for the years ended
December 31, 1997, 1996 and 1995------------------------- 16
Consolidated Balance Sheets as of
December 31, 1997 and 1996------------------------------- 17
Consolidated Statements of Cash Flows
for the years ended
December 31, 1997, 1996 and 1995------------------------- 18
Notes to Consolidated Financial Statements for
the three years ended December 31, 1996------------------ 19-36
(A) 2. FINANCIAL STATEMENT SCHEDULES OF REGISTRANT
Attached to this Report on pages 25 through 27 is Financial Statement
Schedule II - "Ceridian Corporation and Subsidiaries Valuation and Qualifying
Accounts," together with the Independent Auditors' report thereon.
(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 November 3, 1997 by and between
Ceridian Corporation and General Dynamics Corporation (exhibits and
schedules omitted) (incorporated by reference to Exhibit 2.1 to
Ceridian's Current Report on Form 8-K dated December 31, 1997 (File
No. 1-1969)).
18
2.02 Closing Agreement dated as of December 31, 1997 between and among
Ceridian Corporation, General Dynamics Corporation, General Dynamics
Information Systems, Inc. and CDI Acquisition Company (exhibits and
schedules omitted) (incorporated by reference to Exhibit 2.2 to
Ceridian's Current Report on Form 8-K dated December 31, 1997 (File
No. 1-1969)).
2.03 Exchange Agreement, dated as of January 17, 1998, among First Data
Corporation, Integrated Payment Systems Inc., NTS, Inc., First Data
Financial Services, L.L.C., Ceridian Corporation, Comdata Network,
Inc. and Permicom Permits Services, Inc. (exhibits and schedules
omitted).
2.04 Share Purchase Agreement, dated as of January 26, 1998, among The
Toronto-Dominion Bank, Business Windows Inc., 3454916 Canada Inc.,
Ceridian Corporation, Ceridian Canada Ltd. and Ceridian Canada
Holdings, Inc. (exhibits and schedules omitted).
2.05 Agreement for the Purchase and Sale of Certain of the Assets of
Comcheq Services Limited, dated as of March 10, 1998, among the
Canadian Imperial Bank of Commerce, Comcheq Services Limited and
Ceridian Canada Ltd. (exhibits and schedules omitted) (incorporated
by reference to Exhibit 2.1 to Ceridian's Current Report on Form 8-K
dated March 10, 1998 (File No. 1-1969)).
3.01 Restated Certificate of Incorporation of Ceridian Corporation
(incorporated by reference to Exhibit 4.01 to Ceridian's Registration
Statement on Form S-8 (File No. 33-54379)).
3.02 Certificate of Amendment of Restated Certificate of Incorporation of
Ceridian Corporation (incorporated by reference to Exhibit 3 to
Ceridian's Quarterly Report on Form 10-Q for the quarter ended June
30, 1996 (File No. 1-1969))
3.03 Bylaws of Ceridian Corporation, as amended (incorporated by reference
to Exhibit 3.01 to Ceridian's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993 (File No. 1-1969))
10.01* Amended and Restated Executive Employment Agreement between Ceridian
Corporation and Lawrence Perlman, dated as of November 8, 1996
(incorporated by reference to Exhibit 10.01 to Ceridian's Annual
Report on Form 10-K for the year ended December 31, 1996 (File
No. 1-1969)).
10.02* Executive Employment Agreement between Ceridian Corporation and
Ronald L. Turner, dated as of July 1, 1997.
10.03* Executive Employment Agreement between Ceridian Corporation and
Stephen B. Morris, dated as of July 1, 1997.
10.04* Executive Employment Agreement between Ceridian Corporation and John
R. Eickhoff, dated as of July 1, 1997.
10.05* Executive Employment Agreement between Ceridian Corporation and Carl
O. Keil, dated as of October 22, 1997.
- ---------------------
(*) Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Report.
19
10.06* Executive Employment Agreement between Ceridian Corporation and Ronald
James, dated as of January 1, 1996 (incorporated by reference to
Exhibit 10.05 to Ceridian's Annual Report on Form 10-K for the year
ended December 31, 1996 (File No. 1-1969)).
10.07* Form of Amendment to Executive Employment Agreement (applicable to
agreement between Ceridian and Ronald James filed as Exhibit 10.06)
(incorporated by reference to Exhibit 10.06 to Ceridian's Annual
Report on Form 10-K for the year ended December 31, 1996 (File
No. 1-1969)).
10.08* Severance Compensation Agreement, dated as of November 29, 1994,
between Comdata Holdings Corporation and George L. McTavish
(incorporated by reference to Exhibit 10.05 to Ceridian's Annual
Report on Form 10-K for the year ended December 31, 1995 (File
No. 1-1969)).
10.09* Amendment No. 1 to Severance Compensation Agreement, dated as of
January 31, 1996, among Ceridian Corporation, Comdata Holdings
Corporation and George L. McTavish (incorporated by reference to
Exhibit 10.06 to Ceridian's Annual Report on Form 10-K for the year
ended December 31, 1995 (File No. 1-1969)).
10.10* Revision to Amendment No. 1 to Severance Compensation Agreement, dated
as of July 28, 1997, among Ceridian Corporation, Comdata Holdings
Corporation and George L. McTavish.
10.11* Ceridian Corporation 1993 Long-Term Incentive Plan (Amended and
Restated as of May 14, 1997) (incorporated by reference to Appendix A
to Ceridian's Proxy Statement for Annual Meeting of Stockholders, May
14, 1997 (File No. 1-1969)).
10.12* Form of Ceridian Corporation Employee Non-Statutory Stock Option Award
Agreement (under 1993 Long-Term Incentive Plan).
10.13* Form of Ceridian Corporation Performance-Based Stock Option Award
Agreement (under the 1993 Long-Term Incentive Plan).
10.14* Form of Ceridian Corporation Performance Restricted Stock Award
Agreement (under the 1993 Long-Term Incentive Plan) (incorporated by
reference to Exhibit 10.17 to Ceridian's Annual Report on Form 10-K
for the year ended December 31, 1996 (File No. 1-1969)).
10.15* Ceridian Corporation 1990 Long-Term Incentive Plan (1992 Restatement)
(as amended through October 21, 1994) (incorporated by reference to
Exhibit 10.12 to Ceridian's Annual Report on Form 10-K for the year
ended December 31, 1994 (File No. 1-1969)).
10.16* Description of the Ceridian Corporation Annual Executive Incentive
Plan.
10.17* Ceridian Corporation Benefit Equalization Plan, as amended (effective
generally as of January 1, 1994) (incorporated by reference to Exhibit
10.14 to Ceridian's Annual Report on Form 10-K for the year ended
December 31, 1994 (File No. 1-1969)).
- ------------------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this Report.
20
10.18* Ceridian Corporation Employees' Benefit Protection Trust Agreement,
dated as of December 1, 1994, between Ceridian Corporation and First
Trust National Association (incorporated by reference to Exhibit 10.15
to Ceridian's Annual Report on Form 10-K for the year ended December
31, 1994 (File No. 1-1969)).
10.19* Ceridian Corporation Deferred Compensation Plan (incorporated by
reference to Exhibit 10.16 to Ceridian's Annual Report on Form 10-K
for the year ended December 31, 1994 (File No. 1-1969)).
10.20* First Declaration of Amendment to Ceridian Corporation Deferred
Compensation Plan (incorporated by reference to Exhibit 10.15 to
Ceridian's Annual Report on Form 10-K for the year ended December 31,
1996 (File No. 1-1969)).
10.21* Ceridian Corporation 1993 Non-Employee Director Stock Plan
(incorporated by reference to Exhibit 2 to Ceridian's Proxy Statement
for Annual Meeting of Stockholders, May 12, 1993 (File No. 1-1969)).
10.22* Ceridian Corporation 1996 Director Performance Incentive Plan (As
amended through December 15, 1997).
10.23* Form of Indemnification Agreement between Ceridian Corporation and its
Directors (incorporated by reference to Exhibit 10.16 to Ceridian's
Annual Report on Form 10-K for the year ended December 31, 1996 (File
No. 1-1969)).
10.24 Amended and Restated Credit Agreement, dated as of July 31, 1997,
among Ceridian Corporation, Bank of America National Trust and Savings
Association as Agent, and the Financial Institutions Parties Thereto
(exhibits and schedules omitted) (incorporated by reference to Exhibit
10.1 to Ceridian's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997 (File No. 1-1969)).
10.25 Waiver and First Amendment to Credit Agreement, dated as of
December 2, 1997, among Ceridian Corporation, Bank of America
National Trust and Savings Association as Agent, and the Financial
Institutions Parties Thereto.
10.26 Credit Agreement, dated as of January 30, 1998, between The
Toronto-Dominion Bank and Ceridian Canada Ltd. (exhibits and
schedules omitted).
10.27 Guarantee Agreement, dated as of January 30, 1998, between Ceridian
Corporation and The Toronto-Dominion Bank.
10.28 Credit Agreement, dated as of March 2, 1998, between the Canadian
Imperial Bank of Commerce and Ceridian Canada Ltd. (exhibits and
schedules omitted).
10.29 Guarantee Agreement, dated as of March 2, 1998, between Ceridian
Corporation and the Canadian Imperial Bank of Commerce.
10.30 Letter Agreement dated as of December 16, 1997, between Comdata
Network, Inc. and International Business Machines Corporation
pertaining to the Amended and Restated Agreement for Systems
Operations Services dated May 1, 1995 between Comdata Network, Inc.
and Integrated Systems Solutions Corporation n.k.a. International
Business Machines Corporation (exhibits and schedules omitted).
- ------------------------
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Report.
21
10.31 Amended and Restated Agreement for Systems Operations Services dated
May 1, 1995 between Comdata Network, Inc. and Integrated Systems
Solutions Corporation n.k.a. International Business Machines
Corporation (exhibits and schedules omitted) (incorporated by
reference to Exhibit 10.20 to Ceridian's Annual Report on Form 10-K
for the year ended December 31, 1995 (File No. 1-1969)).
10.32 Telecommunications Services Agreement, dated as of September 1, 1997,
among WorldCom Network Services, Inc. d.b.a. WilTel, Comdata Network,
Inc. and Comdata Telecommunications Services, Inc., including Program
Enrollment Terms, as amended (exhibits and schedules omitted).
13.01 Selected Five-Year Data (inside front cover of Ceridian's 1997 Annual
Report to Stockholders).
13.02 Management's Discussion and Analysis of Results of Operations and
Financial Condition (pages 6 through 13 of Ceridian's 1997 Annual
Report to Stockholders).
13.03 Consolidated Financial Statements of Ceridian Corporation (pages 14
through 36 of Ceridian's 1997 Annual Report to Stockholders).
13.04 Supplementary Quarterly Data (Unaudited) (page 37 of Ceridian's 1997
Annual Report to Stockholders).
21. Subsidiaries of Ceridian
23.01 Consent of Independent Auditors - KPMG Peat Marwick LLP
23.02 Consent of Independent Auditors - Arthur Andersen LLP
24. Power of Attorney
27. Financial Data Schedule
If requested, Ceridian will provide copies of any of the exhibits listed
above upon payment of its reasonable expenses in furnishing such exhibits.
Ceridian will provide to the Securities and Exchange Commission, upon
request, any exhibit or schedule to any of the foregoing exhibits which has
not been filed. Neither Ceridian nor its subsidiaries has outstanding as of
the date of this Report any securities authorized pursuant to long-term debt
instruments.
(B) REPORTS ON FORM 8-K
Ceridian filed no reports on Form 8-K during the quarter ended December
31, 1997. On January 15, 1998, Ceridian did, however, file a report on Form
8-K dated December 31, 1997, which reported in "Item 2: Acquisition or
Disposition of Assets" the closing of the sale by Ceridian of its defense
electronics business, Computing Devices International ("CDI"), to General
Dynamics Corporation. Included in Item 7 of that Report was a pro forma
condensed consolidated balance sheet of Ceridian as of September 30, 1997
(assuming the sale of CDI took place on that date), and pro forma condensed
consolidated statements of operations for Ceridian for the nine months ended
September 30, 1997 and for the years 1996 and 1995 (assuming in each case the
sale of CDI took place on January 1, 1995).
On January 20, 1998, Ceridian filed a report on Form 8-K dated January
19, 1997, reporting under Item 5 important factors known to Ceridian that
could cause Ceridian's actual
22
results in 1998 to differ materially from any forward-looking statements made
by Ceridian. This filing was made for purposes of the safe harbor provided
for forward-looking statements by Section 21E of the Securities Exchange Act
of 1934, as amended. On January 29, 1998, Ceridian filed a report on Form
8-K dated January 27, 1997, reporting under Item 5 thereof that Ceridian had
announced its results of operations for the quarter and year ended December
31, 1997, and attached as an exhibit to that report a copy of the press
release by which those results had been announced.
23
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, as of March 27,
1998.
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 as of March 27, 1998.
/S/ Lawrence Perlman /S/ J.R. Eickhoff
- ------------------------------------- ----------------------------------
Lawrence Perlman J. R. Eickhoff
Chairman, President and Chief Executive Vice President and Chief
Executive Officer (Principal Financial Officer
Executive Officer) and Director (Principal Financial Officer)
/S/ Loren D. Gross
- --------------------------------------
Loren D. Gross
Vice President and Corporate
Controller (Principal Accounting
Officer)
*/S/ Ruth M. Davis */S/ George R. Lewis
- ------------------------------------- ----------------------------------
Ruth M. Davis, Director George R. Lewis, Director
*/S/ Charles Marshall
- ------------------------------------- ----------------------------------
Robert H. Ewald, Director Charles Marshall, Director
*/S/ Richard G. Lareau */S/ Carole J. Uhrich
- ------------------------------------- ----------------------------------
Richard G. Lareau, Director Carole J. Uhrich, Director
*/S/ Ronald T. Lemay */S/ Richard W. Vieser
- ------------------------------------- ----------------------------------
Ronald T. LeMay, Director Richard W. Vieser, Director
*/S/ Paul S. Walsh
----------------------------------
Paul S. Walsh, Director
/S/ John A. Haveman
- -------------------------------------
*By: John A. Haveman, Attorney-in-fact
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SCHEDULE II
CERIDIAN CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in millions)
Restructure and Discontinued Operations Reserves
Employer
Services
Arbitron TV Consolidation Other Total
Reserve Balance 12/31/94 $ 11.1 $ 12.4 $ 64.8 $ 88.3
Cash Payments (3.9) (0.7) (13.6) (18.2)
Other Non-cash Items 0.3 0.3
Reserve Balance 12/31/95 $ 7.5 $ 11.7 $ 51.2 $ 70.4
Cash Payments (1.6) (2.6) (10.7) (14.9)
Other Non-cash Items (1) (0.5) 0.2 1.7 1.4
Reserve Balance 12/31/96 $ 5.4 $ 9.3 $ 42.2 $ 56.9
Cash Payments (1.1) (3.2) (16.8) (21.1)
Other Non-cash Items (0.5) 0.3 0.2 --
Reserve Balance 12/31/97 $ 3.8 $ 6.4 $ 25.6 $ 35.8
(1) Primarily proceeds from sale of idled assets which have been reclassified
as cash inflow from investing activities.
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SCHEDULE II (CONT.)
CERIDIAN CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in millions)
Allowance for Doubtful Accounts Receivable Year Ended December 31,
1997 1996(1) 1995(1)
------ ------- -------
Balance at beginning of year $ 11.2 $ 11.7 $ 11.1
Additions charged to costs and expenses 7.9 5.4 6.3
Write-offs and other adjustments (2) (8.6) (5.9) (5.7)
Balance at end of year $ 10.5 $ 11.2 $ 11.7
(1) Restated to remove discontinued operations.
(2) Other adjustments include balances removed as a result of sales of
businesses.
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INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
THE BOARD OF DIRECTORS AND STOCKHOLDERS
CERIDIAN CORPORATION:
Under date of January 27, 1998, we reported on the consolidated
balance sheets of Ceridian Corporation and subsidiaries as of December 31, 1997
and 1996, and the related consolidated statements of operations and cash flows
for each of the years in the three-year period ended December 31, 1997, as
contained in Ceridian's 1997 Annual Report to Stockholders. Our report refers
to a report of other auditors with respect to the 1995 statements of operations
and cash flows of Comdata Holdings Corporation. These consolidated financial
statements and our report thereon are incorporated by reference in the Annual
Report on Form 10-K for the year 1997. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
consolidated financial statement schedule as listed in the accompanying index
(see Item 14.(a)2.). This financial statement schedule is the responsibility of
Ceridian's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.
In our opinion, based on our audits and the report of other auditors,
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/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 27, 1998
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