Business Context and Reporting Period
Company: Automatic Data Processing, Inc. (ADP)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended June 30, 1999
Headquarters: Roseland, New Jersey
ADP is a global computing services provider offering payroll, human resources, benefits administration, and tax filing services to over 425,000 employers. The company operates through four primary segments: Employer Services, Brokerage Services, Dealer Services, and Claims Services. ADP serves clients in the United States, Canada, Europe, Latin America, and other international markets, with approximately 18% of fiscal 1999 revenue generated outside the U.S.
Key Financial Metrics
Note: Specific revenue, profit, cash flow, and debt figures are incorporated by reference to the 1999 Annual Report to Shareholders and are not explicitly detailed in the provided text. The following metrics are available from the filing text:
- Systems Development and Programming: $412.38 million for fiscal 1999 (compared to $376.49 million in 1998 and $297.79 million in 1997).
- Allowance for Doubtful Accounts (Year-end 1999): $62.91 million total ($46.36 million current; $16.56 million long-term).
- Employees: Approximately 37,000 as of June 30, 1999.
- Market Capitalization: Approximately $25.99 billion (as of September 10, 1999).
- Shares Outstanding: 624,590,771 (as of September 10, 1999).
- Client Base: Over 450,000 clients globally.
Material Changes and Operational Highlights
ADP reported significant strategic acquisitions and operational expansions during fiscal 1999:
- Employer Services: Acquired The Vincam Group, Inc., making ADP the second-largest Professional Employer Organization (PEO) in the U.S. with over 81,000 work-site employees. Also acquired the benefits administration business of Johnson & Higgins/Kirke Van Orsdel, Inc.
- Brokerage Services: Acquired Leading Edge Technologies (mortgage-backed securities software) and OMR Systems (global trade processing). Introduced Internet-based products for trade confirmations and mutual fund sales.
- Dealer Services: Acquired Dealer Solutions, Inc. to advance its Web-based client/server strategy (Millennia3 platform).
- Claims Services: Introduced Electronic Medical Data Interchange (EMDI) in Canada.
- International Expansion: ADP Europe acquired three companies (Chessington, Realisator, Adid) and initiated Global Business Services to support multinational clients.
Outlook, Risks, and Management Commentary
Management Commentary: ADP maintains a leadership position in its major service offerings. The company emphasizes that its services are not overly sensitive to price changes, though economic conditions among clients may temporarily impact demand. The firm is actively transitioning toward Web-based solutions and global integration.
Risks and Contingencies:
- Competition: The computing services industry is highly competitive, with rivals including independent firms, diversified enterprise divisions, and banks. Competition is based on service responsiveness, product quality, and price.
- Market Risk: The investment portfolio consists primarily of high-grade fixed income instruments maturing in less than 7 years, resulting in no material market risk exposure.
- Legal Proceedings: No material legal proceedings were reported.
- Client Concentration: No single client accounts for more than approximately 1% of annual revenue.
Investor Verification Checklist
- Verify specific revenue, net income, and cash flow figures in the "Selected Financial Data" and "Statements of Consolidated Earnings" (incorporated by reference from the 1999 Annual Report to Shareholders).
- Review the impact of the pooling-of-interests transactions (Vincam Group, Dealer Solutions, etc.) on earnings per share and historical comparability.
- Assess the integration progress of recent acquisitions, particularly in the PEO and international brokerage sectors.
- Monitor the transition of Dealer Services to the Millennia3 Web-based platform and its effect on client retention.
- Confirm the status of the $412.38 million systems development spend and its return on investment in new product lines.