ADP 1998 Annual Report Download - page 29

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At June 30, 1998 and 1997, the Company had gross deferred
tax assets of approximately $134 million and $142 million,
respectively, consisting primarily of operating expenses not
currently deductible for tax return purposes. Valuation
allowances approximated $23 million as of June 30, 1998 and
1997. Gross deferred tax liabilities approximated $256 million
and $214 million, as of June 30, 1998 and June 30, 1997,
respectively, consisting primarily of differences in the account-
ing and tax values of certain fixed and intangible assets.
Income tax payments were approximately $245 million in
1998, $200 million in 1997, and $178 million in 1996.
A reconciliation between the Companys effective tax rate
and the U.S. federal statutory rate is as follows:
(In thousands, except percentages)
Years ended June 30, 1998 % 1997 % 1996 %
Provision for taxes
at statutory rate $309,500 35.0 $253,400 35.0 $222,400 35.0
Increase (decrease)
in provision from:
Investments in
municipals and
preferred stock (68,670) (7.8) (62,200) (8.6) (55,300) (8.7)
State taxes, net
of federal tax
benefit 27,985 3.2 18,180 2.5 15,370 2.4
Other 10,085 1.1 1,130 0.2 (1,780) (0.3)
$278,900 31.5 $210,510 29.1 $180,690 28.4
NOTE 10. COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries have various facilities and
equipment lease obligations. Total rental expense was
approximately $172 million in 1998 and $165 million in 1997
and 1996, with minimum lease commitments under operating
leases as follows:
(In millions)
Years ending June 30,
1999 $171
2000 125
2001 69
2002 41
2003 31
Thereafter 88
$525
In addition to fixed rentals, certain leases require payment
of maintenance and real estate taxes and contain escalation
provisions based on future adjustments in price indices.
In the normal course of business, the Company is subject
to various claims and litigation. The Company does not
believe that the resolution of these matters will have a
material impact on the consolidated financial statements.
NOTE 11. FINANCIAL DATA BY GEOGRAPHIC AREA
Information about the Companys operations by geographic
area for the three years ended June 30, 1998 is as follows
(in millions):
United Consoli-
States Europe Americas Corporate dated
Revenue
1998 $4,013 $ 493 $261 $ 31 $4,798
1997 $3,417 $ 512 $131 $ 52 $4,112
1996 $3,020 $ 388 $115 $ 44 $3,567
Earnings before
income taxes
1998 $ 838 $ 40 $ 22 $ (16) $ 884
1997 $ 687 $ 41 $ 17 $ (21) $ 724
1996 $ 606 $ 19 $ 17 $ (7) $ 635
Identifiable
assets
1998 $2,207 $1,248 $254 $1,466 $5,175
1997 $1,659 $1,315 $ 84 $1,325 $4,383
1996 $1,553 $1,244 $ 65 $ 978 $3,840
NOTE 12. QUARTERLY FINANCIAL RESULTS
(UNAUDITED)
Summarized quarterly results of operations for the three years
ended June 30, 1998 are as follows:
(In thousands, except per share amounts)
First Second Third Fourth
Yearended June 30,1998 Quarter Quarter Quarter Quarter
Revenue $1,038,498 $1,148,026 $1,309,329 $1,302,208
Net earnings $ 105,410 $ 147,390 $ 190,600 $
161,900
Basic earnings per share $ .36 $ .50 $ .64 $ .54
Diluted earnings per share $ .35 $ .49 $ .62 $ .52
Year ended June 30,1997
Revenue $ 910,730 $ 995,575 $1,126,284 $1,079,597
Net earnings $ 93,280 $ 127,580 $ 164,930 $ 127,710
Basic earnings per share $ .32 $ .44 $ .56 $ .44
Diluted earnings per share $ .31 $ .43 $ .55 $ .42
Year ended June 30, 1996
Revenue $ 747,094 $ 819,723 $1,031,864 $ 967,916
Net earnings $ 81,900 $ 108,900 $ 143,900 $ 120,000
Basic earnings per share $ .28 $ .38 $ .49 $ .42
Diluted earnings per share $ .28 $ .37 $ .48 $ .41
Third quarter revenue and earnings have historically been
positively impacted by calendar year-end processing associated
with many of the Companys services.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AUTOMATIC DATA PROCESSING, INC. AND SUBSIDIARIES