ADP 2002 Annual Report Download

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We’re the business behind business.
®
2002 Annual Report
®

Table of contents

  • Page 1
    ® We're the business behind business. ® 2 0 0 2 Annual Report

  • Page 2
    ... processing, data communication, and information-based business solutions in the world. CONTENTS 1 2 5 16 18 20 21 22 23 27 28 29 30 31 39 39 40 inside back cover Financial Highlights Letter to Our Shareholders Business Narrative Employer Services At-a-glance Brokerage Services At-a-glance Dealer...

  • Page 3
    ... 19.9% At year end: Cash, cash equivalents and marketable securities Working capital Total assets before funds held for clients Long-term debt Shareholders' equity Number of employees $ 2 ,7 4 9 ,5 8 3 $ 1 ,4 0 6 ,1 5 5 $ 7 ,0 5 1 ,2 5 1 $ 9 0 ,6 4 8 $ 2,596,964 $ 1,747,187 $ 6,549,980 $ 110,227...

  • Page 4
    ... us in three primary ways. Employer Services, our largest business at 60% of revenues, had: slow new business sales; weaker retention, as client bankruptcies increased; fewer employees on our clients' payrolls; and less funds to invest, as our clients' employee compensation growth slowed markedly...

  • Page 5
    ... a leading pre-employment background verification and human resource help desk company, and have integrated Avert's employment screening solutions with our core payroll, tax filing, human resource, and benefit services capabilities. • In October, we acquired IBM's Output Services business, which...

  • Page 6
    ... one of great thanks and appreciation. Our associates make ADP's results happen. Nothing tested our associates more than the events of September 11, 2001. Their performance in doing the right thing for our clients and other associates, even at great personal inconvenience and difficulty, can only be...

  • Page 7
    ... industry. W e serve over 500,000 clients w orldw ide w ith products and services that help them im prove their perform ance. O ur prem ier business solutions are supported by approx im ately 40,000 talented, k now ledgeable and dedicated A D P associates around the w orld. A t A D P, w e focus our...

  • Page 8
    ... WITH 50 EMPLOYEES) FEWER THAN P ay-by-Pay® Workers Compensation Service lets small businesses manage their cash more effectively by enabling them to pay their workers' compensation insurance premiums, based upon actual payroll data, A D P's Internet payroll product is so convenient and easy-to...

  • Page 9
    ...with 24/7 control over payroll processing and easy access to the benefits of outsourcing. W e introduced two new Internet-based HR/payroll/ benefits solutions that offer mid-sized employers more flexibility, control, and choice. Both solutions include employee self-service that frees a client's HR...

  • Page 10
    ... an outsourced, hosted time and labor management solution that interfaces with ADP's Enterprise processing platform. ADP Connection for General Ledger expands our ongoing initiative to integrate enterprise resource planning (ERP) applications of large employers with ADP's payroll and other services...

  • Page 11
    ... language version of our GlossSM international securities trade processing system. IN VESTOR COMMUN ICATION SERVICES (ICS) I O ur browser-based Corporate Actions System employs a data-scrubbing engine with built-in, exception handling functionality to help simplify corporate actions processing...

  • Page 12
    ...) Managed Services lets dealerships focus more completely on selling cars, parts and service by outsourcing all IT management, computing and network infrastructure, technology decisions, and system support to ADP. The Web-based ADP Customer Relationship Management (CRM) system provides auto dealers...

  • Page 13
    ...automotive claims cycle, accelerating the review and settlement process. CenseoTM provides an integrated bill review solution for the auto casualty and workers' compensation markets. It is deployable at the client-site via the Web; on an ASP basis; or as part of ADP's traditional outsourcing service...

  • Page 14
    ... insurance companies to whom we provide collision estimating services. Clearly, World Class Service is an integral part of ADP's service culture and will always be at the core of our relationship with our clients and associates. The linkage between client and associate satisfaction is direct...

  • Page 15
    ...associates, on average, receive about 40 hours of professional training every year. Hours of Training A D P w as the only provider that could m anage the entire prox y process... Foods Corporation Pay eX pert ® has proven to be a great product for us in that it's secure, versatile, and easy-to-...

  • Page 16
    ... 1979 and since then w e've added m ore and m ore of A D P's services, most recently ADP's Enterprise v2, w hich w e im plem ented this year. Kelley Jozefick, Payroll M anager The William Carter Company We are committed to Product Leadership, World Class Service and being an Employer of Choice. 14

  • Page 17
    ... ew R iver alliance, w e can offer our custom ers the ability to receive their m utual fund prospectuses online, rather than in paper form at. T his saves tim e and m oney, and allow s the investor to choose his or her preference. Christopher Kershaw, Vice President Electronic Delivery M utual Funds...

  • Page 18
    ...(k) plan administration, benefits administration, regulatory compliance, and workers' compensation insurance. Time and labor management. Unemployment compensation management. Full outsourcing of payroll and personnel administration services including: data gathering, data entry, payroll control and...

  • Page 19
    ... year. Earned the highest client satisfaction scores in our history. Attained World Class Service performance levels at our call centers. Acquired Zurich Payroll, a provider of payroll and tax filing services to mid-size and large companies. Entered Japan's payroll outsourcing market through a joint...

  • Page 20
    ... solutions that allow clients to communicate with investors on a highly personalized level. Easy-to-use, browser-based, desktop tools to increase the efficiency and productivity of financial consultants and back-office personnel, enabling firms to gather and retain more assets. Our Global Processing...

  • Page 21
    ...trading system and new functionality for the Jasdec Pre-Settlement Matching Service. Created a strategic alliance with Caledonian Bank & Trust in Grand Cayman for offshore funds administration. • • Increased overall client satisfaction. Distributed more than 870 million investor communications...

  • Page 22
    ...'s Dealer Services Web portal - by over 200%. Launched our e-Support Web initiative at over 5,000 client sites, enabling clients to report and resolve problems via ADP's dealersuite.com site. Introduced our Pre-Owned Vehicle Analyzer application. Entered a strategic alliance with Ford Motor Company...

  • Page 23
    ... ADP Claims Services is a leading international provider of integrated business solutions for clients in the insurance, auto collision repair, and auto parts recycling industries. O ur products help clients manage costs and improve efficiency, streamline work flow, and accelerate the claim review...

  • Page 24
    Selected Financial Data Automatic Data Processing, Inc. and Subsidiaries (In thousands, except per share amounts) Years ended June 3 0 , 2002 2001 2000 1999 1998 Total revenues Earnings before income taxes Net earnings Pro forma net earnings* Basic earnings per share Diluted earnings per ...

  • Page 25
    ...require significant management estimates and are deemed critical to the Company's results of operations or financial position are discussed below. Intangible assets and goodwill. We have reviewed the carrying value of all our goodwill and other intangible assets in connection with the implementation...

  • Page 26
    ... proxy mailing and voting process towards electronic delivery and the "householding," or consolidation of customer accounts resulted in an increase in mailing suppressions. Suppressed mailings increase service fees, but lower postage revenues and expenses in the Investor Communications business. 24

  • Page 27
    ... mailings and voting process to electronic delivery. These increases in operating margin were offset by a higher mix of lower-margin institutional trades, the impact of pricing pressure in the industry, and investments in new products and acquisitions. D EALER SERVICES Dealer Services' revenues...

  • Page 28
    ... 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 and related industry changes; employment levels...

  • Page 29
    ... per share amounts) Years ended June 3 0 , 2002 2001 2000 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 and selling expenses Systems development and programming...

  • Page 30
    ... Client funds obligations Total liabilities Shareholders' equity: Preferred stock, $1.00 par value: Authorized, 300 shares; issued, none Common stock, $.10 par value: Authorized, 1,000,000 shares; issued, 638,702 shares at June 30, 2002 and 2001 Capital in excess of par value Retained earnings...

  • Page 31
    ...286 $ 921,190 (229,434) - (80,816) 77,286 Net earnings Currency translation Unrealized net gain on securities Comprehensive income Employee stock plans and related tax benefits Treasury stock acquired (16,558 shares) Acquisitions (22 shares) Debt conversion (1,303 shares) Dividends ($.395 per share...

  • Page 32
    ... Flows From Investing Activities Purchases of marketable securities Proceeds from sale of marketable securities Net change in client fund obligations Capital expenditures Additions to intangibles Acquisitions of businesses, net of cash acquired Disposals of businesses Other Net cash flows used in...

  • Page 33
    ...Employer Services' payroll processing fees, Brokerage Services' trade processing fees) as well as investment income on payroll and tax filing funds. Fees associated with services are recognized in the period services are rendered, and earned under service arrangements with clients where service fees...

  • Page 34
    ... company adopted SFAS 142 "Goodwill and Other Intangible Assets," which requires that goodwill no longer be amortized, but instead tested for impairment at least annually at the reporting unit level. If impairment is indicated, a write-down to fair value (normally measured by discounting estimated...

  • Page 35
    ... to previously consummated acquisitions. Goodwill and other intangible assets related to these transactions were allocated to the Company's reportable segments as follows for the twelve months ended June 30, 2002: Customer (In thousands) Goodwill Software Lists Other Intangibles Unearned income...

  • Page 36
    ... of the notes can convert into common stock at any time or require redemption in fiscal 2007. During fiscal 2002 and 2001, approximately $27 million and $50 million face value of notes were converted, respectively. As of June 30, 2002 and 2001, the quoted market prices for the zero coupon notes were...

  • Page 37
    ... funds for the Company's payroll and tax filing and certain other services varies significantly during the year and averaged approximately $8.4 billion in fiscal 2002, $8.2 billion in fiscal 2001, and $6.9 billion in fiscal 2000. N OTE 10. EMPLOYEE BEN EFIT PLAN S The Company has stock option plans...

  • Page 38
    ...-U.S. employees and maintains a Supplemental Officer Retirement Plan ("SORP"). The SORP is a defined benefit plan pursuant to which the Company will pay supplemental pension benefits to certain key officers upon retirement based upon an officer's years of service and compensation. B. Pension Plans...

  • Page 39
    ... 137,371 47,485 $316,153 $181,366 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 40
    ... and pre-tax earnings have been restated to reflect fiscal year 2002 budgeted foreign exchange rates. Business unit assets include funds held for clients but exclude corporate cash, marketable securities and goodwill. "Other" consists primarily of Claims Services, corporate expenses, non-recurring...

  • Page 41
    ... have free access to the Audit Committee. Arthur F. Weinbach Chairman and Chief Executive Officer Karen E. Dykstra Vice President Finance (Principal Financial Officer) Roseland, New Jersey August 12, 2002 Independent Auditors' Report Board of Directors and Shareholders Automatic Data Processing...

  • Page 42
    ... Officer, PWC Consulting Harvey M. Krueger(3) Vice Chairman of Lehman Brothers Chairman, ADP Executive Committee H ON ORARY D IRECTOR Frank R. Lautenberg Retired U.S. Senator Joseph A. Califano, Jr. (1) Chairman of the Board and President, The National Center on Addiction and Substance Abuse...

  • Page 43
    ... Investor Services Overpeck Centre 85 Challenger Road Ridgefield Park, New Jersey 07660 I NTERNET HOME PAGE To obtain financial, product and other information, visit ADP's registered home page address: http://www.adp.com CORPORATE COUNSEL Paul, Weiss, Rifkind Wharton & Garrison ANNUAL MEETING...

  • Page 44
    Automatic Data Processing, Inc. One ADP Boulevard Roseland, New Jersey 07068-1728 973 • 974 • 5000 www.adp.com