Automatic Data Processing Inc 8-K, filed Jul 29, 2020

Automatic Data Processing Inc (ADP)

8-K 2020-07-29 For: 2020-07-29

View Original

Added on April 09, 2026

About this 8-K

Automatic Data Processing Inc filed this 8-K on July 29, 2020.

Items reported

Item 2.02: Financial results
Item 9.01: Financial statements and exhibits

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.10 Par Value (voting)	ADP	NASDAQ Global Select Market


Exhibit Number			Description
99			Earnings Release dated July 29, 2020 issued by Automatic Data Processing, Inc.

104			Cover Page Interactive Data File, embedded in Inline XBRL.


Automatic Data Processing, Inc. and Subsidiaries
Statements of Consolidated Earnings
(In millions, except per share amounts)
(Unaudited)
				Three Months Ended											Twelve Months Ended
				June 30,											June 30,
				2020			2019				2020				2019
Revenues:
		Revenues, other than interest on funds held for clients and PEO revenues			$	2,181.4			$	2,290.5			$	9,538.1			$	9,375.8
		Interest on funds held for clients			114.8				146.9				545.2				561.9
		PEO revenues (A) (B) (C)			1,080.6				1,041.9				4,506.5				4,172.5
			Total revenues	3,376.8			3,479.3				14,589.8				14,110.2

Expenses:
	Costs of revenues:
		Operating expenses (B) (C)			1,806.4				1,756.0				7,404.1				7,080.9
		Systems development and programming costs			165.1				162.1				674.1				636.3
		Depreciation and amortization			95.7				83.0				366.9				304.4
			Total costs of revenues	2,067.2			2,001.1				8,445.1				8,021.6

	Selling, general, and administrative expenses						765.6				854.8				3,003.0				3,064.2
	Interest expense						15.6				33.7				107.1				129.9
			Total expenses	2,848.4			2,889.6				11,555.2				11,215.7

	Other income, net						(2.9)				(43.6)				(148.0)				(111.1)

Earnings before income taxes									531.3				633.3				3,182.6				3,005.6

	Provision for income taxes						119.8				157.8				716.1				712.8

Net earnings									$	411.5			$	475.5			$	2,466.5			$	2,292.8

	Basic earnings per share						$	0.96			$	1.10			$	5.73			$	5.27

	Diluted earnings per share						$	0.96			$	1.09			$	5.70			$	5.24



Components of Other income, net:
	Interest income on corporate funds						$	(14.5)			$	(26.0)			$	(84.5)			$	(97.6)


	Realized (gains) / losses on available-for-sale securities, net						(1.0)				(0.5)				(12.9)				0.9

	Impairment of assets						29.9				—				29.9				12.1
	Gain on sale of assets						(3.9)				—				(5.8)				(4.1)
	Gain on sale of investment						—				(15.7)				(0.2)				(15.7)


	Non-service components of pension (income)/expense, net (D)						(13.4)				(1.4)				(74.5)				(6.7)
	Other income, net						$	(2.9)			$	(43.6)			$	(148.0)			$	(111.1)


Automatic Data Processing, Inc. and Subsidiaries
Consolidated Balance Sheets
(In millions)
(Unaudited)
	June 30,		June 30,
	2020		2019
Assets
Current assets:
Cash and cash equivalents	$	1,908.5	$	1,949.2
Short-term marketable securities	—		10.5
Accounts receivable, net of allowance for doubtful accounts of $92.5 and $54.9, respectively	2,441.3		2,439.3
Other current assets	506.2		509.1
Total current assets before funds held for clients	4,856.0		4,908.1
Funds held for clients	26,708.1		29,434.2
Total current assets	31,564.1		34,342.3
Long-term receivables, net of allowance for doubtful accounts of $0.5 and $0.4, respectively	18.6		23.8
Property, plant and equipment, net	703.9		764.2
Operating lease right-of-use asset	493.7		—
Deferred contract costs	2,401.6		2,428.5
Other assets	458.4		934.4
Goodwill	2,309.4		2,323.0
Intangible assets, net	1,215.8		1,071.5
Total assets	$	39,165.5	$	41,887.7

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	102.0	$	125.5
Accrued expenses and other current liabilities	1,980.7		1,759.0
Accrued payroll and payroll-related expenses	557.0		721.1
Dividends payable	387.3		340.1
Short-term deferred revenues	212.5		220.7
Obligations under reverse repurchase agreements (A)	13.6		262.0


Short-term debt	1,001.8		—
Income taxes payable	40.1		54.8
Total current liabilities before client funds obligations	4,295.0		3,483.2
Client funds obligations	25,831.6		29,144.5
Total current liabilities	30,126.6		32,627.7
Long-term debt	1,002.8		2,002.2
Operating lease liabilities	344.4		—
Other liabilities	837.0		798.7
Deferred income taxes	731.9		659.9
Long-term deferred revenues	370.6		399.3
Total liabilities	33,413.3		36,487.8

Stockholders' equity:
Preferred stock, $1.00 par value: authorized, 0.3 shares; issued, none	—		—
Common stock, $0.10 par value: authorized, 1,000.0 shares; issued, 638.7 shares at June 30, 2020 and June 30, 2019; outstanding, 429.9 and 434.2 shares at June 30, 2020 and June 30, 2019, respectively	63.9		63.9
Capital in excess of par value	1,333.8		1,183.2
Retained earnings	18,436.3		17,500.6
Treasury stock - at cost: 208.9 and 204.5 shares at June 30, 2020 and June 30, 2019, respectively	(14,067.0)		(13,090.5)
Accumulated other comprehensive loss	(14.8)		(257.3)
Total stockholders’ equity	5,752.2		5,399.9
Total liabilities and stockholders’ equity	$	39,165.5	$	41,887.7


Automatic Data Processing, Inc. and Subsidiaries
Statements of Consolidated Cash Flows
(In millions)
(Unaudited)	Twelve Months Ended
	June 30,
	2020		2019
Cash Flows from Operating Activities:
Net earnings	$	2,466.5	$	2,292.8
Adjustments to reconcile net earnings to cash flows provided by operating activities:
Depreciation and amortization	480.0		409.0
Amortization of deferred contract costs	915.0		874.0

Deferred income taxes	26.0		9.3
Stock-based compensation expense	130.8		167.3

Net pension (income)/expense	(11.6)		55.4

Net amortization of premiums and accretion of discounts on available-for-sale securities	50.2		50.1
Impairment of assets	29.9		12.1
Gain on sale of assets	(6.0)		(19.8)

Other	65.4		43.9
Changes in operating assets and liabilities, net of effects from acquisitions and divestitures of businesses:
Increase in accounts receivable	(113.8)		(473.9)
Increase in other assets	(910.4)		(987.2)
Decrease in accounts payable	(18.3)		(10.7)
(Decrease)/Increase in accrued expenses and other liabilities	(77.5)		266.0
Net cash flows provided by operating activities	3,026.2		2,688.3

Cash Flows from Investing Activities:
Purchases of corporate and client funds marketable securities	(3,905.1)		(4,422.6)
Proceeds from the sales and maturities of corporate and client funds marketable securities	7,648.4		2,909.0

Capital expenditures	(172.7)		(162.0)
Additions to intangibles	(443.7)		(404.5)
Acquisitions of businesses, net of cash acquired	—		(125.5)
Proceeds from the sale of property, plant, and equipment and other assets	29.4		7.9





Net cash flows provided by/(used in) investing activities	3,156.3		(2,197.7)

Cash Flows from Financing Activities:
Net (decrease)/increase in client funds obligations	(3,213.2)		1,696.0

Payments of debt	(2.2)		(2.1)
Repurchases of common stock	(1,006.3)		(937.7)
Net proceeds from stock purchase plan and stock-based compensation plans	50.0		72.9

Dividends paid	(1,470.5)		(1,293.0)
Net (payments)/proceeds related to reverse repurchase agreements	(248.4)		262.0


Other	—		(5.8)

Net cash flows used in financing activities	(5,890.6)		(207.7)

Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents	(34.5)		(28.8)

Net change in cash, cash equivalents, restricted cash, and restricted cash equivalents	257.4		254.1

Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of year	6,796.2		6,542.1
Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of year	$	7,053.6	$	6,796.2

Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents to the Consolidated Balance Sheets
Cash and cash equivalents	1,908.5		1,949.2
Restricted cash and restricted cash equivalents included in funds held for clients	5,145.1		4,847.0
Total cash, cash equivalents, restricted cash, and restricted cash equivalents	$	7,053.6	$	6,796.2

Supplemental disclosures of cash flow information:
Cash paid for interest	$	104.8	$	127.5
Cash paid for income taxes, net of income tax refunds	$	677.1	$	633.8



Automatic Data Processing, Inc.
(Exact name of registrant as specified in charter)


N/A
(Former name or former address, if changed since last report)


☐			Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)


☐			Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)


☐			Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))


Automatic Data Processing, Inc. and Subsidiaries
Other Selected Financial Data
(Dollars in millions, except per share amounts)
(Unaudited)
	Three Months Ended											Twelve Months Ended
	June 30,											June 30,
	2020			2019			% Change		2020			2019			% Change
Revenues
Employer Services	$	2,296.0		$	2,435.1		(6)	%	$	10,086.6		$	9,942.8		1	%
PEO Services	1,081.7			1,042.6			4	%	4,511.5			4,177.7			8	%
Other	(0.9)			1.6			n/m		(8.3)			(10.3)			n/m
Total revenues	$	3,376.8		$	3,479.3		(3)	%	$	14,589.8		$	14,110.2		3	%

Segment earnings
Employer Services	$	589.6		$	625.0		(6)	%	$	3,063.0		$	2,960.9		3	%
PEO Services	117.4			160.5			(27)	%	605.5			616.2			(2)	%
Other	(175.7)			(152.2)			n/m		(485.9)			(571.5)			n/m
Total pretax earnings	$	531.3		$	633.3		(16)	%	$	3,182.6		$	3,005.6		6	%


Segment margin
Employer Services	25.7		%	25.7		%	0.0	%	30.4		%	29.8		%	0.6	%
PEO Services	10.9		%	15.4		%	(4.5)	%	13.4		%	14.7		%	(1.3)	%
Other	n/m			n/m			n/m		n/m			n/m			n/m
Total pretax margin	15.7		%	18.2		%	(2.5)	%	21.8		%	21.3		%	0.5	%


	Three Months Ended											Twelve Months Ended
	June 30,											June 30,
Earnings per share information:	2020			2019			% Change		2020			2019			% Change
Net earnings	$	411.5		$	475.5		(13)	%	$	2,466.5		$	2,292.8		8	%

Basic weighted average shares outstanding	429.1			433.5			(1)	%	430.8			435.0			(1)	%
Basic earnings per share	$	0.96		$	1.10		(13)	%	$	5.73		$	5.27		9	%

Diluted weighted average shares outstanding	430.6			436.2			(1)	%	432.7			437.6			(1)	%
Diluted earnings per share	$	0.96		$	1.09		(12)	%	$	5.70		$	5.24		9	%


Automatic Data Processing, Inc. and Subsidiaries
Other Selected Financial Data, Continued
(Dollars in millions, except per share amounts or where otherwise stated)
(Unaudited)
	Three Months Ended											Twelve Months Ended
	June 30,											June 30,
	2020			2019			% Change		2020			2019			% Change
Average investment balances at cost (in billions):
Corporate, other than corporate extended	$	1.6		$	1.9		(14)	%	$	1.6		$	1.7		(7)	%
Corporate extended (A)	2.5			3.1			(19)	%	3.0			3.2			(5)	%
Total corporate	4.1			4.9			(17)	%	4.6			4.8			(5)	%
Funds held for clients	24.0			26.2			(8)	%	26.0			25.5			2	%
Total	$	28.1		$	31.1		(10)	%	$	30.6		$	30.3		1	%

Average interest rates earned exclusive of realized losses (gains) on:
Corporate, other than corporate extended	0.4		%	2.0		%			1.3		%	1.9		%
Corporate extended (A)	2.1		%	2.1		%			2.1		%	2.1		%
Total corporate	1.4		%	2.1		%			1.9		%	2.0		%
Funds held for clients	1.9		%	2.3		%			2.1		%	2.2		%
Total	1.8		%	2.2		%			2.1		%	2.2		%

Net unrealized gain position at end of period	$	876.8		$	287.5				$	876.8		$	287.5

Average short-term financing (in billions):
U.S. commercial paper borrowings	$	2.3		$	2.7				$	2.7		$	2.8
U.S., Canadian & U.K. reverse repurchase agreement borrowings	0.2			0.3					0.3			0.3
	$	2.5		$	3.1				$	3.0		$	3.2

Average interest rates paid on:
U.S. commercial paper borrowings	0.1		%	2.4		%			1.6		%	2.2		%
U.S., Canadian & U.K. reverse repurchase agreement borrowings	0.3		%	2.2		%			1.6		%	1.9		%

Interest on funds held for clients	$	114.8		$	146.9		(22)	%	$	545.2		$	561.9		(3)	%
Corporate extended interest income (B)	12.8			16.5			(22)	%	64.0			65.2			(2)	%
Corporate interest expense-short-term financing (B)	(0.8)			(18.7)			96	%	(47.9)			(70.1)			32	%
Net Impact from Client Fund Strategy	$	126.8		$	144.7		(12)	%	$	561.3		$	557.0		1	%


(a) We include the interest income earned on investments associated with our client funds extended investment strategy and interest expense on borrowings related to our client funds extended investment strategy as we believe these amounts to be fundamental to the underlying operations of our business model. The adjustments in the table above represent the interest income and interest expense that is not related to our client funds extended investment strategy and are labeled as “All other interest expense” and “All other interest income.”

(b) In the three months ended June 30, 2020, transformation initiatives include: (i) charges of $29.9 million related to impairment charges as a result of recognizing certain owned facilities at fair value given intent to sell and accordingly classified as held for sale and impairment charges of operating right-of-use assets and certain related fixed assets associated with the vacating of certain leased locations; (ii) charges of $25.0 million related to severance; and (iii) charges of $3.0 million related to other transformation initiatives. In the twelve months ended June 30, 2020, transformation initiatives include: (i) charges of $29.9 million related to impairment charges as a result of recognizing certain owned facilities at fair value given intent to sell and accordingly classified as held for sale and impairment charges of operating right-of-use assets and certain related fixed assets associated with the vacating of certain leased locations; (ii) charges of $29.1 million related to severance; (iii) charges of $28.5 million related to other transformation initiatives; all of which were partially offset by net reversals of charges related to Voluntary Early Retirement Program (“VERP”) and Service Alignment Initiative (“SAI”) of $10.1 million. Unlike certain other severance charges in prior periods that are not included as an adjustment to get to adjusted results, these specific charges relate to actions that are part of our broad-based, company-wide transformation initiatives.

(c) Represents severance charges related to the impact of COVID-19 pandemic. Unlike other severance charges in prior periods that are not included as an adjustment to get to adjusted results, these specific charges relate to actions that are part of our broad-based, company-wide initiatives to address excess capacity across our business and functions due to the COVID-19 pandemic.

(d) Represents a legal settlement accrual relating to the Illinois Biometric Privacy Act matter.

(e) The income tax provision/(benefit) was calculated based on the annualized marginal rate in effect during the quarter of the adjustment.

(f) There was no impact from the Tax Cuts and Jobs Act in the three and twelve months ended June 30, 2020.

(g) The Adjusted effective tax rate is calculated as our Adjusted provision for income taxes divided by the sum of our Adjusted net earnings plus our Adjusted provision for income taxes.



The following table reconciles our reported growth rates to the non-GAAP measure of organic revenue, which excludes the impact of acquisitions, the impact of dispositions, and the impact of foreign currency. The impact of acquisitions and dispositions is calculated by excluding the current year revenues of acquisitions until the one year anniversary of the transaction and by excluding the prior year revenues of divestitures for the one year period preceding the transaction. The impact of foreign currency is determined by calculating the current year result using foreign exchange rates consistent with the prior year. The PEO segment is not impacted by acquisitions, dispositions or foreign currency.


	Three Months Ended						Twelve Months Ended
	June 30,						June 30,
Revenue growth consolidated:	2020		2019		2020		2019

Employer Services	(6)	%	4	%	1	%	5	%
PEO Services	4	%	9	%	8	%	9	%
Consolidated revenue growth as reported	(3)	%	5	%	3	%	6	%
Adjustments:
Impact of acquisitions	—	%	—	%	—	%	(1)	%

Impact of foreign currency	1	%	1	%	1	%	1	%
Consolidated revenue growth, organic constant currency	(2)	%	6	%	4	%	6	%

Segment:

Employer Services revenue growth as reported	(6)	%	4	%	1	%	5	%
Adjustments:
Impact of acquisitions	—	%	—	%	—	%	(1)	%

Impact of foreign currency	1	%	1	%	1	%	1	%
Employer Services revenue growth, organic constant currency	(5)	%	5	%	2	%	5	%


Automatic Data Processing, Inc. and Subsidiaries
Fiscal 2020 to Fiscal 2021 Non-GAAP Guidance Reconciliation
(Unaudited)
								Fiscal 2021
	Fiscal 2020							Outlook
Earnings before income taxes / margin (GAAP)	$	3,182.6	21.8		%	(250) bps
All other interest expense (a)	59.2		40 bps			0 bps
All other interest income (a)	(20.5)		(15) bps			0 bps
Gain on sale of assets - FY20	(0.2)		0 bps			0 bps
Legal Settlement - FY20	25.0		20 bps			(20) bps
COVID-19 related charges - FY20	25.4		20 bps			(20) bps
Transformation initiatives - FY20 (b)	77.4		55 bps			(55) bps
Transformation initiatives - FY21			-			45 bps
Adjusted EBIT margin (Non-GAAP)	$	3,348.9	23.0		%	(300) bps

Effective tax rate (GAAP)			22.5		%	23.1	%
Gain on sale of assets - FY20			-			-
Legal Settlement - FY20			-			-
COVID-19 related charges - FY20			-			-
Transformation initiatives - FY20 (b)			+0.1		%	-

Transformation initiatives - FY21			-			-

Adjusted effective tax rate (Non-GAAP)			22.6		%	23.1	%

Diluted earnings per share (GAAP)			$	5.70		(12)% to (17)%
Gain on sale of assets - FY20			-			~ 0%
Legal Settlement - FY20			0.04			~ (0.5)%
COVID-19 related charges - FY20			0.04			~ (0.5)%
Transformation initiatives - FY20 (b)			0.13			~ (2)%

Transformation initiatives - FY21			-			~ 2%

Adjusted diluted earnings per share (Non-GAAP)			$	5.92		(13)% to (18)%

a) We include the interest income earned on investments associated with our client funds extended investment strategy and interest expense on borrowings related to our client funds extended investment strategy as we believe these amounts to be fundamental to the underlying operations of our business model. These adjustments in the table above represent the interest income and interest expense that is not related to our client funds extended investment strategy and are labeled as “All other interest expense” and “All other interest income.”

(b) In fiscal 2020, transformation initiatives include: (i) charges of $29.9 million related to impairment charges as a result of recognizing certain owned facilities at fair value given intent to sell and accordingly classified as held for sale and impairment charges of operating right-of-use assets and certain related fixed assets associated with the vacating of certain leased locations; (ii) charges of $29.1 million related to severance; (iii) charges of $28.5 million related to other transformation initiatives; all of which were partially offset by net reversals of charges related to Voluntary Early Retirement Program (“VERP”) and Service Alignment Initiative (“SAI”) of $10.1 million. Unlike certain other severance charges in prior periods that are not included as an adjustment to get to adjusted results, these specific charges relate to actions that are part of our broad-based, company-wide transformation initiatives.


Emerging growth company			☐