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2001 Annual Report
We’re the Business Behind BusinessSM
®

Table of contents

  • Page 1
    ® 2001 Annual Report We're the Business Behind Business SM

  • Page 2
    ... Shareholders' Equity 27 Statements of Consolidated Cash Flows 28 Notes to Consolidated Financial Statements 35 Report of Management Independent Auditors' Report 36 Directors and Corporate Officers Inside Corporate Information Back Cover The people pictured in this year's Annual Report are ADP...

  • Page 3
    Financial Highlights Automatic Data Processing, Inc. 2001 Annual Report (In thousands, except per share amounts) Years ended June 30, 2001 2000 % Increase Total revenues Net earnings Basic earnings per share Diluted earnings per share Cash dividends Cash dividends per share Basic shares ...

  • Page 4
    ...-offs lightly. last 20 years. The slowdown impacted us in three primary areas: Brokerage trades fell behind the prior year's record high levels with a significant reduction in individual investor trading activity; our Employer Services new business sales results slowed sharply; and fed funds rates...

  • Page 5
    ... in the eyes of our clients. Employer of Choice We also realize that we cannot succeed as a world class service company unless we attract and retain knowledgeable and committed associates. Three years ago, we embarked on an Employer of Choice initiative to make ADP an increasingly attractive...

  • Page 6
    ... to ADP's success and assumption Arthur F. Weinbach Chairman and Chief Executive Officer August 13, 2001 Gary C. Butler President and Chief Operating Officer of increased responsibilities. Bud Angelus, President of our ES EBS business; Tim Lamb, President of our ES National Accounts business...

  • Page 7
    over 500,000 clients worldwide with outsourcing solutions that help them improve their performance. These include traditional products and services and Internet-based solutions‚ supported by expert sales and service capabilities‚ that enable us to serve businesses we were never before able to ...

  • Page 8
    ... of our clients' employees on payday; processed an average of over 1.3 million daily trades on the major security exchanges; empowered 16,000 auto retailers with profit-making business solutions; and helped insurance companies process over $25 billion in claims-related losses...The fundamental...

  • Page 9
    ... to serve them with additional products and services, gaining valuable referrals that, in turn, spawn new relationships - and a new generation of incremental growth. One of ADP's most basic beliefs - that each client counts - is central to everything we do. Our very successful business model thrives...

  • Page 10
    ... to World Class Service are client satisfaction scores and client retention rates. Both measures continue to trend upward in our business to record levels. This year, client satisfaction scores improved in all of our major business units. In Employer Services and Brokerage Services - which account...

  • Page 11
    ... year. And, most importantly, the average ADP client is staying with us longer than ever before. While our investment in tools, processing, training, and staffing - well over $100 million during the past several years - makes World Class Service possible, ADP associates make World Class Service...

  • Page 12
    ...-of-the-art training, improved communications programs, and more competitive pay and reward systems. In each successive year, we made further investments, and in fiscal '00 our efforts began to show some early results. This year, the results are even better. Annualized associate turnover is lower...

  • Page 13
    ..., the clients we serve have a longer average life cycle and generate higher margins. We are funding our EOC initiative with the same vitality as we do other strategically important initiatives, such as World Class Service and Product Leadership, which shape the character of our business. Highly...

  • Page 14
    ...and employee self-service features. Up-market, ADP's Enterprise Payroll is rapidly becoming a preferred solutions platform for the market's largest employers. Brokerage Services, which launched its Global Processing Solution last year, has signed several major institutions, including Bank of America...

  • Page 15
    ... partners and customer base. Additionally, ADP's e-business alliance with IBM (myautogarage.com ) links dealers and manufacturers with vehicle owners to reinforce brand loyalty relationships, and schedule authorized dealership maintenance and warranty services online. Claims Services enables clients...

  • Page 16
    ... and Internet-based outsourcing solutions, that help over 455,000 employers worldwide staff, manage, pay, and retain their employees. We paid more than Products & Services • Human resource information management. • Benefits administration. • Payroll processing. • Payroll tax filing...

  • Page 17
    ... Canada 14%; ADP is the largest provider of employer services to Canadian employers. • Realized strong growth in our TotalSource FY01 Payroll Highlights • Paid more than 30 million people worldwide each payday. • Printed and delivered over 43 million year-end tax statements in North America...

  • Page 18
    ... transaction processing systems, desktop productivity applications, and investor communications services to the financial services industry worldwide. Our clients include: full-service, discount, and online brokerage firms; global banks; mutual funds; institutional investors; specialty trading firms...

  • Page 19
    ...approximately 14,000 publicly traded companies and 450 mutual funds on behalf of more than 800 brokerage firms and banks. • Doubled our global product development and outsourced client services operations in India. • Reduced investor communication costs for publicly held companies by more than...

  • Page 20
    ... strategic alliance with Automotive Directions to enhance Customer Relationship Management solutions for auto retailers. • Launched our e-Support Web initiative at 2,700 client sites, enabling clients to report and resolve problems via ADP's dealersuite.com Internet site. • Signed a multi-year...

  • Page 21
    ... and settlement process, and streamlining workflow. Products & Services • Repair estimating applications and total loss vehicle valuation applications and databases. FY01 Highlights • Served over one-third of all property and casualty insurance companies in North America and Europe. • Auto...

  • Page 22
    ... $ 2,689,415 2001 data includes a $90 million ($54 million after-tax) non-cash, non-recurring write-off of the Company's investment in Bridge Information Systems, Inc. 1999 data includes non-recurring charges totaling approximately $17 million (after-tax), associated with certain acquisitions and...

  • Page 23
    ... a public company in 1961. Revenues and revenue growth by ADP's major business units are shown below: Revenues Years Ended June 30, (In millions) 2001 2000 1999 Revenue Growth Years Ended June 30, 2001 2000 1999 responsibility. As a result, various income and expense items, including certain non...

  • Page 24
    ... Board of Directors has authorized the purchase of up to 53 million additional shares. In '01 zero coupon convertible subordinated notes were converted to 1.3 million shares of common stock. In '01 the Company entered into an unsecured revolving credit agreement with certain financial institutions...

  • Page 25
    ...: ADP's success in obtaining, retaining and selling additional services to clients; the pricing of products and services; changes in laws regulating payroll taxes and employee benefits; overall economic trends, including interest rate and foreign currency trends; stock market activity; auto sales...

  • Page 26
    ...Years ended June 30, 2001 2000 1999 Revenues other than interest on funds held for clients and PEO revenues Interest on funds held for clients PEO revenues (A) Total revenues Operating expenses General, administrative... (3,834) 4,455,641 1,084,500 387,660 $ 696,840 Basic ...financial statements. 24

  • Page 27
    ... buildings Data processing equipment Furniture, leaseholds and other Less accumulated depreciation Other assets Intangibles Total assets before funds held for clients Funds held for clients Total assets Liabilities and Shareholders' Equity Current liabilities: Notes payable Accounts payable Accrued...

  • Page 28
    ...) Dividends ($.295 per share) Balance, June 30, 1999 Net earnings Currency translation Unrealized loss on securities Comprehensive income Employee stock plans and related tax benefits Treasury stock acquired (4,648 shares) Acquisitions (478 shares) Debt conversion (808 shares) Dividends ($.33875...

  • Page 29
    .... and Subsidiaries (In thousands) Years ended June 30, 2001 2000 1999 Cash Flows From Operating Activities Net earnings Adjustments to reconcile net earnings to net cash flows provided by operating activities: Depreciation and amortization Write-off of investment in Bridge Deferred income taxes...

  • Page 30
    ... released Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition." Adherence to this SAB has not had a material impact on the Company's consolidated financial statements. C. Cash and Cash Equivalents. Highly-liquid investments with a maturity of ninety days or less at the time of purchase are...

  • Page 31
    ...Note 3. Non-recurring Items In fiscal 1999 the Company divested its Brokerage frontoffice business to Bridge Information Systems, Inc. (Bridge), and received $90 million of Bridge convertible preferred stock as part of the proceeds. In fiscal 2001 Bridge filed for bankruptcy and the Company recorded...

  • Page 32
    ...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, 2001 there were 10,817 participants in the plans. The aggregate purchase price for...

  • Page 33
    ... of options and stock purchase plan rights granted subsequent to July 1, 1995 is shown below. The fair value for these instruments was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions: Years ended June 30, 2001 2000 1999 Risk...

  • Page 34
    ...: (In thousands) Years ended June 30, 2001 2000 1999 Change in plan assets: Funded plan assets at market value at beginning of year Plans of acquired employers Actual return on plan assets Employer contributions Benefits paid Funded plan assets at market value at end of year Change in benefit...

  • Page 35
    ... 35.0 $451,400 35.0 $379,600 35.0 Employer Services, Brokerage Services and Dealer Services are the Company's largest business units. ADP evaluates performance of its business units based on recurring operating results before interest on corporate funds, income taxes and foreign currency gains and...

  • Page 36
    Notes to Consolidated Financial Statements (continued) Employer Services Brokerage Services Dealer Services (In millions) Other Total Year ended June 30, 2001 Revenues Pre-tax earnings Assets Capital expenditures Depreciation and amortization Year ended June 30, 2000 Revenues Pre-tax earnings ...

  • Page 37
    ...have free access to the Audit Committee. Roseland, New Jersey August 13, 2001 Karen E. Dykstra Vice President Finance Arthur F. Weinbach Chairman and Chief Executive Officer Independent Auditors' Report Board of Directors and Shareholders Automatic Data Processing, Inc. Roseland, New Jersey We have...

  • Page 38
    ...Honorary Director Frank R. Lautenberg Retired U.S. Senator Honorary Chairman of the Board Arthur F. Weinbach(3) Chairman and Chief Executive Officer Gary C. Butler President and Chief Operating Officer Joseph A. Califano, Jr.(1) Chairman of the Board and President, The National Center on Addiction...

  • Page 39
    ..., Roseland, New Jersey, on November 13, 2001 at 10:00 a.m. A notice of the meeting, proxy statement, and proxy voting card will be mailed to shareholders starting on or about September 24, 2001. © 2001 Automatic Data Processing, Inc. The ADP logo is a registered trademark of ADP of North America...

  • Page 40
    ® Automatic Data Processing, Inc. One ADP Boulevard Roseland, New Jersey 07068-1728 973•974•5000 www.adp.com