Business Context and Reporting Period
Company: Automatic Data Processing, Inc. (ADP)
Filing Type: Form 8-K (Current Report)
Date of Report: June 16, 2006
Earliest Event Reported: August 11, 2005
Context: This filing reports the entry into material definitive agreements regarding amendments to executive compensation plans and the approval of a new long-term growth incentive program.
Key Financial Metrics
This Form 8-K does not contain financial statements, revenue figures, profit margins, cash flow data, debt levels, or liquidity metrics. The filing focuses exclusively on corporate governance and executive compensation structures.
Material Changes and Agreements
- Amendment to Supplemental Officers' Retirement Plan (SORP): On June 15, 2006, the Compensation Committee amended the SORP to exclude specific program amounts from the definition of "compensation" to align with normal compensation metrics.
- Amendment to Change in Control Severance Plan: The plan was amended to include two new performance-based restricted stock programs.
- Growth Incentive Program (GIP): Approved on August 11, 2005, this is a three-year program (ending fiscal year 2008) designed to accelerate long-term revenue and earnings per share growth.
Guidance, Outlook, and Management Commentary
Program Objectives: The GIP targets revenue growth, net operating income growth, sales growth, and earnings per share growth. Management retains the right to modify financial objectives based on unforeseen business issues.
Payout Structure:
- Threshold achievement is required for any payout; underachievement results in zero bonus.
- 50% of the target bonus is paid if threshold financial performance and revenue growth targets are met.
- Maximum payout is capped at 150% of the target bonus.
- Bonus payments will be determined after fiscal year 2008 and paid early in fiscal year 2009.
Named Executive Officer Maximum Potential Bonuses:
| Executive | Role | Maximum GIP Bonus |
|---|---|---|
| Mr. Gary C. Butler | President and COO | $756,000 |
| Mr. S. Michael Martone | Group President (Employer Services) | $483,300 |
| Mr. Richard J. Daly | Group President (Brokerage Services) | $330,000 |
| Mr. John Hogan | Group President (Brokerage Services) | $330,000 |
Investor Verification Checklist
- Verify the specific definitions of "compensation" excluded from the SORP in Exhibit 10.4.
- Review the performance metrics for the GIP to understand the specific revenue and EPS growth targets required for payout.
- Confirm the total potential liability of the GIP ($1.899 million for the four named executives) relative to the company's overall compensation expense.
- Monitor future filings for the determination of performance objectives after fiscal year 2008.