ADP 1999 Annual Report Download - page 34

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The zero coupon convertible subordinated notes have a face value of
approximately $190 million at June 30, 1999, and mature February 20,
2012, unless converted or redeemed earlier. At June 30, 1999, the notes
were convertible into approximately 4.9 million shares of the Company’s
common stock. The notes are callable at the option of the Company,
and the holders of the notes can convert into common stock at any time
or require redemption in 2002 and 2007. During fiscal 1999 and 1998,
approximately $101 million and $458 million face value of notes were
converted or redeemed. As of June 30, 1999 and 1998, the quoted market
prices for the zero coupon notes were approximately $197 million and
$267 million, respectively. The fair value of the other debt included above,
based on available market information, approximates its carrying value.
Long-term debt repayments are due as follows:
(In thousands)
2001 $ 8,768
2002 1,400
2003 76
2004 81
2005 1,000
Thereafter 134,440
$145,765
During fiscal 1999 and 1998, the average interest rate for notes payable
was 4.3% and 3.8%, respectively.
Interest payments were approximately $12 million in both fiscal 1999
and 1998, and $10 million in fiscal 1997.
Note 7. Payroll and Payroll Tax Filing Services
As part of its integrated payroll and payroll tax filing services, the
Company collects funds for federal, state and local employment taxes
from approximately 330,000 clients, files annually over 16 million
returns, handles all regulatory correspondence, amendments, and penalty
and interest disputes, remits the funds to the appropriate tax agencies,
and handles other employer-related services. In addition to fees paid by
clients for these services, the Company receives interest during the interval
between the receipt and disbursement of funds by investing the funds
primarily in fixed income instruments. The amount of collected but
unremitted funds for the Company’s payroll and tax filing and certain
other services varies significantly during the year and averaged approxi-
mately $5.9 billion in fiscal 1999, $5.2 billion in fiscal 1998 and $4.5
billion in fiscal 1997. The amount of such funds was $7.0 billion as of
June 30, 1999 and $6.5 billion as of June 30, 1998. In June 1999, the
Company entered into interest rate swap agreements in the notional
amount of $400 million for twelve months. Interest on collected but
unremitted funds amounted to approximately $269 million in fiscal 1999,
$246 million in 1998 and $213 million in 1997.
Notes to Consolidated Financial Statements (continued)
Automatic Data Processing, Inc. and Subsidiaries
Note 8. Employee Benefit Plans
A. Stock Plans. The Company has stock option plans which provide for
the issuance to eligible employees of incentive and non-qualified stock
options, which may expire as much as 10 years from the date of grant, at
prices not less than the fair market value on the date of grant. At June 30,
1999, there were 8,500 participants in the plans. The aggregate purchase
price for options outstanding at June 30, 1999 was approximately $1.1
billion. The options expire at various points between 1999 and 2009.
A summary of changes in the stock option plans for the three years
ended June 30, 1999 is as follows:
(In thousands, except per share amounts)
Number of options Weighted average price
Years ended June 30, 1999 1998 1997 1999 1998 1997
Options outstanding,
beginning of year 45,596 43,176 45,846 $18 $15 $12
Options granted 11,616 11,377 7,346 $38 $29 $23
Options exercised (6,154) (5,970) (5,913) $12 $10 $19
Options canceled (3,591) (2,987) (4,103) $24 $18 $14
Options outstanding,
end of year 47,467 45,596 43,176 $24 $18 $15
Options exercisable,
end of year 16,898 14,820 14,525 $15 $11 $19
Shares available for
future grants,
end of year 1,691 9,358 17,441
Shares reserved for
issuance under
stock option plans 49 ,158 54,954 60,617
Summarized information about stock options outstanding as of
June 30, 1999 is as follows:
Outstanding Exercisable
Exercise Remaining Average Average
Price No. of options Life Exercise No. of options Exercise
Range (in thousands) (in years) Price (inthousands) Price
Under $15 13,129 3.6 $ 11 10,128 $ 10
$15 to $20 8,540 6.3 $ 18 3,660 $ 18
$20 to $25 5,486 7.7 $ 23 1,287 $ 23
$25 to $30 6,699 8.4 $ 27 1,105 $ 27
$30 to $35 2,908 8.9 $ 32 450 $ 32
Over $35 10,705 9.4 $ 40 268 $ 43
The Company has stock purchase plans under which eligible employ-
ees have the ability to purchase shares of common stock at 85% of the
lower of market value as of the date of purchase election or end of the
plans. Approximately 3.0 million and 3.3 million shares are scheduled
for issuance on December 31, 2000 and 1999, respectively. Approximately
3.2 million and 3.6 million shares were issued during the years ended
June 30, 1999 and 1998, respectively. At June 30, 1999 and 1998, there
were approximately 9.5 million and 11.0 million shares, respectively,
reserved for purchase under the plans. Included in liabilities as of
June 30, 1999 and 1998 are employee stock purchase plan withholdings
of approximately $72 million and $63 million, respectively.