ADP 2004 Annual Report Download - page 39

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Automatic Data Processing, Inc. and Subsidiaries
NOTE 3 Acquisitions and Divestitures
Assets acquired and liabilities assumed in business combinations
were recorded on the Company’s Consolidated Balance Sheets as
of the respective acquisition dates based upon their estimated fair
values at such dates. The results of operations of businesses
acquired by the Company have been included in the Company’s
Statements of Consolidated Earnings since their respective dates
of acquisition. The excess of the purchase price over the estimated
fair values of the underlying assets acquired and liabilities
assumed was allocated to goodwill. In certain circumstances, the
allocations of the excess purchase price are based upon prelimi-
nary estimates and assumptions. Accordingly, the allocations are
subject to revision when the Company receives final information,
including appraisals and other analyses.
The Company acquired six businesses in fiscal 2004 for
approximately $270 million, net of cash acquired. These acquisi-
tions resulted in approximately $186 million of goodwill. Intangi-
ble assets acquired, which total approximately $88 million,
consisted primarily of software and customer contracts and lists
that are being amortized over a weighted average life of 9 years.
In addition to goodwill recognized in the transactions noted
above, the Company made contingent payments totaling $26 mil-
lion (including $1 million in common stock), relating to previously
consummated acquisitions. As of June 30, 2004, the Company
had contingent consideration remaining for all transactions of
approximately $80 million, which is payable over the next four
years, subject to the acquired entity’s achievement of specified
revenue, earnings and/or development targets.
On June 20, 2003, the Company acquired all of the out-
standing common and preferred stock of ProBusiness Services,
Inc. (ProBusiness) for $17 per common share and $26 per pre-
ferred share. The transaction was consummated in cash of approx-
imately $517 million, net of cash acquired. ProBusiness was a
leading provider of comprehensive payroll and human resource
processing solutions to larger employers within the United States.
During fiscal 2004, the allocation of the purchase price was final-
ized and adjustments were made to increase goodwill by $5 mil-
lion. The adjustments primarily related to the final fair value
adjustments to certain assets and liabilities in the preliminary pur-
chase price allocation. The acquisition resulted in approximately
$422 million of goodwill. Intangible assets acquired, which
totaled approximately $80 million, consisted of software, cus-
tomer contracts and lists, and other intangible assets that are
being amortized over a weighted average life of 8 years.
In addition to the acquisition of ProBusiness in fiscal 2003,
the Company also acquired ten other businesses for approximately
$118 million, net of cash acquired. These acquisitions resulted
in approximately $90 million of goodwill. Intangible assets
acquired of $28 million, which consist of software, customer con-
tracts and lists, and other intangible assets, are being amortized
over a weighted average life of 5 years.
The Company purchased several businesses in fiscal 2002
in the amount of $232 million (including $12 million in common
stock), net of cash acquired.
The acquisitions discussed above for fiscal 2004, 2003 and
2002 were not material to the Company’s operations, financial
position or cash flows.
The Company divested of five small businesses in fiscal
2004 for $26 million. The divestitures of these businesses were
not material to the Company’s operations, financial position or
cash flows in fiscal 2004, 2003 and 2002.
NOTE 4 Corporate Investments and Funds Held for Clients
Corporate investments and funds held for clients at June 30, 2004 and 2003 are as follows:
2004 2003
Cost Fair Value Cost Fair Value
Type of issue:
Money market securities and other cash equivalents $ 2,903,284 $ 2,903,284 $ 4,276,175 $ 4,276,175
Available-for-sale securities:
U.S. Treasury and direct obligations of U.S. government agencies 5,449,694 5,485,632 4,145,995 4,349,052
Asset backed securities 2,570,424 2,580,609 2,420,233 2,489,521
Corporate bonds 2,342,017 2,341,015 1,568,195 1,620,621
Canadian government obligations and Canadian government agency obligations 765,908 774,877 492,581 513,366
Other debt securities 899,216 900,550 867,284 887,548
Other equity securities 5,696 10,141 5,696 15,809
Total available-for-sale securities 12,032,955 12,092,824 9,499,984 9,875,917
Total corporate investments and funds held for clients $14,936,239 $14,996,108 $13,776,159 $14,152,092
Classification of investments on the Consolidated Balance Sheets
Corporate investments $ 2,096,014 $ 2,092,576 $ 2,327,244 $ 2,344,343
Funds held for clients 12,840,225 12,903,532 11,448,915 11,807,749
Total corporate investments and funds held for clients $14,936,239 $14,996,108 $13,776,159 $14,152,092
At June 30, 2004, approximately 95% of our available-for-sale securities held a AAA or AA rating, as rated by Moody’s and
Standard & Poor’s.